Avnet Expands Business in Asia

Avnet Inc. (AVT - Analyst Report) recently entered into a distribution agreement with India-based MosChip Semiconductor Technology Ltd.

Based in Phoenix, Arizona, Avnet is one of the world’s largest distributors of electronic components and computer products. MosChip provides high performance multimedia and connectivity solutions for consumer, industrial and computing applications.

According to the deal, Avnet’s Electronics Marketing unit will distribute MosChip products throughout Asia. The distribution agreement spans Australia, China, India, Korea, Hong Kong, New Zealand, Taiwan and Southeast Asia. MosChip products include Network Appliance Processors and co-processors, audio / video processors, USB and PCI / PCI Express connectivity semiconductors.

Last month, Avnet reported weak fourth-quarter results as its top line remained challenged by adverse business conditions amid the global economic slowdown. The company’s organic growth continues to be lackluster and it continues to expand only through acquisitions.

Although both bookings and billings increased during the period and backlog was up for the first time in several quarters, rival Arrow Electronics (ARW - Analyst Report) maintained that the weakness in top line is yet to bottom out and visibility still remains limited. In particular, business conditions in Europe remain challenging.

Management stated that growth in Asia continues to offset sales decline in other regions. Business in Asia is associated with lower selling prices and lower costs. While this might help margins in the short term, it would not be sustainable until Avnet sees some strength in the high-margin Americas and EMEA regions.

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