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Avnet Inks Deal with relayr to Support Internet of Things

FORM ARW AVT

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Electronics and IT distributor Avnet Inc. (AVT - Free Report) is moving ahead in the Internet of Things (IoT) space with its strategic partnerships and initiatives. Recently, the company in collaboration with relayr announced a new agreement to develop solutions that support IoT in the U.S. and Canada.

relayr is an IoT company for the Digital Transformation of Industries. The company offers an enterprise middleware platform that enables fast and cost-effective growth of new solutions, equipment and services for the IoT.

The agreement aims at providing IoT solutions including analytic platforms, cloud and security technologies to help their customers’ digital transformation processes. We believe the new agreement will enable the company to scale up Avnet’s business and enhance service offerings that garner significant market traction.

The agreement will enable Avnet’s partners to access relayr’s enterprise middleware platform thereby providing its channel partners with better solutions for IoT. It will also enable Avnet to provide powerful, simple-to-use tools that enable fast and cost-effective development of IoT solutions, thus improving Avnet’s revenue stream and possibly its market share.

According to Colin Blair, vice president of Avnet Technology Solutions, Americas, “Our partners will be able to use relayr’s offerings to create IOT solutions that can easily be integrated with their customers’ existing technologies. Working together, Avnet and relayr will empower partners to help their customers create IOT solutions that span a wide range of devices and offer solutions from simple experimentation kits to industrial hardware, supporting their customers’ digital transformation processes.”

The IoT platform is expected to include billions of connected devices and systems with applications ranging from sensors and mobile devices to home appliances and cars. According to research firm IDC, via the Wall Street Journal, the IoT market could nearly triple in the coming years. In 2014, the global IoT market was worth $655.8 billion and could reach up to $1.7 trillion by the year 2020.

Both companies clearly see the Internet of Things as the next major market. We believe that such initiatives in the industrial space will allow Avnet to transform its model for the better.

Bottom Line

Despite the company’s strategic initiatives to expand in newer markets, the stock generated a year-to-date return of 7.59% compared with the Zacks Electronic Parts Distributor industry's gain of 23.25%.

The underperformance can be blamed on the company’s last quarter’s unimpressive results, which make us increasingly cautious about its near-term performance. While the bottom line managed to surpass the Zacks Consensus Estimate, the top line fell short of the same. Moreover, both earnings and revenues declined on a year-over-year basis, primarily due to the impact of an extra week of sales in the year-ago quarter and unfavorable exchange rate.

Furthermore, competition from the likes of Arrow Electronics Inc. (ARW - Free Report) and Ingram Micro also remains a headwind.

Currently, Avnet carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in the technology sector is FormFactor, Inc. (FORM - Free Report) , carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

FormFactor has a long-term expected earnings per share growth rate of 12%.

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