Arrow Electronics, Inc.’s (ARW - Analyst Report) operating unit Arrow Enterprise Computing Solutions (ECS) recently signed a distribution agreement with Emerson Network Power. This will introduce Emerson’s wide range of enterprise data center infrastructure management (DCIM) services to Arrow’s distribution channel database catering to the needs of its comprehensive clientele in the United States.
The venture undertaken is to directly distribute Emerson’s real-time infrastructure optimization Trellis portal in order to improve the efficacy of the data center. Moreover, the company will be also managing and supporting data center’s IT and facilities systems through supplying a wide range of DCIM solution including Avocent Universal Management Gateway, Avocent DSView, MergePoint Unity, ACS and PM3000 solutions. By adding these solutions to its line card offerings in the United States, Arrow will make the entire infrastructure management of the data centers less costly and more efficient for its customers.
Management was appeased regarding its decision to conflate with Emerson, as this venture would allow Arrow to provide best-in-class data center management through integrating with Emerson’s DCIM solution. These solutions would easily cater to the needs of Arrow’s data center customers.
Recently the company reported revenues of $1.59 billion, up 3.0% year over year in its Global enterprise computing solutions (ECS) segment. The rise in the sales was on the back of the Americas’ solid performance in the core value-added distribution business and Europe’s strong performance even amid the weak market conditions due to the company’s matrix expansion. We believe that this agreement would further bolster the performance of this segment moving ahead.
However, it should be noted that the company’s domestic and foreign operations are subject to significant competitive pressures from the likes of Richardson Electronics Ltd. and Avnet, Inc. (AVT - Analyst Report) . Avnet very recently acquired Genilogix LLC for strengthening its HP software solutions and Cloud services. Hence, to compete successfully, Arrow must excel in terms of product quality and innovation, customer service, technical and computing capabilities and price competitiveness.
The current Zacks Consensus Estimates for Arrow are $1.09 and $4.27 for the fourth quarter of 2012 and for 2012, respectively. The estimates represent a year-over-year growth of (21.34%) for the fourth quarter and (17.78%) for 2012. The company currently retains a Zacks #5 Rank, which translates into a short-term ‘Strong Sell’ rating. We also maintain a long-term ‘Neutral’ recommendation on the stock.