Avnet 2000 Annual Report Download - page 4

AVNET, INC. FY 2000
WORLDWIDE SALES
$ billions % of Avnet
EM 6.64 72.4%
CM 1.86 20.3%
AAC 0.67 7.3%
Avnet is a dynamic industry
consolidator, integrating seven
acquisitions contributing more
than $1.7 billion in sales this year.
Electronics Marketing’s supply-chain management arm, Integrated Material Services
(IMS), continues its explosive global growth. In the United States alone, IMS has achieved
growth of more than 40 percent per year compounded annually. IMS ended FY’00 at
approximately $2.6 billion in sales, positioning Avnet as a premier material manager in
the electronics industry supply chain.
The Asian electronics market is booming, and Avnet’s business in the AsiaPac region
is growing even faster. Asia, including Japan, is now the world’s largest and fastest
growing economic region. China is the world’s second-largest national economy. We
are excited about our relationship with ChinaECNet, a Chinese government-sponsored
Internet venture that selected Avnet as its exclusive source of non-Chinese products,
logistics and technical services to indigenous Chinese original equipment manufac-
turers (OEMs).
Avnet’s EMEA region (Europe, the Middle East and Africa) is progressing. This follows
an intense period of focus on upgrading to SAP 4.0, a multi-lingual, multi-currency
client/ server system that allows us to operate across the continent and in Asia using
a single, IT platform.
Y2K is behind us. While the millennial turnover did not materially affect Avnet’s opera-
tions, anticipation of the event and a resultant slump in sales negatively impacted Avnet
Computer Marketing (CM) for most of the fiscal year. We are now, however, seeing a
return to robust growth rates in sales and profits for CM, and FY’01 is being ushered in
by a strong second half of FY’00.
Realignment of this operating group has delivered a greater focus on key suppliers
at Hall-Mark Global Solutions (rebranded Avnet Hall-Mark), and on the
end-user solutions integration business, Avnet Computer (rebranded Avnet
Enterprise Solutions).
We launched our newest operating group, Avnet Applied Computing (AAC), to serve
the embedded systems market. Since realigning our business to focus on this high
growth opportunity, AAC has grown operating profits sequentially each quarter.
More importantly, we have laid the foundation for what should be a very exciting and
productive billion dollar-plus global operating group for Avnet.
There are many highlights to share from each of our three operating groups, and I invite
you to read more about them in the succeeding pages of our Annual Report. Suffice it
to say, I’m very proud of our employees’ contributions to Avnet during this unprecedented,
dynamic and demanding fiscal year, and I welcome our new employees as we embark on
yet another exciting 12 months.
Now, on to the second of the dual engines, acquisitions.
Driven by the globalization of our customers and suppliers and our chosen role as industry
consolidator, Avnet’s acquisition strategy is moving full steam ahead. This year, we’ve
integrated companies in Europe, Asia and the Americas: Integrand Solutions (Australia);
SEI Macro Group (UK); Marshall Industries (US); Matica S.p.A. and PCD Italia S.r.l.
(Italy); Eurotronics, which did business as SEI (Netherlands); SEI Nordstar (Italy); and
Cosco Electronics/ Jung Kwang (Korea). Through these acquisitions, we have expanded
our customer and supplier base, strengthened relationships, increased our global reach
and added the invaluable intellectual capital of thousands of talented, knowledgeable
employees. We have become the number one value-added distributor of electronic
components in North America and, with our acquisition of Savoir Technology Group, Inc.
(US) just after the fiscal year ended, the number one value-added distributor of IBM
mid-range computing products in the world. The pending acquisition of EBV Elektronik,
WBC, Atlas Services (Europe) and Raab Karcher Electronic Systems (RKE), announced
on August 7, 2000, will further strengthen the position of all three of Avnet’s operating
groups throughout Europe with historical revenue of approximated $1.8 billion.
Additionally, while acquisitions can be difficult to complete and challenging to integrate,
Avnet has built a core competency in this arena. All our current acquisitions are planned
to be accretive to earnings immediately, or within their first year of integration, and
deliver return on capital employed that meets or exceeds our targets. Marshall
Industries was fully integrated with Avnet’s systems one full quarter ahead of schedule
and brought the Company over $85 million in annualized cost synergies by the end of
fiscal 2000. That acquisition, along with the others, helped produce the lowest selling,
general and administrative expenses (SG&A) as a percent of sales in our history, ending
FY’00 at 9.2 percent for the fourth quarter.
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By the latter half of the decade,
successful enterprises will have
integrated the Internet into their
processes such that e-business
will be totally embedded in all
activities. Avnet expects to lead
the way as the industry shifts to
the click-and-mortar model.
Embedded systems technicians
working at the new Avnet
Applied Computing Lab,
Network Operating Center,
Tempe, Arizona.