Avnet 2001 Annual Report Download - page 5

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To Our Shareholders:
At no time in my 30-year career in the high tech industry have I experienced
a year more novel, or more like a novel, than fiscal 2001. It was a tale of two
markets – literally, the best of times during the first half, and the worst of times
during the second half, as we experienced an unprecedented confluence of events
precipitating the most severe downturn in the history of the technology industry.
Avnet ended the first half of FY’01 with revenues totaling $6.82 billion, equaling,
in just six months, the Company’s total FY’99 revenues. Record diluted earnings
per share (EPS) of $0.69 in the second quarter were more than double what they
were the year before. Other key financial metrics were up as well, including
operating margin, return on capital employed and sales per employee.
Avnet finished the year with sales of $12.81 billion, up 29 percent versus a record
FY’00, continuing a strong growth trend that has averaged 18.6 percent
compounded annually over the past five years. As a result, FY’01 revenues were
more than double the $6.33 billion reported just three years ago.
While the Company performed admirably on a year-over-year basis, that success
was tempered by the challenging conditions that converged upon the industry
in the second half of FY’01. Cyclicality in the electronic components market,
especially with regard to semiconductors, is to be expected, and Avnet is adept
at anticipating and dealing with such volatility. However, by December three
significant events had coincided: the worldwide economy slowed; demand for
electronic equipment fell, especially in the saturated communications market; and
the supply of electronic components increased significantly. As a result, by the
end of FY’01 the worldwide supply chain was bloated with excess inventory.
In the second half of the fiscal year, Avnet’s bookings plummeted and revenues
fell 27 percent from the third to the fourth quarter. Consequently, just two quar-
ters after posting record results diluted EPS declined to just $0.05, before special
charges, for the year-ending June quarter.
ELECTRONICS MARKETING (EM)
Through focused divisions, EM
markets, inventories and adds value,
via services such as supply-chain
management and engineering design,
to semiconductors, interconnect,
passive and electromechanical
devices, radio frequency and
microwave devices, and specialty
products from leading component
manufacturers.
COMPUTER MARKETING (CM)
CM builds channels to market that
provide focused sales, marketing and
value-added distribution of enterprise
computing systems, software,
storage and services for value-added
resellers, and enterprise solutions
for end users.
APPLIED COMPUTING (AC)
AC markets and adds value through
engineering assistance, supply-chain
management and end product
integration to embedded technology
subsystems, including computer
platforms and servers, boards and
memory modules, mass storage,
peripherals, microprocessors, flat
panel displays and operating systems.
letter to
shareholders
letter to
shareholders
AVNET, INC. FY 2001
SALES BY OPERATING GROUP
% OF
$ BILLIONS AVNET'S SALES
EM $8.29 64.7%
CM $2.85 22.3%
AC $1.67 13.0%
EM
AC
CM