Avnet chief Rick Hamada said his IT distribution giant will need to cut another $40m in costs to turn itself around - after its net income dropped nearly 42 per cent in its fiscal third quarter.
Hamada said the new cost reductions should be done by the end of the next quarter, bringing its entire savings for this fiscal year to about $140m. But even these new measures may not be enough if the economic climate doesn't start improving.
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"While these cost reductions are designed to contribute to improving our operating income margins, the rate of improvement will depend on market trends going forward," Hamada said in a canned statement.
"[However] we remain positioned to leverage future growth into higher margins and returns, and are committed to drive continued progress toward our long-term goals across our portfolio no matter what course the recovery takes," the boss of the Arizona-based biz continued.
The extra cost-cutting comes after Avnet banked a $86.2m net income in the three months to the end of March, compared to $147.6m in the same quarter last year. Operating income in its electronics marketing division dropped 16.6 per cent, while the technology solutions arm's operating profit fell 7.5 per cent on revenue of $3.8bn and $2.5bn respectively.
In the fiscal fourth quarter, the distributor expects EM and TS sales to stay more or less the same as this quarter, with overall sales of between $6.15bn and $6.75bn.
"Even though the end markets continue to be challenging, our profitability and consistent cash flow generation remain strong, providing us with opportunities to capitalise on new value-creating acquisitions as well as future investments in our own stock," chief financial officer Kevin Moriarty said, referring to the company's purchases of Magirus, Genilogix and BrightStar Partners last quarter. ®