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By | Paul Kunert 2nd May 2013 15:26

Arrow tightens belt yet another notch, vows to shed $75m in costs in 2013

Sales flat, profits come tumbling down in Q1

The powers that be at Arrow have found another $35m worth of savings to lop off this year as it tries to match costs with the market realities.

One of the big four global wholesalers - Ingram Micro, Tech Data and Avnet Inc constitute the others - Arrow reported a one per cent decline in calendar Q1 sales to $4.85bn.

Flat is the new growth, at least in the current climate, and few distributors are posting any meaningful growth. Arrow for its part said the top line met the mid-point of expectations.

The Global Components (GC) business decreased in size by five per cent to $3.19bn, went down by six per cent in the Americas, but climbed 11 per cent in Asia Pacific.

The Enterprise Computing Solutions (ECS) unit managed to post sales growth of two per cent to $1.66bn led by storage, software and services.

CEO Michael Long described the market as "challenging" but praised ECS for its 13th consecutive quarter of growth.

Arrow has changed the way it accounts for revenues related to certain fulfilment contracts - factoring this in, GC declined two per cent and ECS grew by two per cent.

Net profit fell 31 per cent to $77.9m down from $113.6m in Q1 2012, including restructuring, integration and other charges of $21.6m.

Chief beancounter Paul Reilly pointed to the commitment from Arrow earlier this year to slash $40m off its expense bill in 2013 but said it was able to go "further".

He said: "With a more thorough review of our processes and productivity enhancement opportunities driven by new systems … we will be able to exceed that commitment and reduce cost by more than $75m," he said.

The "ERP implementation" in the European components business was an area highlighted as helping to lower overheads, said the exec. Long made no mention of job cuts.

He said the cost-cutting process will also involve consolidating warehouse space and potentially other real estate.

Sales for Q2 are expected to be between $4.9bn to $5.3bn, Arrow forecast. ®

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