Avnet Takes Over TSSLink - Analyst Blog

By Zacks | January 07, 2013 AAA

Electronics and IT distributor Avnet Inc. (AVT) kicked off the new year with the acquisition of California-based IT professional services company, TSSLink Inc. Financial details of the deal were kept confidential.

Nine-year-old TSSLink Inc. specializes in delivering technical support, consulting and outsourcing services for storage and virtualization solutions, audit preparation services, field product installation and implementation, and end-user training.

Post closure of the acquisition, TSSLink will be integrated into Avnet's Technology Solutions segment. Management stated that the acquisition would be immediately accretive. Moreover, Avnet expects the new unit to support its targeted return-on-capital (ROC) of 12.5%.

There is no doubt that TSSLink's capabilities will be a good supplement to Avnet's technology offerings and consolidate its position as a key player in the IT distribution market.

Revenues from Avnet's Technology Solutions segment fell 15.1% from the year-ago quarter to $2.21 billion due to low demand in the EMEA region. But the company expects Technology Solutions revenues within the range of $2.60 billion and $3.00 billion, implying a decent sequential comparison.

We believe that with TSSLink, Avnet will be able to achieve or even surpass its expectations.

Avnet has had a keen eye for profitable acquisitions that have facilitated market expansion and technological upgrades. During 2012, the company acquired as many as 13 new units. These acquisitions are expected to augment the company's product portfolio and enhance its performance quite comprehensively going forward.

Avnet sees significant competition for both its domestic and foreign operations. It has an archrival in Arrow Electronics Inc. (ARW), although other big players such as Anixter International Inc. (AXE) and Richardson Electronics Ltd. (RELL) are also not to be discounted.

Currently, Avnet has a Zacks #3 Rank (Hold). The stock is performing better than its peer Arrow, which has a Zacks #4 Rank (Sell).

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