Eurodis @1.07 oversold!!

from the ample forum :


"I believe we're in the bottom of the trough."

Sales Gains Gone For Distributors

By Heidi Elliott -- 2/12/2002

Electronic News

Distributors this year have gone back in time—but there's no nostalgia. Nearly all the revenue gains they made during the upturn have vaporized and total projected revenues for this year are just above 1999 levels.

The top 25 distributors as a group will have an estimated $30 billion in revenue this year—down 17 percent from last year's $36.1 billion. It's a slippery slope: Last year the top 25's collective revenue was down 18 percent from the year before. And though most distributors described 2001 as a year no one would forget, 2002 is certainly not one for the scrapbook. So, if 2001 was cited as one to forget, what does that make 2002?

"Forget that year, too. There's a two-year gap in memory here," said Robin Gray, executive VP of the National Electronic Distributors Association (NEDA).

For the full report on Distribution Trends 2003, see pages DT1 to DT24.

This year was supposed to bring recovery, albeit in the second half. Instead, this downturn has the staying power of chewing gum on the bottom of your shoe. The industry has sustained hits to its workforce, its profitability levels and average selling prices (ASPs). This year will also go down as among the worst in industry history. While some might argue that the recession in the 1980s was bad, most executives are convinced this one is far more severe. The best part of 2002, executives say, is that it's almost over.

"That's the good news," said Robert Klatel, executive VP of Arrow Electronics. "Obviously it's been tough for everyone. I think we can definitively say this has been the longest and deepest recession ever."

Analysts and other executives echoed that sentiment. "No one, myself included, believed it would last this long," said Joel Girsky, founder and CEO of Jaco Electronics Inc.

This downturn caught the industry completely by surprise. It hit so fast—in November 2000—that the industry at first believed it was a one- or two-quarter period of "inventory correction." The up-cycle that began in 1999 lasted barely a year, an abrupt change from the industry's historical pattern where the current economic cycle (up or down) lasts for at least eight quarters. But companies quickly learned this recession had some very strong teeth. Distributors went from reporting record-breaking sales and net income figures to ultimately reporting losses.

Distributors are a bit encouraged, though, that the bleeding has stopped. "Based on our numbers, I feel like we're going to be real close to flat," said Roy Vallee, CEO and chairman of Avnet Inc., about his company's calendar year results. "The biggest factor in the recovery is when product is readily available and lead-times are 'stocked' to 'zero' a lot of the inventory that would normally flow through distribution is going direct (from supplier to customer) and DTAM is shifting to TAM."

And, the news is not entirely bleak. There are encouraging signs in the market. Distributors have seen lead-times stretch on a few components, and overall unit sales have been on the rise. "The last few quarters, volumes have been increasing. It's just that prices have not," Gray said. "In 2003, we're likely to see improvement across the board … volumes are going up, so sooner or later prices have to respond."

Others agreed. "I believe the end-markets we serve are going to begin to grow [in 2003]," Vallee said. "The biggest driver continues to be the IT industry. In 2001, IT revenue fell for the first time, and 2002 is going to be very close to flat. We'll go into 2003 having just had two of the worst years in industry history. I'm betting that there won't be a third.

"Actually, I'm not betting. I'm predicting," Vallee said. "I just have the strong feeling that there is very, very little inventory in the supply chain and capacity has been pulled back as far as the suppliers can do it. Just a little bit of demand from the end-markets will create big ripples in the supply chain."

Vallee was more confident than most, though the distribution community is also hopeful for recovery in the coming year.

"We're there waiting for it. I know it's going to come, I just don't know when," Klatell said. "We have very little visibility right now, and that's been true for a while. There are no significant data points that give us guidance. That, in fact, is the situation we're in. No one has a great deal of visibility in the supply chain [but] in my heart, I believe we're in the bottom of the trough."