Arrow Electronics Inc.'s (ARW) second-quarter profit tumbled 78%
on weak sales and restructuring costs,and it announced an
additional $100 million in cost-savings moves.
"The cost savings we have generated to date have not been enough
to offset both the sales declines and margin pressure we have
experienced during this downturn," said Chief Financial Officer
Paul J. Reilly.
The latest cost reductions are expected to be implemented by
year's end, primarily in Arrow's European operations. Reilly called
the actions - details which weren't disclosed - "necessary" to help
the company reach its long-term goals."
The distributor of semiconductor products to computers and
electronics makers has rushed to cut costs to keep up with
declining sales. Last month, Arrow said its European components
business was particularly weak in the quarter.
Chip demand has started to improve and prices are recovering as
manufacturers cut output, but analysts say the growth is mostly due
to inventory corrections. And with rising unemployment and credit
still scarce for consumers, it is unclear whether chip makers will
be able to grow after the supply chain gets back in line.
Arrow reported earnings of $21.1 million, or 18 cents a share,
down from $96.2 million, or 79 cents a share, a year earlier.
Earnings excluding restructuring and other charges, earnings fell
to 31 cents from 84 cents.
Revenue fell 22% to $3.39 billion.
Last month, Arrow trimmed the high-end of its earnings target,
putting the projection at 26 cents to 31 cents, while lowering its
revenue view to $3.05 billion to $3.65 billion.
Gross margin fell to 11.9% from 14.1%.
Arrow projected third-quarter earnings of 25 cents to 37 cents a
share on revenue of $3.1 billion to $3.7 billion. Analysts on
average expected 32 cents and $3.37 billion, respectively,
according to Thomson Reuters.
Shares closed at $24.51 Tuesday, and were inactive premarket.
The stock has more than doubled from its nearly six-year low in
November, but is still under the high of $36 set in August.
-By John Kell and Mike Barris, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com