Arrow points to European cost cuts

Distributor eyes cost base in Europe after posting a 22 per cent drop in quarterly sales

Distributor Arrow Electronics plans to shave a further $100m (£61m) off its cost base in the second half of 2009, primarily relating to its European operations.

Although its second-quarter profits came in at the high end of its revised forecast, Arrow admitted that its enterprise computing solutions (ECS) arm’s performance trailed expectations.

The New York-listed distributor posted total revenue of $3.39bn, down 22 per cent on an annual comparison. Net profit fell from $96.2m to $21.1m year on year.

Chief financial officer, Paul Reilly, claimed the further savings Arrow had earmarked - the majority of which will come on this side of the Atlantic - were justified given the reality of the market.

“We believe these actions are necessary to properly position our company to move forward with our long-term objectives, and should result in business simplification and alignment with market opportunities,” he explained.

Quarterly ECS sales stood at $1.12bn, down 19 per cent on last year. Excluding the contribution of recent European acquisition Logix, ECS sales dropped 24 per cent, year on year.

“ECS sales were at the low end of our expectations, due to lower demand and IT spending, as capital-intensive projects continue to be highly scrutinised,” confirmed chief executive Michael Long.

Global components sales fell 23 per cent to $2.27bn as Arrow pointed to continued weakness in Europe.

But Long remained upbeat overall. “This quarter’s results were at the high end of our updated expectations, and we delivered on our commitment to radically simplify the business while remaining focused on our long-term goals,” he said.