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Arrow eyes services and UC boost after robust Q1

Distributor's CEO outlines plans to widen value-add portfolio after 23 per cent Q1 sales spike

Distribution monolith Arrow is planning to expand its higher-margin services and hosting portfolio after boosting sales and operating margins in 2011's first quarter.

The Long Island-based distributor saw Q1 sales rise 23 per cent year on year to $5.2bn (£3.1bn), with operational income growing more than 50 per cent to $219.2m. This translates to operating margins of more than four per cent, compared with about 3.4 per cent in the corresponding period last year.

Arrow saw components sales rise 24 per cent annually to $3.89bn during 2011's first quarter. Revenue for its value-add Enterprise Computing Solutions (ECS) business rose 21 per cent to $1.34bn.

The distributor claimed Q1 saw strong sales of servers, storage and services. Looking forward, it claimed its diversification into areas such as security networking and virtualisation will allow it to "capitalise on the next wave of IT spending growth".

Second-quarter revenue is projected to be between $5.55bn and $5.95bn, with components sales contributing $4bn to $4.2bn, and ECS adding $1.55bn to $1.75bn to the top line.

In Arrow's Q1 earnings call, transcribed by Seeking Alpha, chief executive Michael Long outlined his plans to boost his firm's value-add portfolio.

"We have gone into the unified communications business; we believe that business has legs," said Long. We believe there's more around the services portfolio that we can add. We certainly believe there's more work to be done around the cloud and software as a service. And we'll continue to home in on products that fall within the datacentre that have an impact on the cloud.

"And what's interesting is that people are building out their private clouds. We are already a large supplier to those types of customers and that will have a positive impact on the core business. But, all in all, we've put some stakes in the ground and we'll continue to build out the service and revenue opportunities there."