Five key takeaways from Arrow's annual results

We've sifted through Arrow's Q4 and annual numbers, so you don't have to

'Big Four' shake-up hasn't harmed Arrow

While its three key global rivals have all been distracted by ownership changes of late, Arrow has just closed the books on "the most successful year in our 83-year-old history", according to its CEO Michael Long.

An 18 per cent sales hike in the final quarter of the year propelled Arrow's total 2017 revenue haul to $26.81bn (£19.3bn), a 13 per cent rise. Ignoring a $125m hit from changes relating to US tax regulations, net income also rose handsomely, from $182m to $224m.

Having struggled in previous quarters, Arrow's Enterprise Computing Solutions (ECS) arm was back on song in Q4, recording a 10 per cent hike in revenues to $2.69bn. But its components arm remains the star of the show, with revenues booming 24 per cent to $4.94bn.

"We delivered unprecedented growth in 2017. This growth validates our strategy and inspires us to push forward to 2018 and the years ahead," Long said on a conference call, a transcript of which can be found here.

Rivals Tech Data and Ingram have endured more mixed fortunes of late. Although the former branded Q3 its best ever quarter, it admitted the division that houses its newly acquired Avnet business had struggled. Ingram, meanwhile, was last month forced to bat off rumours it could be sold on by its new Chinese owner.

Storage has reached a turning point

The storage market has been in the doldrums, with sales in EMEA declining for 10 consecutive quarters between Q1 of 2016 and Q2 of 2017, according to Gartner.

But the storm is now over, according to Arrow, which said the market reached a "turning point" during Q4, with new form factors driving growth of its storage revenues in both the Americas and EMEA.

"Last year, we really thought that the storage piece would cross over in the third quarter," Long explained.

"It actually happened in the fourth quarter that we saw the growth… What's exciting or what actually drove us down was there was a pretty good budget flush on hardware, and that changed our mix a bit. But I still read into that as good news."

Cloud now a $1bn-a-quarter business for Arrow

The 10 per cent sales rise at ECS was underpinned by "strong growth" in infrastructure software and cloud sales, Long said on the call.

Asked about where Arrow is versus its $1bn cloud services quarter run rate target, Long indicated the distributor is "on track".

"If we basically take out December, we exceeded the $1bn run rate," he said. "It's still growing at a strong rate. It's going to be exciting. And since you asked about that, we might as well tell you that digital is well over the $1bn mark at this point in time, too. So both of those activities are ramping and going very strong."

ERP banana skin has been avoided

As rival Westcon's recent painful experiences go to show, distributors often endure a serious disruption in trade when deploying new back-office systems.

But Long said that Arrow is not expecting any "down trouble or any problems with inventory or bookings and billings" from a North American ERP rollout in Q4.

"The good news is we just completed the journey," Long said. "North America was the last journey. And so, we're really happy to have that behind us, and now we feel like we can just turn things loose. And I think you're just going to see the growth continue."

Europe no longer a drag on results

Having been a problem child for Arrow ECS in previous quarters, Europe was back on song for the distributor in Q4.

ECS's European revenues rose by 19 per cent to $971m (although in constant currencies growth was a more modest eight per cent).

Long also indicated that Arrow may see some additional demand in the region driven by the arrival of GDPR in May.

Arrow has a "healthy" outlook for Europe this year, ECS global president Sean Kerins added.

"It's hard to call it precisely, but I think so far this year, out of the gate, we're seeing some good momentum. And as I said earlier for the business overall, also good backlog exiting Q4 2017," he said.