Synnex's stock sags after disappointing forecast

Synnex's stock falls after disappointing outlook underscores company's exposure to PC industry

Associated Press

SAN FRANCISCO (AP) -- Synnex Corp.'s stock slid by more than 5 percent Wednesday after the high-tech contractor become the latest company connected to the personal computer industry to disappoint Wall Street with its outlook.

THE SPARK: After the stock market closed Tuesday, Synnex released its fiscal third-quarter earnings and provided guidance for the current quarter ending in November.

While the results for the past quarter fell in line with analyst projections, Synnex's projections were a letdown. The company, which is based in Fremont, Calif., forecast fiscal fourth-quarter earnings of $1.02 to $1.06 per share on revenue of $2.71 billion to $2.81 billion. Analysts, on average, had projected of $1.16 per share on revenue of $2.86 billion.

The letdown prompted some analysts to lower their earnings estimates. Raymond James analyst Brian Alexander dropped his price target on Synnex's stock from $40 to $38.

THE BIG PICTURE: Synnex provides a variety of services, from assembly to product distribution, for a range of high-tech companies. Most of them have ties to the personal computer industry, which is suffering a sales slump as more consumers and businesses embrace tablet computers, such as Apple Inc.'s iPad. Synnex's biggest customer is Hewlett-Packard Co., the world's biggest PC maker.

HP is mired in a slump and other PC-dependent companies such as chip maker Intel Corp. have warned their sales are tapering off.

THE ANALYSIS: The high exposure to the fortunes of the PC industry is raising concerns that Synnex is suffering peripheral damage. This marks the third straight quarter in which Synnex's financial forecast has fallen below analyst estimates.

Raymond James' Alexander said one positive spot for the company is its business services segment, where investments seem to be paying off. Growth remained strong and the company improved profit margins in this part of the business for the second straight quarter, he said.

SHARE ACTION: Synnex's stock fell $1.90, or 5.6 percent, to $32.35 in afternoon trading. Shares have changed hands between $23.19 and $44.25 in the past 52 weeks.

View Comments (0)