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Arrow to Buy Computerlinks for $300M

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Arrow Electronics (ARW) has agreed to acquire Munich-based Computerlinks for $300 million. The acquisition, expected to close in the fourth quarter of the current fiscal year, will add approximately 20 cents to 25 cents (excluding the impact of amortization of related intangible assets) to Arrow’s earnings per share for the year.

Computerlinks, a distributor of value-added IT services and solutions, has operations all over the world. The company provides IT security and Internet Technology solutions and services to hardware and software manufacturers. Furthermore, the company has been expanding into cloud-based services. The acquisition is expected to synergize with Arrow’s value-added services portfolio.

Arrow Electronics provides a wide range of value-added services to help customers reduce their time to market, lower their total cost of ownership, introduce innovative products through demand creation opportunities and enhance their overall competitiveness.

The acquisition would also help Arrow gain traction in the emerging data center market. Additionally, the product portfolio of Computerlinks will enhance Arrows Enterprise computing solutions (:ECS) offerings. Arrow’s ECS has partnerships with many companies such as Check Point (CHKP), Juniper (JNPR) and International Business Machines (IBM), which provides varied products and services related to security and networking to its clients.

Arrow has been very active on the acquisition front, having purchased seven companies in 2012 alone. These acquisitions were intended to enable Arrow to enter new markets, diversify and broaden its product portfolio and maintain its leading position in the world. Moreover, the company’s continued acquisitions are expected to be a robust contributor to its revenue stream, going forward.

Moreover, the company’s prospects are dependent on IT spending. As per the U.S. research firm Gartner, overall IT spending is expected to grow 4.1% in 2013. The improvement in spending will be mostly driven by enterprise software and IT services.

Arrow’s Global Enterprise Computing Solutions segment deals in the enterprise software and IT services areas and generates roughly 50.0% of the company’s annual billings. Thus, the acquisition should bode well for the company.

Its positive commentary about enhanced productivity, annual cost savings and successful ERP implementation across Europe is encouraging. We believe that Arrow could get better contribution from Europe after the ERP program becomes operational.

Currently, Arrow has a Zacks Rank #1 (Strong Buy).

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