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Avnet to Distribute SAP's Solutions

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Electronics and IT distributor, Avnet Inc. (AVT), is set to distribute software solutions related to analytics, big data and enterprise mobility from SAP AG (SAP) in the U.S. and Canada per an agreement signed between the two companies. Avnet will also distribute the SAP HANA data base platform.

The current deal extends Avnet’s existing distribution agreement with SAP covering a number of countries in the Asia Pacific region including China, India, Indonesia, Malaysia and Singapore. Avnet has significantly boosted SAP’s global reach through its strong network of channel partners.

The current agreement is expected to place Avnet in a strong position in the enterprise software market compared to its prime competitor Arrow Electronics (ARW). According to market research firm Gartner, enterprise software spending is expected to increase 6.4% in 2013 and 6.6% in 2014 to $304 billion and $324 billion, respectively.

Separately, Avnet’s recent agreements with TechNexion and Cisco (CSCO) are also expected to expand the company’s product offering. The agreement with Cisco to distribute its high-value specialty data center products in Latin America and the Caribbean is a positive for Avnet and should further strengthen its core business of distributing electronic components.

The TechNexion agreement will help Avnet to provide low-cost and high-value embedded System-on-Modules to its original equipment manufacturer customer base which will significantly lower customers’ costs and cut the product development cycle short.

We remain optimistic about Avnet’s leading position in electronics distribution, continuous cost cutting initiatives and acquisition synergies. The company’s acquisitions have been prudent, enabling it to expand its product portfolio and add to its revenue streams.

However, a sluggish macroeconomic environment coupled with a tepid IT spending projection and competition from other electronic component distributors remain headwinds, going forward.

Currently, Avnet has a Zacks Rank #2 (Buy).

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