Avnet Inks Deal to Offer HP ConvergedSystem 700 in U.S. - Analyst Blog

Avnet, Inc. (AVT) expanded its technology solutions portfolio by announcing the availability of ConvergedSystem 700 solutions powered by Hewlett-Packard Co.'s (HPQ) OneView infrastructure for its channel partners in the U.S.

H-P's converged infrastructure solutions bring together servers, storage and networking products to manage data centers from a common platform. Additionally, the converged platform has been designed to make data center handling simpler, more flexible, efficient and cost effective. These solutions are used by companies that deal in Big Data and cloud computing technology.

This open standards-based software-defined networking (SDN) solution will provide enhanced performance and secure connectivity. SDN enables customers to enjoy increased bandwidth utilization, higher reliability and reduces capital spending. Another important factor for choosing SDN technology is that it is applicable for both private and public cloud infrastructures.

The companies are expected to benefit from this new technology as it is a flexible yet affordable solution that is likely to meet growing business needs. Avnet's role in bringing this solution to market was disclosed at HP Discover 2014, held in Barcelona, Spain.

Avnet has the reputation of converging multi-vendor solutions that cater to the customized needs of its clients. Apart from this, the company is a key distributor of electronic components and computer products. It offers a wide range of products such as semiconductors, computer products, passives and electromechanical connectors. Thus, the company's revenues depend on the overall IT spending environment.

Per the U.S. research firm Gartner, overall IT spending is expected to grow 2.6% in 2014 to $3.8 trillion. The 2014 forecast was increased from the earlier projection of 2.1% growth driven by better-than-expected demand in devices, data center systems coupled with exchange rate fluctuations. These predictions bode well for Avnet's Technology Solutions segment deriving revenues from the distribution of enterprise computing servers and systems, software, storage and related services. In fiscal 2014, revenues from the segment increased 5.7% from the year-ago period.

Also, IDC's prediction that SDN network applications will generate $1.1 billion by 2017 bodes well for the company.  

In addition to securing deals and enhancing channel relations, the company has been prudently growing through acquisitions.  They not only boost the company's product portfolio but also strengthen revenue streams.

Nonetheless, a significant portion of Avnet's revenues comes from the sale of semiconductors, which is a cyclical industry characterized by changes in technology and manufacturing capacity and subject to significant market fluctuations.

Additionally, competition from Arrow Electronics (ARW) and Ingram Micro (IM) remains a headwind.

Currently, Avnet has a Zacks Rank #3 (Hold).