It’s hard, at times, not to get discouraged by all the negativity in the news these days.
Nortel just filed for bankruptcy, Motorola is laying off another 4,000 employees in an effort to cut costs and Lexmark has downgraded its fourth-quarter forecast because of soft sales. When we read these types of headlines day after day, it’s easy to miss the good stuff.
And Synnex has had some good news to announce over the last week. The distie earned $26.4 million in its fourth quarter, which ended on Nov. 30, compared to earnings of $20.2 million during the same time period the year before. So it actually gained market share, without sacrificing profits. As a result, the distie’s shares jumped more than 20 per cent last week.
So what’s the secret to its success? Has Synnex made major changes to its business model in order to weather the economic storm?
Nope. It hasn’t messed around with its credit offerings, for example, and says that credit still isn’t an issue for solution providers, despite the recession.
And clearly, it’s not taking a hit for this stance.
Synnex was also the one distributor that didn’t start charging handling fees to offset rising freight charges last year – an issue that ticked off many solution providers who felt they were being penny-pinched. Many industry-watchers, however, thought Synnex would eventually cave under the pressure, especially since rivals Ingram Micro and Tech Data were doing it.
But it didn’t. And that can only be a testament to a business model that actually works, and has been working for some time.
Over the past few months, many businesses have found themselves in the uncomfortable position of having to make radical changes, from restructuring operations to trimming head counts to freezing salaries to asking employees to take unpaid vacation leave.
But so far, the disties have been doing okay. And in Synnex’s case, it’s doing better than okay. In 2008, the distie earned $83.8 million on sales of $7.77 billion, compared to $63.1 million on sales of $7 billion the year before. Not bad.
The big IT distributors have weathered tough times before, such as the dot-com bust earlier in this decade, so perhaps they’ve got some experience behind them to help cope – and not panic under the weight of all the negativity out there.
With so much uncertainty about the coming year, many businesses haven’t provided predictions on net income for this quarter, unsure about the softness of markets. Many are in a wait-and-see mode.
But Synnex hasn’t shied away from making this prediction – it’s expecting net income in the range of $16.6 million to $17.6 million – since it says it has good control over its operations. And, recession or not, that’s good news.
