As Synnex Preps For CEO Change, Sales And Profit Surge

The Fremont, Calif.-based distributor saw its sales increase 16 percent in the third fiscal quarter ended Aug. 31 and its net income increase 53 percent for the same period. The numbers come just weeks after its chief competitor, Ingram Micro, cut its own third quarter outlook based on soft sales. (However Ingram's quarter ends this month, not in August, and its executives said September was softer than expected).

Murai is expected to replace Bob Huang when he steps down as president and co-CEO of Synnex. The transition is expected to happen around the start of Synnex's new fiscal year on Dec. 1, pending board approval.

"We obviously are very pleased with the third quarter. We addressed the market effectively," Murai said. More specifically, Murai said Synnex had a strong back-to-school season with second-tier retailers through its New Age Electronics group, particularly with notebooks and printers.

"We understand that back-to-school has been a bit muted across the board, but we performed well," Murai said.

Synnex's BPO services business also performed well and was a "significant component to our profitability," Murai said.

Synnex's distribution sales with VARs was also strong due to enhanced marketing programs, particularly around its nascent VARnex community, Murai said. "We probably grew faster than the market organically and we did it by executing better than the competition."

The company earned $22.1 million, or 66 cents per share, on revenue of $2.05 billion. The numbers compare to earnings of $14.4 million, or 44 cents per share, on $1.76 billion in the year-ago quarter. Analysts had estimated earnings of 58 cents per share and revenue of $1.96 billion for the third quarter, according to Thomson Financial. It marked the 85th consecutive profitable quarter for the company.

The quarter included a $1.7 million net of tax charge related to restructuring of its Canadian operations and a $1.1 million reduction in income tax expense, according to the company.

Synnex has long been known to be more price aggressive than competitors Ingram Micro and Tech Data, but a senior-level executive at a competitor recently said that is not as true anymore.

"It's our MO to get paid fairly for what we provide to customers and vendors. Will we walk from unprofitable business? Absolutely. But what comes before that is working with customers, work with vendors on more profitable sales growth opportunities," Murai said.

For example, Synnex is pushing more VARs toward digital signage, a higher-margin and less-commoditized solution sale, Murai said.

"It's still in relatively early stages, but we're going out and training our customers how to sell that and how to articulate the return that certain verticals can get. We're also working with vendors to get the marketing message out there," he said.

Meanwhile, as Murai continues the transition with the expectation to take the reins before the end of the year, he said he won't forget what helped Synnex report its 85th consecutive profitable quarter.

"Bob [Huang] is not going to step out of the company. He will maintain some role. He will likely be chairman of the board but probably retain some strategic oversight. Honestly, I wouldn't have it any other way. It's a huge advantage to leverage the knowledge he brings to the business," Murai said.