Arrow CEO Long Eyes More Software Solutions Growth, Shares Rise After Record Q4 Results

Arrow Electronics Inc. CEO Mike Long says the enterprise solutions distributor is aiming to capture an even bigger piece of the software pie in key areas like security and big data after the company posted "record" quarterly results.

"We are positioning our solutions portfolio to capture a greater piece of the rapidly growing opportunities in security, data analytics and converged solutions, and broadening our cloud-based offering to help our resellers transition to managed service provider business models," said Long in a conference call with financial analysts after the company posted results well above Wall Street expectations.

Long's comments came after Arrow posted earnings of $1.94 per share for the fourth quarter, 11 cents above the Wall Street consensus, on sales of $6.75 billion, well above the $6.36 billion Wall Street estimate.

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Arrow shares soared 7 percent Thursday, to $55.40, after what investment adviser Raymond James called a "bounce back quarter driven by strong execution." In after-hours trading Friday, Arrow shares were trading at $55.39.

Arrow Enterprise Computing Solutions (ECS) sales in the fourth quarter were up 10 percent, to $3.08 billion, compared with $2.8 billion in the similar quarter one year ago. Americas sales, meanwhile, were up 11 percent compared with the year-ago quarter.

"There were some really interesting drivers, when you think about it, and it was primarily around the software front," said Long. "We saw security software up pretty significant. We saw infrastructure software up pretty significant. And while it wasn't better growth than Europe, the proprietary server business was up in North America. So it was what I would say was one of those quarters that everything sort of hit at once for us."

Long praised Arrow's ECS sales team for helping solution providers drive "complete" solution sales. "That's pulling some of the other sales that we might have otherwise missed if we were just focusing on individual products like storage or a server or something like that," he said. "So we're in pretty good shape with the way we attack the market."

For the full year, ECS posted sales of $8.9 billion, compared with $8.45 billion. "Enterprise Computing Solutions delivered an exceptional year as our software-led solutions are well-aligned to changes with IT spending," said Long. "Our leading security offerings are matched to CIOs' top priorities, and analytics solutions are helping customers harness their own data to provide powerful insights and compelling new opportunities."

Sean Kerins, president of ECS for Arrow, told analysts that the distributor is "aggressively pursuing" its software-based solutions strategy. "What I call the software-defined or hyper cloud data center of the future, we think are all pretty good demand trends that we're well-positioned to participate in," he told analysts.

Kerins said the distributor's cloud strategy is aimed at "propelling our software-based solution strategy versus just cloud" for cloud's sake.

"Software is all about choice," said Kerins. "Customers may want to buy software in a traditional fashion or they might want to buy it on a subscription basis. Our job is to bring that choice to the market. As we do that, we make our sales really sticky by building a recurring revenue business model. So software is key to our solution strategy, and it's certainly going to be good from an annuity perspective going forward."