Avnet Interim CEO: I'd Assume I'm The Frontrunner For Permanent Job

Former Lenovo CEO Bill Amelio believes he will be named the permanent leader of Phoenix-based distribution powerhouse Avnet after temporarily filling the top post.

"I would assume I'm the frontrunner," Amelio said during an earnings call Wednesday. "I expect the search to be done relatively rapidly, and I'm hopeful for good news sometime in the future."

Amelio said serving as interim CEO since July 11 and working with Avnet's world-class management team has been incredibly exciting, leaving him "very interested" in the permanent CEO role. Amelio replaced Rick Hamada, who stepped down last month after leading Avnet for more than five years.

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"I think we're in a great market," Amelio said. "I think this is a great opportunity."

Amelio acknowledged, though, that Avnet's board of directors has a fiduciary responsibility to carry out a credible CEO search and make sure that no stone is left unturned. Amelio has sat on Avnet's board since May 2014 and remains on the board while serving as interim CEO, though he is no longer a member of the board's compensation or audit committees.

Avnet said year-over-year revenue for its fiscal 2016 fourth quarter ended July 2 dropped 8.4 percent from $6.8 billion last year to $6.23 billion this year. That edged out Seeking Alpha's estimate of $6.21 billion.

Net income plummeted by 39 percent from $158.7 million last year, or $1.15 per share, to $96.8 million this year, or 75 cents per share. On a non-GAAP basis, net income tanked by 29.6 percent from $159.5 million last year to $112.3 million this year, or 86 cents per share, missing Seeking Alpha's projection of 88 cents per share.

For Avnet's 2016 fiscal year, which also ended July 2, sales fell by 6.1 percent to $26.22 billion from $27.92 billion in fiscal 2015. Net income tumbled 11.4 percent to $506.5 million this year, or $3.80 per share, from $571.9 million in fiscal 2015, or $4.12 per share.

"We have, over the course of the last several quarters, lost a bit of ground," Amelio said. "We have not performed to your expectations or our full potential."

Amelio plans to visit Avnet locations around the globe over the next couple of months to get a better understanding of the local markets and what it will take to succeed. Amelio said he's dedicated to identifying and doubling down on the profit-generating sources within Avnet, as well as fixing or exiting Avnet's areas of poor profitability.

"We participate in a rapidly changing technical marketplace, and it is imperative that we make steady progress toward our strategic initiatives," Amelio said. "And when that progress stalls, we must quickly correct course and make sure we have the right people and adequate resources to win in the marketplace."

To that end, Amelio said he's focused on building a stronger bench of talent by working with Avnet's management teams and putting future leaders in challenging roles in critical, high-growth markets so that the next generation can develop more leadership capabilities.

Amelio plans to instill a greater sense of urgency within Avnet by rolling out new business management systems that emphasize accountability, address organizational barriers and allow the distributor to work more effectively through collective operating groups.

And while Amelio values Avnet's strategic initiatives around the Internet of Things, digital technologies and improved experience, he said the distributor must accelerate its progress toward long-term financial goals as it relates to both margins and returns.

To get there, Amelio said Avnet must leverage its strength around sales, operations, and vendor and solution provider relationships to achieve growth and more consistent execution.

Investors sent Avnet's stock down 1.5 percent in trading Wednesday, to $40.87 per share, after the release of the quarterly results, which happened before the market opened.

Avnet Technology Solutions (TS) saw revenue drop 7.8 percent, to $2.29 billion, as year-over-year declines in server and storage system sales outpaced growth in services, software and networking revenue. All three of the distributor's regions experienced sales drops.

Technology sales in the Americas dropped for the third consecutive quarter, falling 7.6 percent to $1.38 billion.

In Asia, Avnet saw its eighth consecutive quarter of double-digit technology revenue declines, with year-over-year sales ending 20.8 percent lower, at $283.9 million. Europe, the Middle East and Africa (EMEA) recorded their third consecutive quarter of declining sales, with revenue falling 0.7 percent to $620.8 million.

For its current quarter, Avnet said it expects earnings per share between 84 cents and 94 cents and revenue in the range of $5.8 billion to $6.4 billion. Thomson Reuters had been projecting revenue of $6.12 billion on earnings of 85 cents per share.

Technology solution sales are expected to be in the range of $1.9 billion to $2.2 billion in the quarter.