Arrow Electronics has issued a profit warning ahead of its second quarter results, and will close its personal computer and mobility asset disposition business by the end of this year.
“While we are disappointed that our anticipated results for the second quarter are lower than we had initially expected due to deteriorating demand conditions in the global components business, we remain confident in our long-term strategy and our ability to generate strong cash flow,” said Michael J. Long (pictured), chairman, president and chief executive officer. “Arrow Electronics has built a resilient business model comprising a broad portfolio of technology solutions. As we look to the rest of 2019 and beyond, we are taking decisive actions to preserve profits while maintaining our engineering and value-added capabilities to continue to guide innovation forward.”
The company expects to report total second quarter 2019 sales of approximately $7.30 billion, with global components sales of approximately $5.25bn, and global enterprise computing solutions sales of approximately $2.05bn. Expectations were for revenues to be in the $7.6bn range.
The shutdown of its personal computer and mobility asset disposition business will impact the UK, Sweden and Belgium in Europe as well as the US.
“After careful market analysis indicating that business dynamics have changed since we entered this market, we have decided to wind down operations at our personal computer and mobility asset disposition business,” said Long. “This will allow us to continue to focus on our cross-enterprise strategy to enable next-generation technologies such as artificial intelligence, industrial automation, smart cities and vehicles.”
As a result of winding down the personal computer and mobility asset disposition business, the company expects to incur charges of approximately $115 million.
The company also plans to slash $130m from its cost base by year end, which will include job cuts.
“Our cost reduction program reflects our thoughtful approach to improving efficiency while continuing to deliver the high levels of engineering and supply chain services our customers expect,” said Chris Stansbury, senior vice president and chief financial officer. “We are laser-focused on improving profit performance and capitalising on the opportunities created by the convergence of information technology with operational technology.”
Full second-quarter results, and guidance for the third quarter of 2019 on August 1.