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Arrow Electronics

Analysts Su Chen Thanh Le Gina Huang Presented: November 17, 2011. Arrow Electronics. Business Summary. Arrow Electronics, Inc. distributes products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions worldwide.

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Arrow Electronics

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  1. Analysts Su Chen Thanh Le Gina Huang Presented: November 17, 2011 Arrow Electronics

  2. Business Summary • Arrow Electronics, Inc. distributes products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions worldwide. Locations: 340 locations in 52 countries Corporate Headquarters: Melville, New York Customers: 115,000 2010 Sales:$18.7 billion Global Components:$13.2 billion ECS:$5.6 billion Employees:12,700; Suppliers:1,200 Fortune 500 Rank:140 Source: Arrow 2010 Annual Report

  3. Arrow Worldwide Source: Arrow 201 Fast fact

  4. Global Customer Base Source: Introduction to Arrow Electronic_9_16_2011 pg. 4

  5. Electronic Components Source: Introduction to Arrow Electronic_9_16_2011 pg. 10

  6. Electronic Components • Core Drivers • Broad line card –1,200+ suppliers • Broad customer base –100,000+ • Engineering focus • Demand creation • Value-added programs • Differentiators • Global strength and depth • Design win performance • Highest ranked level of customer service • Industry leading operating margins • Financial resources Source: Introduction to Arrow Electronic_9_16_2011 pg. 11

  7. Enterprise Computing Solutions • Enterprise Computing Solutions (ECS) – 30% of 2010 ARW Revenue • Arrow ECS is the global business group that provides enterprise and midrange computing products, services and solutions to value-added resellers and system integrators • -ECS Americas –72% of ECS sales • --4 Billion • -ECS Europe –28% of ECS sales • --1.6 Billion • Differentiators • Customer service • Customer and OEM relations • Solutions focused • Non-compete relationship with reseller customers • Unparalleled line card • Core Drivers • Small and medium sized customers –13,000 VAR partners • Business continuity • Server consolidation • Compliance/regulatory environment • Engineering and technical expertise • Education and training services • Enterprise Solutions Centers (Atlanta & Minneapolis) • Financing programs • Business development & marketing expertise • Innovation and investments Source: Introduction to Arrow Electronic_9_16_2011 pg. 12

  8. Industry Structure Source: IBISWorld

  9. Wholesale Annual Sales Growth Source: First Research

  10. Industry Trends, Opportunity, Challenge, external revenue drive Source: First Research & IBISWorld

  11. Per Capital Disposable Income Source: IBISWorld

  12. Products & Services • Major products: • semiconductors (computer chips); • connectors; • electromechanical devices. • Other products • disk and tape drives, • computer subsystems, • microwave and fiber optic components, • transistors, • diodes, • power supplies, • switches. • Services: • purchasing; • marketing; • warehousing; • packing, shipping, and delivery; • customized packaging • private labeling • minor repair and refurbishment • simple assembly. Source: IBISWorld

  13. Global Semiconductor Sales Source: First Research

  14. Demand for communications equipment • Expanding consumer and enterprise reliance upon voice, video and data communications has increased demand for carrier network bandwidth. • Demand for wireless handsets over the next five years will be influenced by the degree to which consumers respond to an increasing number of products with multimedia capability and with functions previously found in other products. Source: First Research

  15. Demand for electronic parts • Demand for electronic components will be promoted by the continued substitution of mechanical devices for electronic devices and growth in sales of final electronic products. • Adversely effected by slow growth in final electronic product manufacturing industries Source: First Research

  16. Domestic Industry Forecast Source: First Research

  17. Global Strategy Drive growth in the core, services & high-growth product sets Source: Introduction to Arrow Electronic_9_16_2011 pg. 6

  18. Source: Introduction to Arrow Electronic_9_16_2011 pg. 7

  19. Powering the Supply Chain: ECS Source: Introduction to Arrow Electronic_9_16_2011 pg. 13

  20. 10 years price performance Source: Capital IQ

  21. 10 years revenue performance Source: Capital IQ

  22. Financial Ratios Growth Source: Arrow Electronic website

  23. Acquisition Activities 2011 Nu Horizons Electronics Corp. On January 3, 2011, the company acquired Nu Horizons Electronics Corp. ("Nu Horizons"), a global distributor of advanced technology semiconductor, display, illumination, and power solutions to a wide variety of commercial OEMs and electronic manufacturing services providers. This acquisition builds on the company's strategy to expand its global capabilities, particularly in the fast-growing Asia Pacific region. Source: Arrow Electronic 2010 Annual reports

  24. Acquisition Activities 2011 Richardson RFPD On October 1, 2010, the company announced an agreement to acquire all the assets and operations of the RF, Wireless and Power Division ("RFPD") of Richardson Electronics, Ltd. ("Richardson") a leading value-added global component distributor and provider of engineered solutions serving the global radio frequency and wireless communications market. This acquisition supports the company's strategy to expand its portfolio of products and strategic capabilities, such as value-added services, to help it meet the evolving needs of its suppliers and customers. The acquisition is done. Source: Arrow Electronic 2010 Annual reports

  25. Acquisition Activities 08-10 • In February 2008, it acquired the components distribution business of Hynetic Electronics and Shreyanics Electronics ("Hynetic") in India. • • In February 2008, it acquired all the assets and operations of ACI Electronics LLC ("ACI") • In December 2008, it acquired Excel Tech, Inc. ("Excel Tech") • In December 2009, it acquired A.E. Petsche Company, Inc. ("Petsche") Source: Arrow Electronic 2010 Annual reports

  26. Acquisition Activities 08-10 • In April 2010, it acquired Verical Incorporated ("Verical") • In June 2010, it acquired PCG Parent Corp. • In August 2010, it acquired Transim Technology Corporation ("Transim") • In October 2010, it acquired Eshel Technology Group, Inc. ("ETG") • In December 2010, it acquired all of the assets and operations of INT Holdings, LLC Source: Arrow Electronic 2010 Annual reports

  27. Competitors

  28. Competitors Financial Ratio

  29. Multiple

  30. ARW valuation

  31. Recommendation • Current price: $37 • Recommendation: Put on the watched list

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