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Software and services mix starting to deliver for Arrow ECS

The latest set of financial numbers from the distributor reveal a business in transition as it moves away from a reliance on hardware sales

Arrow ECS is making the transition to software look fairly straightforward with the distributor managing to offset the decline in hardware revenues.

The firm's enterprise computing solutions business saw sales in Q4 decline by 21% to $2.45bn with hardware sales dropping year-on-year by $250m.

That decrease was offset by software sales and the firm was keen to talk up the positives from the Q4 numbers.

“Full-year 2016 global enterprise computing solutions operating income grew 4 percent year over year, and we believe this is the best measure of our business,” said Michael Long, chairman, president and CEO of Arrow.

Q4 net income rose from $158m to $165m on sales of $6.44bn, which were down by 5% from a year earlier.

Arrow ECS saw sales decrease by 22% in Europe with the impact of acquisitions and exchange rates partly to blame for that drop. Operating income was up and the distributor reported growth in security and virtualisation software sales and services.

The firm also has an electronics business side and Long said that it had been able to develop a strong portfolio that would see it gaining more business into 2017.

“Our digital transformation and IoT solutions spanning from sensor to sunset helped drive record full-year sales and earnings per share,” he added “Our customers value our comprehensive portfolio of electronic components and embedded computing, datacenter, cloud, and reverse logistics solutions.”

Full year numbers showed improvements in net income to $523m from $498m and revenues nudging upwards from $23.28bn in 2015 to $23.83bn.

Looking forward the distributor is expecting exchange rates will continue to have a negative impact, with it forecasting a potential $70m hit to growth in the firm's first quarter, compared to last year.

“We delivered record results in 2016, and our business is increasingly differentiated from the competition. We have a built a solid foundation for 2017 and into the future,” said Long.

Going forward the hardware sales might well pick back up with the firm getting the green light to be a Dell distributor building on its previous relationship with EMC.

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