Avnet, Inc. · NASDAQ:AVT
Avnet — Investor Day (December 2002)
106 slides from Avnet's investor day presentation, December 2002
Slide 1: Welcome 2002 Analyst Day
Global Reach Superior Capabilities Deeper Relationships WELCOME 2002 Analyst Day Management Strength Distinctive Value Presentations will Begin at 10:00 a.m. Eastern Time Investment Opportunity
Slide 2: Avnet, Inc. Investor Relations
Global Reach Superior Capabilities Avnet, Inc. Deeper Relationships Creating Value for the Technology Supply Chain Management Strength John J. Hovis Vice President and Director Investor Relations Distinctive Value Avnet, Inc. Investment Opportunity
Slide 3: Forward Looking Statement
Forward Looking Statement This presentation contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management’s current expectations and are subject to uncerta
Slide 4: Human Model of Forecasting
Human Model of Forecasting “It will be soft landing…” “The industry is no longer cyclical…” “Things are so bad they will never improve…” Today Time Source: Adapted from H.S. Dent Forecast, The Economic Guide for Effective Financial Decision Making, October 2002, page 3 AVT Creating Value for the Tec
Slide 5: Back to the Future…
Back to the Future… November, 2000 December 2002 ¾ Shareholders Meeting ¾ Analyst Day at NYSE and Analyst Day at Stable sales / improving NYSE EPS Record sales & EPS in Meeting consensus for prior quarters Dec-02 quarter Below consensus for Dec-00 Stock undervalued, but Stock dropped nea
Slide 6: Avnet Snapshot
Avnet Snapshot FY02 Revenues $8.92 B ¾ Incorporated in 1955 [NYSE: AVT] $1.68B June 30 Fiscal Year End 18.8% AC ¾ ≈ $1.7 B Market Cap (11-29-02) EM 54.3% 26.9% ¾ ≈ 10,500 employees $2.40B CM ¾ 63 countries $4.84B >300 locations ¾ Businesses Spanning the Tech $0.72B 8.1% Supply Chain: ASIA El
Slide 7: Technology Supply Chain Market Leader
Technology Supply Chain Market Leader ¾ Largest technology distributor in net sales ($8,920 million FYE 2002) ¾ Preferred distributor for Suppliers ¾ Vital Link in the Technology Supply Chain Product Supplier Base OEMs & End Users Technology Supply Chain Physical Components Subsystems Informational
Slide 8: Management Strength
Management Strength Roy Vallee Chairman & CEO, Avnet, Inc. 26 Yrs OPERATING GROUP PRESIDENTS Andy Bryant Ed Kamins Rick Hamada Electronics Marketing Applied Computing Computer Marketing 25 Yrs 4 Yrs 20 Yrs CORPORATE EXECUTIVES Al Maag Ray Sadowski Chief Communications Officer Chief Financial Officer
Slide 9: Differentiators
Differentiators Market Leader Global Reach Brand Strength Superior Capabilities / Knowledge Capital Superior Product Knowledge Unique Service Models Longstanding Customer & Supplier Relationships Experienced Management / Depth Value / Differentiation Strategy Value Based Manageme
Slide 10: Agenda for the Day
Agenda for the Day Begin End Subject Speaker 9:30 am 10:00 am Coffee Reception 10:00 am 10:10am Welcome and Safe Harbor Statement John Hovis 10:10 am 10:40 am Enterprise overview Roy Vallee 10:40 am 11:30 am Financial Overview and 2nd quarter outlook Ray Sadowski 11:30 am 12:00 pm Q&A regarding firs
Slide 11: Roy Vallee, Chairman and CEO
Global Reach Superior Capabilities Avnet, Inc. Deeper Relationships Creating Value for the Technology Supply Chain Management Strength Roy Vallee Chairman and Chief Executive Officer Distinctive Value Avnet, Inc. Investment Opportunity
Slide 12: Distinctive Value … Spanning the Technology Supply Chain
Distinctive Value … … Spanning the Technology Supply Chain Electronic Component Electronic & End Manufacturers Computer User Semiconductors OEMs IP&E AVT Creating Value for the Technology Supply Chain 12
Slide 13: Avnet's Value Propositions
Avnet’s Value Propositions Contract Manufacturers Flextronics, Solectron, etc. Electronic Component Electronic & End Manufacturers Computer User Semiconductors OEMs IP&E Subsystem Manufacturers Disk Drives, Computer Boards, Flat Panel Displays, etc. AVT Creating Value for the Technology Supply Chain
Slide 14: Avnet's Value Propositions
Avnet’s Value Propositions Contract Manufacturers Flextronics, Solectron, etc. Avnet Electronics Electronic Marketing Component Electronic & End Manufacturers Computer User Semiconductors OEMs IP&E Subsystem Manufacturers Disk Drives, Computer Boards, Flat Panel Displays, etc. AVT Creating Value for
Slide 15: Avnet's Value Propositions
Avnet’s Value Propositions Contract Manufacturers Flextronics, Solectron, etc. Electronic Component Electronic & End Manufacturers Computer User Semiconductors OEMs IP&E Avnet Applied Computing Subsystem Manufacturers Disk Drives, Computer Boards, Flat Panel Displays, etc. AVT Creating Value for the
Slide 16: Avnet's Value Propositions
Avnet’s Value Propositions Contract Manufacturers Flextronics, Solectron, etc. Electronic Component Electronic & End Manufacturers Computer User Semiconductors OEMs IP&E Subsystem VARs Manufacturers Disk Drives, Computer Boards, Avnet Flat Panel Displays, Computer etc. Marketing AVT Creating Value f
Slide 17: Avnet's Value Propositions
Avnet’s Value Propositions Contract Manufacturers Flextronics, Solectron, etc. Avnet Electronics Electronic Marketing Component Electronic & End Manufacturers Computer User Semiconductors OEMs IP&E Avnet Applied Computing VARs Subsystem Manufacturers Disk Drives, Computer Boards, Avnet Flat Panel Di
Slide 18: Size of Technology Supply Chain We Serve
Size of Technology Supply Chain We Serve Total Available Market (Percentages Represent Year-Over-Year Growth Rates) Total TAM: $454 $362 $376 $421 $489 $540 600 10% 500 16% 24% 13% 12% 15% Revenue ($ billions) 400 13% 4% -20% 10% 10% 10% -15% 9% 300 14% 9% -2% 7% 200 100 35% -31% -1% 15% 22% 10% 0 2
Slide 19: Corporate Strategy
Corporate Strategy ¾Stay Focused on the Global Technology Supply Chain DTAM Market Size and Growth Rate TAM Market Size and Growth Rate Leverage Capabilities, Relationships and Knowledge AVT Creating Value for the Technology Supply Chain 19
Slide 20: Avnet Sales 1990 - 2000
Avnet Sales 1990 - 2000 $10,000 $9,915 $9,000 $8,000 $6,806 $7,000 $5,507 $5,916 (in $000’s) $6,000 $5,391 $5,000 $4,300 $3,548 $4,000 $3,000 $1,759 $2,238 $1,751 $1,740 $2,000 $1,000 $0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Pre-1998 Not Adjust for Kent Acquisition AVT Creating Valu
Slide 21: Avnet EPS 1990 - 2000
Avnet EPS 1990 - 2000 $2.50 $2.43 $2.16 $2.13 $1.90 $2.00 $1.66 $1.75 $1.50 (in $000’s) $1.08 $0.96 $1.00 $0.79 $0.86 $0.71 $0.50 $0.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: Standard & Poors; Split Adjusted, Diluted EPS Before Special Charges; Pre-1998 Not Adjusted for Kent
Slide 22: Distribution Industry Return on Capital
Distribution Industry Return on Capital Market Profitability ROCE – WACC (%) 6% 1996 – 2000 Avg. Profitability = 1.8% 4% Historical Forecast 2% 0% -2% 1989 – 1995 Avg. Profitability = (0.6%) -4% 2001 – 2006 -6% Est. Avg. Profitability = (1.3%) -8% Intensifying consolidation activity from ‘93 1994 19
Slide 23: Strategy
Strategy ¾Drive ROCE>WACC and Create Shareholder Value Educate Team Set Targets and Align Compensation Develop a Value-Based Management Culture AVT Creating Value for the Technology Supply Chain 23
Slide 24: Market Leadership
Market Leadership (In $ billions) Calendar Year 97 Prior Four Quarters Arrow $7.8 Avnet $8.9 Avnet * $5.4 Arrow $7.7 VEBA $3.7 Marshall $2.2 Future Electronics** $2.6 Pioneer-Standard $1.5 Pioneer-Standard $2.1 ** Future Electronics $2.1 Memec $1.7 Premier Farnell $1.0 Bell Micro $2.1 $0.0 $2.0 $4.0
Slide 25: Global Reach
Global Reach Norway Sweden Denmark U.K. Canada Ireland France Spain Korea U.S.A. Italy Japan Israel China Mexico India Taiwan Hong Kong Thailand Vietnam Philippines Indonesia Central Warehouses Brazil Australia Existing Locations South Africa Future, Planned Locations Chile Argentina - Customers in
Slide 26: Avnet Inc. Structure
Avnet Inc. Structure Board of Directors CEO CORPORATE CENTER Strategic Serv. Bus. CFO Planning OD Develop. CIO CCO Strategic Guidance & Fiduciary Stewardship EM AC CM Efficient & Value-Added Service Delivery SHARED BUSINESS SERVICES IT HR Legal Administration AVT Creating Value for the Technology Su
Slide 27: Strategy
Strategy ¾Leverage the Scale and Scope Created by our Market Position Lowest Cost Core Business Processes, e.g. Logistics, Using IT Increase Working Capital Velocity Leverage Relationships, Knowledge, and Avnet Brand Globally Accelerate Profitable Growth AVT Creating Value for the Technology
Slide 28: Products and Services Related Revenue
Products and Services Related Revenue ¾Services Related Physical Value Add Traditional Technical Distribution 40% Services Supply Chain Related 60% AVT Creating Value for the Technology Supply Chain 28
Slide 29: TAM vs. Direct TAM
TAM vs. Direct TAM 2002 TAM $376 billion est. 2002 Direct TAM $301 billion est. Services TAM Distribution $6 to $24 billion $75 billion est. AVT Creating Value for the Technology Supply Chain 29
Slide 30: Strategy
Strategy ¾Develop Services Business To: Differentiate Products Distribution Businesses Create New Services-Only Revenue Streams Address Direct TAM AVT Creating Value for the Technology Supply Chain 30
Slide 31: Distribution vs. Semiconductors
Distribution vs. Semiconductors Electronics Distribution vs. Semiconductor Industry Year to Year Revenue Growth Rates & Business Cycles 5 year cycle 8 year cycle Distribution: A Low 65.0% WW Semiconductors Consensus view that semi Beta play in Tech NA Component Distribution industry no longer "cycli
Slide 32: Worldwide Semiconductor Revenue vs. Growth Rates
Revenue vs. Growth Rates Worldwide Semiconductor Revenue 250 200 ($ Billions) 150 100 50 0 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: SIA/WSTS Positive Growth Growth < 5% Negative Growth Ele
Slide 33: Strategy
Strategy ¾Mitigate Semiconductor Cyclicality Grow Non-Semi Products Distribution Business Grow Services-Only Revenues Migrate to a More Variable Cost AVT Creating Value for the Technology Supply Chain 33
Slide 34: Grow People
Grow People ¾Skillsoft, Ingenium, Content Delivery Network (CDN) ¾GOLD Program 500 Executive Training Events Completed ¾Succession Plans Level 1,2, and 3 executives with plans required AVT Creating Value for the Technology Supply Chain 34
Slide 35: Avnet Executive Board
Avnet Executive Board RICK HAMADA JANICE MILLER President, Strategic Planning Computer Marketing 20 years 2 years DAVID BIRK STEVE CHURCH Chief of Staff Services Business Dev 23 years 12 years ANDY BRYANT AL MAAG President, Communications Electronics Marketing 5 years 25 years ROY VALLEE Chairman &
Slide 36: Strategy
Strategy ¾Grow People Succession Planning Executive Development Employee Development AVT Creating Value for the Technology Supply Chain 36
Slide 37: Avnet, Inc. Creating Value Strategy
AVNET, INC. CREATING VALUE STRATEGY Stay Focused on the Global Technology Supply Chain Drive ROCE>WACC and Create Shareholder Value Leverage the Scale and Scope Created by Our Global Market Position Develop Services Businesses Mitigate Semiconductor Cyclicality Grow People AVT Creating V
Slide 38: Ray Sadowski, Chief Financial Officer
Global Reach Superior Capabilities Avnet, Inc. Deeper Relationships Creating Value for the Technology Supply Chain Management Strength Ray Sadowski Chief Financial Officer Distinctive Value Avnet, Inc. Investment Opportunity
Slide 39: Revenue History
Revenue History $14.00 $12.81 ∆ – 30% $12.00 Revenue in $ Billions $9.92 $10.00 $8.92 $8.93 $8.00 $6.33 $6.81 $5.73 $6.00 Expectations Consensus $4.00 $2.00 $0.00 FY97 FY98 FY99 FY00 FY01 FY02 FY03 (E) AVT Creating Value for the Technology Supply Chain 39
Slide 40: Quarterly Revenue History
Quarterly Revenue History Avnet Enterprise Revenue History FY 2001 FY 2002 FY 2003 4,000,000 3,500,000 6 Quarters of Stable Revenues 3,000,000 2,500,000 2,000,000 Expectations 1,500,000 Consensus 1,000,000 500,000 - Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03(E) Avnet Inc. 3,188,591
Slide 41: Quarterly Earnings (Loss) Per Share
Quarterly Earnings (Loss) Per Share EPS from Continuing Operations (Before Special Charges) FY 2001 FY 2002 FY 2003 $0.80 $0.68 $0.69 $0.70 $0.56 $0.60 $0.50 Profitability Return to $0.40 $0.30 Gradual EPS Progress $0.20 $0.10 $0.05 $0.04 $0.01 $(0.00) $- $(0.02) $(0.01) Consensus $(0.10) $(0.16) Ex
Slide 42: Avnet: Managing What We Can Control
Avnet: Managing What We Can Control Gross Profit Margins Business Mix Expenses Variable / Fixed Costs Working Capital Customer / Product Mix Debt Balances Short vs. Long term Liquidity Cash Cushion Capital Structure Debt vs. Equity Return on Capital Employed AVT Creating Value for the Te
Slide 43: Managing Gross Profit Margins
Managing Gross Profit Margins Avnet Enterprise Gross Margins (Before Special Charges) AC FY 2000 FY 2001 19% Cycle Peak 16.0% 15.5% EM 15.3% 15.5% 15.1% CM 55% 15.0% 15.0% 14.8% 26% 15.0% 14.5% 14.1% 14.2% AC 14.0% 14.0% 12% 13.7% 13.5% 13.5% CM 21% Cycle Trough 13.0% EM 12.5% FY 2002 FY 2003 67% 12
Slide 44: Operating Profit Margin
Operating Profit Margin Avnet Enterprise Operating Profit Margins (Before Special Charges) FY 2000 5.61% FY 2001 FY 2002 FY 2003 6.00% 5.00% Slightly Improved Operating Income 4.00% 3.33% Margins … But not enough 3.00% 2.00% 1.22% 1.01% 1.04% 0.92% 1.00% 0.16% 0.00% (Sep-99) (Dec-99) (Mar-00) (Jun-0
Slide 45: Managing Expenses – Return to Profitability
Managing Expenses Ö Return to Profitability Cumulative Annualized Operating Expense Reductions (Before Special Charges) $403,460** 400,000 350,000 300,000 $$ Thousands 250,000 200,000 150,000 100,000 • Eight consecutive quarters of expense reduction $20,028* • Removed $400+ Million of annualized exp
Slide 46: Improving Working Capital Productivity
Improving Working Capital Productivity Days Sales Outstanding(1) Inventory Turns(2) 75.0 72.2 6.0x 69.7 5.4x 5.5x 70.0 5.0x 4.8x 4.9x 4.7x 65.0 61.2 61.3 61.9 4.5x 59.4 60.0 3.9x 4.0x 4.0x 55.0 3.5x 50.0 3.0x 01 02 02 02 02 03 1 2 2 2 2 3 -0 -0 -0 -0 -0 -0 - - - - - - Q4 Q1 Q2 Q3 Q4 Q1 Q4 Q1 Q2 Q3 Q
Slide 47: Managing Total Debt
Managing Total Debt Reductions in Total Debt (with Addback of A/R Securitization) FY 2001 FY 2002 FY 2003 3.90 $3.32 3.40 Eight consecutive quarters of debt reduction $1.8 Billion reduction in Total Debt $$ Billions 2.90 2.40 1.90 $1.73 $1.55 1.40 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-0
Slide 48: Liquidity: The Numbers
Liquidity: The Numbers $ Millions Capacity under multiyear bank credit facility $ 300 Capacity under A/R securitization program 350 Total Capacity 650 Amounts outstanding @ November 30, 2002 75 Total Current Available Borrowing Capacity 575 Cash and Cash Equivalents @ November 30, 2002 175 Total Ava
Slide 49: Liquidity: The Facts
Liquidity: The Facts ¾ Avnet can use its available credit lines to liquidate maturing 2003 debt, if needed. ¾ Cash generation plus available credit is more than sufficient to liquidate maturing 2003 debt. ¾ Avnet intends to attempt to access capital markets and complete an “affordable” debt offering
Slide 50: Avnet: Managing What We Can Control
Avnet: Managing What We Can Control Since December 2000 Quarter* [Start of Market Downturn] Reduced SGA $400+ M Annualized** Reduced WC $1.90 B (thru 11/30/02) Reduced Debt $1.77 B (thru 11/30/02) Liquidity $750 M Capacity *** * All numbers include the impact of foreign currency ** Proforma
Slide 51: Capital Structure – Financing Alternatives
Capital Structure Ö Financing Alternatives Scenario Do Nothing Debt Offering Securitization Expected 1. MYBF Secured Ö 1. MYBF Secured Ö 1. MYBF Secured Ö Results Yes Time dependent No, both MYBF 2. Liquidate maturing and not automatic and A/R 2003 LTDebt using 2. Depends on Market Securitization ca
Slide 52: Value Based Management
Value Based Management Education Shareholder Customer / Supplier Mix Value Creation Compensation Culture Return on Capital Employed AVT Creating Value for the Technology Supply Chain 52
Slide 53: Avnet's Financial Objective
Avnet’s Financial Objective Create shareholder value while stabilizing earnings growth and lowering Avnet’s ‘Beta’ Improve ROCE • Value Based Management Culture Accelerate earnings growth • Specialist divisions, Services, SG&A control Improve earnings growth stability • Balanced revenue portfo
Slide 54: Updated Guidance
Updated Guidance ¾ Cost Reductions: Achieved $80 Million in additional annualized expense reductions in Dec-02 quarter • Reducing Infrastructure in three areas: 1. Census 2. Facilities 3. IT There will be a special charge associated with expense reductions in Dec-02 quarter Full impact of cost
Slide 55: Updated Guidance
Updated Guidance December Quarter (Q2 - FY03) UPDATE Revenues: Growth 15% to 20% sequential (AC and CM); EM Flattish On Track Earnings: Growth Meet EPS consensus of $0.04 On Track March Quarter (Q3 - FY03) Revenues: Growth Expect revenues to be flattish with Sept-02 quarter No Change Earnings: Growt
Slide 56: Question & Answer Session
Global Reach Superior Capabilities Deeper Relationships Question & Answer Session Management Strength Followed by Lunch Break 12:00 – 1:00 Eastern Time Distinctive Value www.ir.avnet.com 480-643-7053 Investment Opportunity investorrelations@avnet.com
Slide 57: Rick Hamada, Avnet Computer Marketing
Global Reach Superior Capabilities Avnet, Inc. Deeper Relationships Creating Value for the Technology Supply Chain Management Strength Rick Hamada President Distinctive Value Avnet Computer Marketing Investment Opportunity
Slide 58: Avnet CM Divisional Structure
Avnet CM Divisional Structure Avnet Computer Marketing Avnet Hall-Mark Avnet Partner Avnet Avnet Enterprise North America Solutions Savoir/Enlaces/IDEA Solutions (Distributor) (Distributor) (Distributor/VAR) (VAR/Integrator) US & Canada Europe Australia Mexico United States AVT Creating Value for th
Slide 59: Avnet CM Key Suppliers
Avnet CM Key Suppliers * All Trademarks are the properties of their respective owners AVT Creating Value for the Technology Supply Chain 59
Slide 60: CM North America – Key Suppliers
CM North America – Key Suppliers FY '02 Sales Breakdown ORCL Cisco Other Compaq AVT SVCS HP ** IBM ** = HP product equivalent value AVT Creating Value for the Technology Supply Chain 60
Slide 61: CM Europe – Key Suppliers
CM Europe – Key Suppliers FY '02 Sales Breakdown Sun Compaq Other IBM AVT Creating Value for the Technology Supply Chain 61
Slide 62: CM Operating Group Financial History
CM Operating Group Financial History 900 4 800 3.5 700 3 600 2.5 Sales in millions 500 Sales 2 400 Op Margin 300 1.5 200 1 100 0.5 0 0 02 02 01 01 02 00 01 01 / 20 / 20 / 20 / 20 / 20 / 20 / 20 / 20 /30 /30 /30 /31 /30 /30 /31 /31 12 03 06 09 12 03 06 09 Quarter ending AVT Creating Value for the Tec
Slide 63: Environmental Commentary
Environmental Commentary ¾“Supply chain” continuing to go “non-linear” Moving to collaborative supply chain management Some “influencers” not so impartial anymore? ¾Suppliers looking to mid-range channels for focus on mid-market (SMB) coverage ¾Commoditization/margin pressure a constant Standa
Slide 64: The CM Value Creation Environment
The CM Value Creation Environment End SUPPLIERS Users USERS END IT VARs TRAINING FINANCE LOGISTICS OPERATIONS Products & Solving Technologies Business Key Questions for Suppliers Problems 1) Which products/technologies to which customers? 2) Which products need to be sold? AVT Creating Value for the
Slide 65: CM's Total Value Proposition
CM’s Total Value Proposition Cost focus ROI focus Solution Order Solution Demand Provisioning Acquisition Engineering Mining Key Metrics: Key Metrics: - Basic SG&A - ROI by channel - Working Capital requirements - Utilization/realization on services - Costs to order process - Value of opportunity id
Slide 66: CM Detailed Value Proposition
CM Detailed Value Proposition Competency Supplier Value Reseller Value “Demand Mining” Focused and targeted Scope, scale and quality development of primary of marketing resource to demand creation maximize utilization Solution Development Knowledgeable, Ability to tap into responsive advocates incre
Slide 67: Return on Capital Initiatives
Return on Capital Initiatives ¾Driving NOPAT ROWC throughout group WC reduced $151M (39%) for 12 mos. ended 9/30/02 Management compensation plans aligned ¾Evaluating new business opportunities IBM Software: new revenue stream ¾Continuing to drive & develop Activity Based Intelligence (ABI) fro
Slide 68: Services Initiatives
Services Initiatives ¾CM FY ’03 plan: 17% of Net Gross Profit dollars derived from Avnet fee services ¾HP “fee for service” model continuing ¾Professional Services business in place Managed to utilization & realization metrics ¾Integration Services: solutions “factory” ¾ SP model: hosting secure I
Slide 69: Growth Opportunities
Growth Opportunities ¾Product areas Software Storage Industry Standard Servers Product Line expansion? ¾Services: resold & Avnet delivered ¾Direct to Indirect shifts SI’s, ISV’s, etc. – economics of “direct” resellers? ¾Geographic (longer-term horizon) Latin America & Asia AVT Creating V
Slide 70: Ed Kamins, Avnet Applied Computing
Global Reach Superior Capabilities Avnet, Inc. Deeper Relationships Creating Value for the Technology Supply Chain Management Strength Ed Kamins President Distinctive Value Avnet Applied Computing Investment Opportunity
Slide 71: AAC Market Concept
AAC Market Concept ¾ Trend toward outsourcing – core vs. context ¾ Need for speed - shorter product life cycles ¾ Globalization – design once, build anywhere AVT Creating Value for the Technology Supply Chain 71
Slide 72: Video currently airing on location
Video currently airing on location (8 minutes total) AVT Creating Value for the Technology Supply Chain 72
Slide 73: The Evolution of AAC
The Evolution of AAC $1.67B $1.68B 1.8 OP 3.5% OP 2.5% Value 1.6 Volume 1.4 Billions of Dollars 1.2 1 $.67B 0.8 OP 3.2% 0.6 0.4 0.2 0 FY 2000 FY 2001 FY 2002 AVT Creating Value for the Technology Supply Chain 73
Slide 74: AVT
AVT Creating Value for the Technology Supply Chain 74
Slide 75: AVT
AVT Creating Value for the Technology Supply Chain 75
Slide 76: AVT
AVT Creating Value for the Technology Supply Chain 76
Slide 77: AVT
AVT Creating Value for the Technology Supply Chain 77
Slide 78: AVT
AVT Creating Value for the Technology Supply Chain 78
Slide 79: AAC Value Strategy
AAC Value Strategy ¾ Deliver value to our solutions customers Avnet FasTrac Web Portal Fast Build on-line configurator Applied Computing Labs Next Generation Product Showcase Engineering Design Service Product Integration (5+ Sigma) ¾ Globalize our capability Currently in North America
Slide 80: AAC Value Strategy
AAC Value Strategy ¾ Develop services utilizing existing capabilities Supply chain management Product design Product integration / manufacturing Financial services No Touch Solutions for customers and suppliers AVT Creating Value for the Technology Supply Chain 80
Slide 81: AAC Volume Strategy
AAC Volume Strategy ¾ Support strategic suppliers with volume sales ¾ Position Avnet as a market leader for important technologies ¾ But….. Manage the business to return on working capital objectives Operate within minimum acceptable margin guidelines Be careful of inventory and receivables ri
Slide 82: Recent Strategic Announcements
Recent Strategic Announcements ¾ Signed Seagate in Europe and North America ¾ Access Plus Partnership with Symbol Technologies in North America ¾ Moving into China with Motorola ¾ Announced Partnership with Oracle to develop their Oracle Collaboration Suite AVT Creating Value for the Technology Supp
Slide 83: Avnet Applied Computing Mission: First to Market
Avnet Applied Computing Mission First to Market ™ AVT Creating Value for the Technology Supply Chain 83
Slide 84: Andy Bryant, Avnet Electronics Marketing
Global Reach Superior Capabilities Avnet, Inc. Deeper Relationships Creating Value for the Technology Supply Chain Management Strength Andy Bryant President Distinctive Value Avnet Electronics Marketing Investment Opportunity
Slide 85: Organization
Organization Andy Bryant President Worldwide Monika Sperke Executive Assistant Harley Feldberg Raymond Tsang Axel Hartstang Phil Gallagher President President President Sr. Vice President Americas Asia EMEA Global Business Development Ross Crane Barbara Martensen Sean Fanning Peter Walker Sr. Vice P
Slide 86: TAM and Estimated DTAM
TAM and Estimated DTAM $200,000 $186,611 40.00% 29.30% 33.70% $161,115 35.00% 28.80% $150,000 $138,330 $128,972 30.00% $124,483 24.80% 25.00% 24.80% $100,000 20.00% 15.00% 53,815 $50,000 40,576 41,965 32,000 40,000 10.00% 5.00% $0 0.00% 1999 2000 2001 2002 2003 (Proj) (Proj) TAM DTAM DTAM % of TAM N
Slide 87: Book-to-Bill Ratio
Avnet EM WW Book to Bill 3000 1.4 1.18 2500 1.08 1.2 1.02 0.99 0.93 1 2000 0.86 Book-to-Bill Ratio 0.79 US$ (Millions) 0.75 0.78 0.8 1500 0.6 1000 0.4 500 0.2 0 0 1 1 1 1 2 2 2 2 3 Y0 Y0 Y0 Y0 Y0 Y0 Y0 Y0 Y0 F F F F F F F F F Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Book Bill Ratio AVT Creating Value for the Tech
Slide 88: Operating Trend Analysis
Operating Trend Analysis 3.0 2.9 2.7 2.5 2.3 2.3 2.0 2.2 2.0 1.9 1.8 1.7 1.5 1.6 1.6 1.5 1.5 1.4 1.4 1.2 1.2 1.2 1.2 1.2 1.0 1.2 1.1 1.1 1 0.5 0.0 Q2 FY01 Q3 FY01 Q4 FY01 Q1 FY01 Q2 FY02 Q3 FY02 Q4 FY02 Q1 FY03 Sales Inventory Working Capital AVT Creating Value for the Technology Supply Chain 88
Slide 89: Mission
Mission Avnet Electronics Marketing will be the most Successful electronic components distributor in the world by providing best in class technical expertise and supply chain solutions to our customers and suppliers. AVT Creating Value for the Technology Supply Chain 89
Slide 90: Forces of Change
Forces of Change Globalization of Supply Chain and Manufacturing Outsourcing accelerates(EMS percentage of the TAM expanding) Low cost manufacturing (Asia and Eastern Europe the new targets) The Customer and Information Economy Ordering made simpler (ETDBW) From physical to digital domai
Slide 91: Avnet EM Global Reach
Avnet EM Global Reach Norway Sweden Denmark U.K. Canada TONGEREN, Belgium Ireland France POING, Germany U.S.A. Spain Italy Korea OXFORD, N. Carolina Japan CHANDLER, Arizona Israel China GRAPEVINE, Texas Mexico India Taiwan Hong Kong Thailand Vietnam Philippines SINGAPORE Indonesia Central Warehouses
Slide 92: FY01 EM Revenues by Region
FY01 EM Revenues by Region 5.7% Americas = 66.7% $5.53 billion 27.6% EMEA = 27.6% $2.29 billion Asia = 5.7% 66.7% $0.47 billion Americas EMEA Asia Total FY01 Revenues = $8.29B AVT Creating Value for the Technology Supply Chain 92
Slide 93: FY02 EM Revenues by Region
FY02 EM Revenues by Region 12.0% Americas = 55% $2.63 billion EMEA = 33% $1.57 billion 33.0% 55.0% Asia = 12% $0.59 billion Americas EMEA Asia Total FY02 Revenues = $4.79B AVT Creating Value for the Technology Supply Chain 93
Slide 94: Avnet EM Asia Market Coverage
Avnet EM Asia Market Coverage SOUTH KOREA INDIA z Seoul zNew Delhi zBangalore TAIWAN NORTH SOUTH zPune zTaipei CHINA CHINA zBombay zBeijing zHong Kong zShanghai zShenzhen zSuzhou zShunde ASEAN zDalian zWuhan zSingapore zQingdao zXiamen zPenang zTianjin zChangsha zKuala Lumpur PACIFIC z Wulumuqi zChe
Slide 95: Evolving Value Proposition
Evolving Value Proposition Design Win Service Expectations Logistics And Technical Finance Sales Marketing Order Fulfillment Services Supply Chain and Design Services Cost Expectations Fulfillment AVT Creating Value for the Technology Supply Chain 95
Slide 96: Market Segmentation
Market Segmentation •Global 100 dominated by direct sales “Sweet and large EMSI providers – high Global volumes, limited technical services 100 Spot” •Design and Supply Chain Services Core critical to sweet spot 10,000 •Suppliers vulnerable in sweet spot Developing / MRO 100,000 •Emerging wins criti
Slide 97: FY'03 Objectives
FY’03 Objectives Leverage EM’s market position to scale our product distribution business while developing new value-added services which differentiate us in the market Leverage our core competency in materials management to accelerate our ROWC and create barriers to entry for our competitors
Slide 98: Tactics Underway
Tactics Underway Focus majority of our resources on the Tier II customer base Services push focusing on DMI / VMI and the unbundling of our core offerings Accelerate our move to “Market Price” versus “Ship and Debit” on standard product – particularly in the Americas Match sales strategy to
Slide 99: Distribution is Still the Best Bet to Manage Inventory
Distribution is Still the Best Bet to Manage Inventory in the Supply Chain We understand risk Outside of credit, the only place we invest our working capital is inventory We have thousands of customers which enable us more outlets to sell inventory excess AVT Creating Value for the Technology
Slide 100: Distribution is Still the Best Bet to Manage Inventory
Distribution is Still the Best Bet to Manage Inventory in the Supply Chain Customers / % of Business Top Customers Celestica 3 = ~60% IBM, Lucent, Sun Flextronics 10 = ~72% HP, Sony Jabil 3 = ~60% HP, Cisco, Marconi Sanmina / SCI 10 = ~72% IBM, HP Solectron 10 = ~70% Nortel, Cisco Avnet currently
Slide 101: Why We are the Best Cost Model to Attack Tier II
Why We are the Best Cost Model to Attack Tier II A refined technical model Our size and scale puts more feet on the street, attacking a smaller, fragmented market Inventory and time to market are interwoven value propositions Outsourcing partnerships accelerating and requiring additional acc
Slide 102: Summary
Summary Distribution’s role in the electronic components supply chain not only solidified, but expanding as the industry adjusts to globalization Services unbundled to serve the greater TAM represents new frontier for higher returns on capital Environment favors size and scale AVT Creating Val
Slide 103: Roy Vallee, Chairman and CEO
Global Reach Superior Capabilities Avnet, Inc. Deeper Relationships Creating Value for the Technology Supply Chain Management Strength Roy Vallee Chairman and Chief Executive Officer Distinctive Value Avnet, Inc. Investment Opportunity
Slide 104: Evolution of Strategic Focus
Evolution of Strategic Focus 1980s 1990s 2001 Identity Diversified holding co. Global electronics & Global technology & electronics computer products marketing, distribution & hardware distributor distributor services company 1) Revenue Growth 1) Earnings Growth 1) Return on Capital Goals 2) Revenue
Slide 105: Avnet's Vision
Avnet’s Vision Avnet will deliver the highest value to our customers, suppliers, employees and shareholders as the premier technology marketing and services company, globally AVT Creating Value for the Technology Supply Chain 105
Slide 106: Question and Answer Session
Question and Answer Session Thank you for your interest in Avnet. Please contact us at: 480-643-7053 Investorrelations@avnet.com www.ir.avnet.com AVT Creating Value for the Technology Supply Chain 106