Supply chain issues still choking the market

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TD Synnex's year-end results show problems remain on the ground but plenty of opportunities above it, says Billy MacInnes

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13 January 2022 | 0

The publication of global distributor TD Synnex’s first results as a combined operation this week served to highlight the effects of supply constraints and the continuing influence they are likely to have on the market this year.

The results showed fourth quarter revenue of $15.6 billion, down 2% from the previous year, with net income of $119.4 million, Revenue for the full year ending 30 November 2021 was $31.6 billion with net income of $395.1 million.

Commenting on the results, CEO Rich Hume said the distributor and its team had “responded to the ongoing supply chain challenges with an unwavering focus, strong execution and collaboration, leading to results ahead of expectations”.

 

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In a conference call with analysts, CFO Marshall Witt said the distributor was pleased with the Q4 turnover figure “given the tough comparison to prior year, supply chain constraints and newness of operating as one company as well as an approximate 1% FX headwind due to the euro weakening against the dollar”.

The issue of supply constraints was raised several times during the call. Hume admitted that the distributor expected to “remain in a supply constrained environment through fiscal 2022”. He revealed that TD Synnex’s “backlog level continues to be elevated, and we estimate the impact of fiscal Q1 revenue to be approximately 5%”.

He sought to provide further perspective when he suggested that in addition to current needs and demand, the backlog also represented “customers putting up orders based on lead times. So there clearly is future orders, I would allege, in anyone’s backlog as they talk about that right now”.

Hume estimated there was “two years of pent-up demand” in infrastructure and “strong growth” in next-generation technology areas such as cloud, analytics, IoT and security. PC growth would moderate and would “be more profound in the consumer side versus the commercial side”.

On the subject of cloud, he was asked about the distributor’s cloud business. “We have two very good platforms right now in market with StreamOne as well as Stellar,” Hume responded. The distributor had not completed plans as to what its strategy would be, “but we’re close”. He added that the end result would “be something of a mix of both”.

The distributor forecast revenue for fiscal Q1 2022 to be in the range of $14.75 billion to $15.75 billion. Asked by Shannon Cross, analyst at Cross Research, what swing factors contributed to the $1 billion range in TD Synnex’s revenue forecast, Hume replied that the “biggest difference is how much supply we’ll get”.

He elaborated further on that point. “We have to spend as much time as leaders to try to estimate our best judgments on what supply we’re going to get in the quarter. And that becomes as big a factor as anything else in terms of trying to provide a view of the business performance. So I think that I’d answer your question more single-threaded to say, if you can tell me what supply we’re going to get, I can tell you where we’d be at within that range.”

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