Avocent (AVCT) prereleases lower 1Q:2009

A little behind the curve today as I’m working on a new computer.

I did want to call attention to Avocent, a name that’s not very widely followed.  They sell “IT infrastructure management solutions and technologies”, which is to say, server tools.  They attributed the miss to lower industry server shipments – specifically from within the management systems business unit.  Takeaway here is enterprise is still weak and didn’t bounce in March.  Dell and HPQ are significant customers, as are Tech Data and Ingram Micro, the two largest IT distributors in the world.

From their 10K:

Customers

 

Our customers include our channel partners, which is a diversified group of dealers, major distributors, resellers, and direct end users who purchase our branded products.  These customers represented 67% of net sales in 2008, 65% of net sales in 2007, and 60% of net sales in 2006.  We believe that our broad range of products sold at different price points offers us the opportunity to market our products to customers of all sizes, in different industries, and with varying degrees of technical sophistication.

 

Sales to OEM customers represented 33% of net sales in 2008, 35% of net sales in 2007, and 40% of net sales in 2006. The declining trend in percentage of sales in recent years is due in part to the change in the mix of our business as a result of our acquisitions.  While we have agreements with many of our OEM customers, these agreements are generally cancellable at the will of the OEM (generally subject to notice provisions), and none of our OEM customers is obligated to purchase products from us except pursuant to binding purchase orders or licensing agreements.  Consequently, any OEM customer could cease doing business with us at any time.  Although we are not substantially dependent on any one OEM customer, the loss of, or material decline in orders from, certain of our current OEM customers would have a material adverse effect on our business, financial condition, results of operations, and cash flow.

 

The following table identifies our customers that exceeded 10% of our net sales for the years 2008, 2007, and 2006:

 

		Percentage of Net Sales for the Year Ended
		December 31, 2008		December 31, 2007		December 31, 2006
Dell		11	%	13	%	14	%
Hewlett-Packard		<10	%	12	%	14	%
Ingram Micro		13	%	<10	%	<10	%
Tech Data		<10	%	11	%	12	%

 

Sales to these customers are reported primarily through our Management Systems business unit, but also through our LANDesk business unit.  No other customer accounted for more than 10% of our net sales in 2008, 2007, or 2006.