Proprietary Server Sales Up 22 Percent in Q1

Server makers, including IBM and thankfully including Power Systems machines supporting the IBM i operating system, saw an uptick in server sales in the first quarter. So it will come as little surprise that master distributor Arrow Electronics, which pulls from the big server makers and pushes down through its vast global reseller channel, is seeing business improve a bit, too.

In its first quarter of fiscal 2011 ended April 2, Arrow posted $5.22 billion in earnings, up 23.3 percent over last year. Sales in its electronic elements group were up 23.4 percent, to $3.89 billion, during its Enterprise Computing Solutions group, which peddles servers, storage, and software, rose by 20.7 percent, to $1.33 billion. The company in its entirety brought $136.5 million to the bottom line, up 56.6 percent.

The high end of normal seasonality

"Sales were in line with the high end of normal seasonality, and we saw excellent year-over-year growth in industry-standard servers, storage, and services," explained Michael Long, Arrow's president, CEO, and chairman in a statement accompanying the financial results." We remain very optimistic about the outlook for the ECS business, as we have diversified into a number of faster growing markets, just as security, networking, and virtualization, and are so then positioned to capitalize on the at once wave of IT spending growth." The ECS business had an operating income of $39.1 million, or about 2.9 percent of earnings, seven-tenths of a point better than the year-ago quarter. The elements group, by contrast, was more profitable in the first quarter, with an operating income of $228.9 million, or about 5.9 percent of earnings.

"We saw a fair amount of rebound, not only in industry standard servers, however also in proprietary servers being up for the quarter," Long said on a conference call with Wall Street analysts. "And I believe as long as the cloud continues to be built out, it should be a good robust year for IT spending." The prognostications for 2011 are truly warming up a bit, which is a good sign. "When you look at the overall IT spending business, whether it is services, software, storage, and even servers, it is nice to see a rebound in servers because that tells us some of the larger projects are back out there and money is getting spent."

Arrow said that its X64 server business was up over 30 percent, and that virtualization software sales were as well up over 30 percent. Security product sales within ECS rose by 16 percent, during networking gear had a 24 percent bump.

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