Zacks_Analysts' Blog : Arrow Shifts Headquarters - Analyst Blog

Arrow Electronics, Inc. (ARW) recently announced that Englewood, Colorado will become its new global headquarters, effective Nov. 15, 2011.

The company is currently headquartered in Melville, NY, and has had a significant presence in Englewood, CO, since 2000.

The Englewood facility has served as the global base for the company’s Enterprise Computing Solutions, Americas components and global services businesses.

Management stated that the New York operations will continue to play a key role in the company.

Recently, Arrow Electronics successfully completed an all-cash tender offer to acquire Japan-based Chip One Stop. On August 16, Arrow announced that it will launch a tender offer to acquire all of the common stock of Chip One Stop for ¥220,000 per share ($2,857 per share). 

Based in Japan, Chip One Stop supplies electronic components to design engineers. The company partners with more than 700 suppliers of electronic components and allows customers to access selected stocked parts data and a sourcing request service through a comprehensive database with more than 8 million line items.

Management stated that the acquisition will strengthen Arrow’s presence in one of the largest electronics markets in the world.

We recently downgraded our recommendation on Arrow to Neutral from Outperform. Earnings estimates have declined in the last thirty days. Although second-quarter results came in line with the Zacks Consensus Estimate, the guidance for the third quarter was disappointing.

Arrow expects 2011 sales between $5.15 billion and $5.55 billion in the third quarter. Management stated that the core global components business is expected to be in line with the low-end of normal seasonality resulting from oversupply of inventory in the supply chain at the end of the second quarter and weaker global macroeconomic conditions.

In the short-run, we have a Zacks #4 Rank, which translates into a short-term rating of Sell, primarily due to the near-term pressure on the stock because of the weakness in guidance.