Synnex files for IPO

After pulling back from an IPO in the midst of the dot-com market meltdown, distributor Synnex Information Technologies is once again making plans to go public.

Synnex filed a preliminary prospectus with the Security and Exchange Commission on Friday, disclosing that sales increased 9.1 percent to US$1.84 billion for the six months ended May 31 over the prior-year period while earnings were up about 4 percent to US$13.7 million.

The filing did not disclose how much Synnex hoped to raise or how much of the company it planned to sell in the offering. Nor did the filing disclose how much ownership Mitac International Corporation, which currently owns 98 percent of Synnex, would retain in the company after the IPO.

The company paid registration fees based on an estimated US$92 million maximum offering price, the filing showed.

Synnex's contract-manufacturing operations, which have included large OEMs such as Compaq and Sun Microsystems in the past, have been steadily declining over the past three years while its distribution sales have been rising, the document disclosed.

The company's distribution sales rose 19.5 percent to US$1.47 billion over the six-month period, which the company attributed primarily to its acquisition of Gates/Arrow Distributing in May 2002 and the start up of operations in Mexico the following month.

The company's contract manufacturing revenue, meanwhile, dropped 60.9 percent to US$85.1 million over the same period. The company further disclosed that 95.7 percent of contract-manufacturing sales during the period came from one customer, which the filing did not disclose.

Three years ago, contract manufacturing accounted for almost 43 percent of the company's sales, until it lost a major contract to assemble systems for Compaq Computer in fiscal 2001, the statement disclosed.

Going forward, Synnex officials stated that the company plans to grow its distribution business by adding product lines and expanding internationally, as well as possibly through acquisitions.

Synnex, which some competitors blamed earlier this year for aggressive price-cutting, reported that its gross margins dropped from 4.8 percent of revenue to 4.6 percent of revenue over the period.

However, company officials said gross margins on distribution revenue remained about the same, pointing to the decline of its higher-margin contract-manufacturing business as the cause.

The company's largest vendor was Hewlett-Packard. The company derived about 31 percent of its revenue during the period from the sale of HP products.
Bear, Sterans & Co., Securities LLC, Banc of America and Raymond James were listed as handling the offering.