Synnex bets on China to drive sales growth

After 10 years in China, the firm’s biggest sales earner, Synnex is now betting on its new mobile phone business to further drive sales there, President and CEO Evans Tu told Reuters Wednesday.

“In China, we can see more people have strong purchasing power because they are getting rich, and domestic demand there is huge,” Tu said in an interview at the firm’s headquarters.

Synnex began around three decades ago as a sales agent of integrated circuit components in Taiwan before branching into logistics and repair services, establishing its presence across Asia. More than 60 percent of its revenues now come from outside Taiwan.

Synnex, which trails U.S.-based Ingram Micro Inc. and Tech Data Corp., sells computers, communications and consumer products for global vendors such as Hewlett-Packard Co. and Nokia.

In July, Synnex said it obtained rights to sell Nokia mobile phones in mainland China, where Tu said Nokia has a 37 percent mobile market share.

“We are just warming up this year and our business will start taking off from next year,” said Tu, 55, referring to its China cellphone operations. Synnex expected its China and Hong Kong sales to rise 40 percent this year from NT$68 billion (US$2.1 billion) last year, with similar growth forecast for Australia, while sales in India are seen rising 35 percent.

On a consolidated basis, Synnex’s sales rose 2 percent last year to NT$142.3 billion.

While bigger growth is likely this year, Synnex’s sales growth forecast was slightly below market expectations.

Synnex sales are forecast to increase 21 percent this year to NT$172.86 billion, according to Reuters Estimates, with 2008 sales seen rising another 26 percent to NT$217.82 billion.

In the longer term, Tu said a strong distribution network was crucial for success, and three new logistics centers were under construction in China.

“For distributors, coverage (of channels) is key,” Tu said at his office where a large globe is prominent. “That’s why vendors think you have value.”

Synnex shares, valued at close to US$2.9 billion, have more than doubled so far this year, but closed down 1.2 percent at NT$85.30 Wednesday, against the TAIEX’s 0.8 percent gain.

Solid fundamentals and bright earnings prospects have made Synnex popular with foreign investors, who own 40 of the company’s shares, according to the Taiwan Stock Exchange.

China’s growth potential has prompted Macquarie Research to raise its Synnex 2007 earnings forecast by 29 percent and by 37 percent for 2008.

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