What the IBM Deal Means for Synnex Earnings

Synnex (NYSE: SNX  ) will release its quarterly report on Wednesday, and investors have gotten a lot more excited about the little-known provider of business-process services since the company agreed to pay $505 million to buy IBM's (NYSE: IBM  ) customer-care services business. But looking beyond the IBM buyout, shareholders have to wonder what the long-term impact of having a larger business will be on Synnex earnings in the future.

Synnex plays a vital role in bridging the gap between IT product manufacturers and the customers who buy them. With its distribution-services business, the company works with its suppliers to get thousands of popular tech products and then distribute them through its network of reseller customers. At the same time, the business-services division provides tech support and customer service of the type that IBM's sold-off segment provided. Combined with contract-assembly services, Synnex has a wide array of offerings for customers to take advantage of. Let's take an early look at what's been happening with Synnex over the past quarter and what we're likely to see in its report.

Stats on Synnex

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$2.72 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How will Synnex earnings fare this quarter?
In recent months, analysts have had mixed views on prospects for Synnex earnings. In the short-term, they've cut August-quarter estimates by $0.01 and projections for the current fiscal year by $0.04 per share. But they've boosted their fiscal 2014 expectations slightly, and the stock has responded positively to the IBM deal, rising 45% since mid-June.

Clearly, the purchase of IBM's customer-care division is the biggest news to hit Synnex in a long time. Synnex believes that the move will push its Concentrix division into the top 10 globally in its industry, giving the company a lot more exposure than it has gotten in the past.

But perhaps more important will be the continuing relationship between Synnex and IBM going forward. As part of the deal, Synnex will become an IBM preferred business partner for customer-care outsourcing services, helping IBM in its quest to deliver broad-based IT solutions to its own customers. IBM also accepted part of the payment for its customer-care business in Synnex stock, giving IBM a stake in the company going forward.

Yet Synnex isn't putting all of its eggs in IBM's basket. In July, the company said that it's participating in the Microsoft (NASDAQ: MSFT  ) Devices Program, with the aim of helping Microsoft resell more of its Surface RT and Surface Pro tablets to business customers. Synnex created a Microsoft-specific business unit to handle Microsoft's extensive array of products and help it improve the flow of those products from manufacturer to end-user. Last month, Comcast¬†made Synnex its first distributor to serve as a master agent in its Business Solutions Provider Program. Synnex hopes that being part of Comcast's program will help it in its broader mobility strategy, helping its resellers offer their customers better connectivity solutions.

In the Synnex earnings report, watch to see how much the company focuses on its IBM acquisition. With the potential to transform its business, Synnex will have to be careful not to upset the balance of the its other customer relationships if it wants to keep pushing ahead on all cylinders.

Can Synnex profit from the war among tech giants?
Synnex's deal with IBM puts it squarely in the middle of the trillion-dollar revolution that the largest tech companies in the industry are fighting right now. Learn "Who Will Win the War Between the 5 Biggest Tech Stocks?" by reading the Fool's latest special report on the mobile industry. Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!

Click here to add Synnex to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2649412, ~/Articles/ArticleHandler.aspx, 9/26/2016 11:53:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:02 PM
SNX $106.18 Down -0.50 -0.47%
SYNNEX CAPS Rating: *****
CMCSA $65.81 Down -1.34 -2.00%
Comcast CAPS Rating: ***
IBM $153.98 Down -1.00 -0.65%
IBM CAPS Rating: ****
MSFT $56.90 Down -0.53 -0.92%
Microsoft CAPS Rating: ****