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On Tuesday, Synnex Corporation (NYSE:SNX) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Matt Sheerin – Stifel Nicolas: Just a question regarding the revenue, not so much the revenue, but the EPS guidance, backing in to that it sort of implies gross margins sort of flattish, and I’m just wondering, how much of that has to do with mix, are you seeing some pricing pressure on any volume deals, I know you also talked a little bit about Japan as a headwind, but could you just talk about the components of gross margin and how you see that playing out in the next quarter or two?
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Thomas Alsborg – CFO: Matt, this is Thomas. I’ll start off with that. First of all, it’s actually both. As we look at the margin profile here without being specific as to what we forecast for gross profit, we do see that based on our guidance, as you’ve seen and as we saw in Q3, our gross margin is at the lower end of our normal range and as we commented in Q3, it is driven by two primary factors and that is the mix of business that we’re incurring currently and pricing pressure in the competitive marketplace. I would tell you that both of them are – I wouldn’t say equal, both of them are important aspects of the gross profit outlook.
Matt Sheerin – Stifel Nicolas: Then, and I know that the – is that primarily on the commodity type of products because I know your margins in the enterprise data center related space tends to be higher, is that true, is that more in the commodity side, are you seeing it on the enterprise side as well?
Thomas Alsborg – CFO: No, certainly, your comments and observations are correct and that that’s partially where the mix play comes in to being, but the pricing pressure is more pronounced on a more commoditized and more standardized side of our business.
Matt Sheerin – Stifel Nicolas: Then, it looks like the SG&A control obviously was very good in the quarter. Do you expect SG&A to be up a little bit sequentially given the higher volume revenue run rate or are you expecting to keep it in this area, at this range?
Thomas Alsborg – CFO: There is a variable component of SG&A that does correspond to a revenue and so as the revenue goes up by the upper single digits we’re going to see some level of SG&A spend related to that, but we remain very diligent around spending and we look for opportunities to tighten our belt when the economy gets a little bit tougher as in our view currently is and so we’ll do our best to try to keep that increasing SG&A from being disproportionate.
The Competitive Environment
Robbie Wilkins – Goldman Sachs: Just a follow-up on the competitive environment. You mentioned certain markets and offerings are bit more competitive. I was wondering if you could maybe drill down a bit more on that?
Kevin Murai – President and CEO: I’m not sure how much more we can drill down. I think just talking about the more commoditized higher volume product area is really where we do see that kind of competition. So, specifically that would be in areas like notebook and desktop and also other higher volume peripheral devices.
Robbie Wilkins – Goldman Sachs: So, it’s not the areas that you are gaining market share, it’s more on the service side so the comments made earlier on the call on to gains in market share it’s more of these white box offerings and service towards where you are gaining share?
Kevin Murai – President and CEO: We gain share pretty much across the board, across our product segment, even in the commoditized phase, but in the areas of focus that offer higher margin, the higher margin for the products and services that we sell, we don’t see the activity on pricing the same way that we do on the commoditized product side.
Robbie Wilkins – Goldman Sachs: Secondly, I was wondering if you could give us some color on the government vertical and if you’ve seen much volatility in that market?
Kevin Murai – President and CEO: I assume you’re talking more federal government?
Robbie Wilkins – Goldman Sachs: Yes.
Kevin Murai – President and CEO: So, on the federal side, through our past quarter, actually our business was relatively stable but, I’m sure you’ve heard as many others have as well that the federal government spending seems to be a little more back end loaded this year than we’ve typically seen in the past. Also, talk of perhaps overall spending to be a little bit softer. So, we’re kind of coming to the tail end of that big spending season. So, we’ll see, but I think the market commentary out there is that it’s likely a bit softer.
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