Avnet: On top of the world
CEO takes Avnet to No. 1—and works to keep it there
By Heidi Elliott -- Movers & Shakers, 8/15/2002
Avnet CEO Roy Vallee finds himself in a position that he has dreamed of holding since he took the helm of Avnet four years ago: He’s CEO of the No. 1 distributor on the globe.
 “We have not only survived, but
we have made changes that have strengthened our
position. The company is stronger coming out of this correction
than we were going into it.” Roy Vallee, CEO,
Avnet |
“It feels good to see Avnet back at the top,” Vallee says. “It’s a position we held for many years. We were overtaken by Arrow due to their very effective and aggressive acquisition strategy. So, it’s been seven years and it feels good.”
It’s been a difficult year, though, for Avnet and other distributors, as they have worked their way through the worst recession in electronics-industry history. Most distributors saw their sales shrink back to 1999 levels, and many companies, including Avnet, were forced to layoff portions of their workforce. “There’s no more detested responsibility for a chief executive than the need to tell people that their job has been eliminated and it has nothing to do with their individual performance,” Vallee says.
Despite the harsh conditions, Vallee notes, “I’m proud of the performance of our team through what has been the most difficult correction in the history of the technology industry. We have not only survived, but we have made changes that have strengthened our position. The company is stronger coming out of this correction than we were going into it.”
Since taking over as CEO, Vallee has overseen a total of 15 acquisitions—including some of the biggest deals in distribution-industry history—which added more than $6 billion to the company’s revenue. His actions, particularly the watershed acquisition of Marshall Industries, drew praise. “The Marshall acquisition put Avnet back into a neck-and-neck race with Arrow and really broke the barrier of shelf-sharing restrictions, where US semiconductor suppliers wouldn’t be on the same line card as Asian suppliers,” says analyst Robert Damron of SWS Securities.
In fact, Avnet got back the leadership position the same way Arrow took it away: through acquisition. In Avnet’s case it was the acquisition of passives specialist Kent Electronics that pushed the company out front.
Vallee has been busy on other fronts besides acquisition. In the past year, the top two distributors ushered in the era of fee-for-service programs. In Avnet’s case, it was the launch of Avnet Global Services (AGS), a “company-within-a-company” that will offer services to the electronics industry and beyond. Headed by Steve Church, AGS offers services in supply chain, technical assistance, logistics, information technology (IT) outsourcing, and professional services. The group is a standalone unit, separate from the company’s Electronics Marketing, Applied Computing, and Computer Marketing operating groups. The services AGS provides are not linked to any of the products Avnet sells.
Historically, distributors have offered value-added services as a way to get component orders, and the customer base has grown accustomed to getting services for “free.” Going after new customers with existing services—and offering new services to existing customers—should speed up acceptance of these fee-for-service offerings.
Arrow and Avnet executives have stressed that distributors must get paid for services they provide because those services cost them money. Separating out the services business, or “unbundling,” is the key point in making that distinction. But the industry is still waiting to see if these plans gain market acceptance, or if distributors will cave in to customers’ demands for free service.
| “I am firmly convinced Avnet will end up a major service supplier to the supply chain as well as a major distribution player.” Roy Vallee, CEO, Avnet |
Vallee is optimistic about success. “I am firmly convinced Avnet will end up a major service supplier to the supply chain as well as a major distribution player,” he says. Vallee’s goal is to have services represent 10 percent of total revenue in five years and at the same time represent 20 percent of profits. “We need to make sure we leverage the sale and scope we’ve realized for our customers and suppliers,” he adds.
Vallee was born in Southbridge, Massachusetts, and grew up in the Los Angeles area. He holds an Associate of Science Degree in Electronics Technology from the Don Bosco Technical Institute, of San Gabriel, California. He has been in the distribution industry for just over three decades. He got his start in 1971 stocking shelves for Los Angeles-based Radio Products, later moving to the shipping dock, then to the sales department. Ultimately, Vallee established a sales office for the company in San Diego.
His early job duties included putting parts into the warehouse inventory and “picking” orders. Eventually he was promoted to what would now be inside sales, in the days when a customer would call to see if the distributor had parts and the sales person would put the call on hold to physically look at what was in inventory and then move parts into a “hold” bin.
In 1977, Vallee joined then-Hamilton/Avnet as a field sales representative. In 1989 he became president of Hamilton/Avnet Computer, and in 1990 was named senior vice president and director of worldwide electronics operations for Avnet. In March 1992 he became president and COO. He took over as CEO from industry pioneer and company founder Leon Machiz in July 1998.
Vallee has received high marks for the changes in Avnet in the last four years, including two reorganizations, the acquisitions, and the creation of new business units. “I think Roy has brought a sense of purpose and direction to Avnet that maybe it didn’t have before,” says analyst Clarke Walser, principal with Walser & Associates.
