AnalystsSu Chen

Thanh Le

Gina HuangPresented: November 17, 2011

Business Summary

Arrow Electronics, Inc. distributes products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions worldwide.

Source: Arrow 2010 Annual Report

Locations: 340 locations in 52 countries

Corporate Headquarters: Melville, New York

Customers:115,000

2010 Sales:$18.7 billionGlobal Components:$13.2 billionECS:$5.6 billion

Employees:12,700; Suppliers:1,200Fortune 500 Rank:140

Arrow Worldwide

Source: Arrow 201 Fast fact

Global Customer Base

Source: Introduction to Arrow Electronic_9_16_2011 pg. 4

Electronic Components

Source: Introduction to Arrow Electronic_9_16_2011 pg. 10

Electronic Components Core Drivers Broad line card –1,200+ suppliers Broad customer base –100,000+ Engineering focus Demand creation Value-added programs

Differentiators Global strength and depth Design win performance Highest ranked level of customer

service Industry leading operating margins Financial resources

Source: Introduction to Arrow Electronic_9_16_2011 pg. 11

Enterprise Computing Solutions

Differentiators Customer service Customer and OEM relations Solutions focused Non-compete relationship with

reseller customers Unparalleled line card

Core Drivers Small and medium sized customers –

13,000 VAR partners Business continuity Server consolidation Compliance/regulatory environment Engineering and technical expertise Education and training services Enterprise Solutions Centers (Atlanta &

Minneapolis) Financing programs Business development & marketing

expertise Innovation and investments

Enterprise Computing Solutions (ECS) – 30% of 2010 ARW RevenueArrow ECS is the global business group that provides enterprise and midrange computing products, services and solutions to value-added resellers and system integrators-ECS Americas –72% of ECS sales

--4 Billion-ECS Europe –28% of ECS sales --1.6 Billion

Source: Introduction to Arrow Electronic_9_16_2011 pg. 12

Industry Structure

Source: IBISWorld

Wholesale Annual Sales Growth

Source: First Research

Industry Trends, Opportunity, Challenge, external revenue drive

Source: First Research & IBISWorld

Per Capital Disposable Income

Source: IBISWorld

Products & Services Major products:

semiconductors (computer chips); connectors; electromechanical devices.

Other products disk and tape drives, computer subsystems, microwave and fiber optic

components, transistors, diodes, power supplies, switches.

Services: purchasing; marketing; warehousing; packing, shipping, and

delivery; customized packaging private labeling minor repair and

refurbishment simple assembly.

Source: IBISWorld

Global Semiconductor Sales

Source: First Research

Demand for communications equipment

Expanding consumer and enterprise reliance upon voice, video and data communications has increased demand for carrier network bandwidth.

Demand for wireless handsets over the next five years will be influenced by the degree to which consumers respond to an increasing number of products with multimedia capability and with functions previously found in other products.

Source: First Research

Demand for electronic parts

Demand for electronic components will be promoted by the continued substitution of mechanical devices for electronic devices and growth in sales of final electronic products.

Adversely effected by slow growth in final electronic product manufacturing industries

Source: First Research

Domestic Industry Forecast

Source: First Research

Global StrategyDrive growth in the core, services & high-growth product sets

Source: Introduction to Arrow Electronic_9_16_2011 pg. 6

Source: Introduction to Arrow Electronic_9_16_2011 pg. 7

Powering the Supply Chain: ECS

Source: Introduction to Arrow Electronic_9_16_2011 pg. 13

10 years price performance

Source: Capital IQ

10 years revenue performance

Source: Capital IQ

Financial Ratios Growth

Source: Arrow Electronic website

Acquisition Activities 2011

Nu Horizons Electronics Corp.

On January 3, 2011, the company acquired Nu Horizons Electronics

Corp. ("Nu Horizons"), a global distributor of advanced technology

semiconductor, display, illumination, and power solutions to a wide

variety of commercial OEMs and electronic manufacturing services

providers.

This acquisition builds on the company's strategy to expand its global

capabilities, particularly in the fast-growing Asia Pacific region.

Source: Arrow Electronic 2010 Annual reports

Acquisition Activities 2011

Richardson RFPD

On October 1, 2010, the company announced an agreement to acquire all the

assets and operations of the RF, Wireless and Power Division ("RFPD") of

Richardson Electronics, Ltd. ("Richardson") a leading value-added global

component distributor and provider of engineered solutions serving the global

radio frequency and wireless communications market.

This acquisition supports the company's strategy to expand its portfolio of

products and strategic capabilities, such as value-added services, to help it meet

the evolving needs of its suppliers and customers. The acquisition is done.

Source: Arrow Electronic 2010 Annual reports

Acquisition Activities 08-10

In February 2008, it acquired the components distribution

business of Hynetic Electronics and Shreyanics Electronics

("Hynetic") in India.

• In February 2008, it acquired all the assets and operations

of ACI Electronics LLC ("ACI")

In December 2008, it acquired Excel Tech, Inc. ("Excel

Tech")

In December 2009, it acquired A.E. Petsche Company, Inc.

("Petsche")

Source: Arrow Electronic 2010 Annual reports

Acquisition Activities 08-10

In April 2010, it acquired Verical Incorporated ("Verical")

In June 2010, it acquired PCG Parent Corp.

In August 2010, it acquired Transim Technology Corporation

("Transim")

In October 2010, it acquired Eshel Technology Group, Inc.

("ETG")

In December 2010, it acquired all of the assets and

operations of INT Holdings, LLC

Source: Arrow Electronic 2010 Annual reports

Competitors

AVNET Inc distributes electronic components, enterprise computer and embedded subsystems

Watsco Inc distributes refrigeration equipment and offer flexible marketing programs, technical support

Brightpoint Incdistributes information technology products ,offers logistics management and other value-added services

Network Engines, Inc

provides application platforms and appliance solutions for original equipment manufacturers and independent software vendors worldwide

Tech Data Corp.

distributes information technology products, as well as offers logistics management and other value-added services

Competitors Financial Ratio

Enterprise Value

EBITREVENU

EP/E P/B P/S ROA ROE

AVT AVNET Inc 5840.19 1007.7 26778 7.0x 1.15 0.17 6.60% 18.45%

WSO Watsco Inc 2170 673.24 2990 23.9x 2.58 0.69 8.62% 13.32%

Cell Brightpoint Inc 801.17 314.62 4180 14.0x 2.35 0.14 4.81% 19.15%

NEINetwork Engines,

Inc31.58 25.47 263.72 1.3x 0.77 0.18 3.60% 8.93%

TECD Tech Data Corp. 1767.23 944.1 26062.5 10.2x 0.99 0.08 3.78% 11.39%

Multiple

Valuation Method Weight Price Relative Price

P/E 33% $41.18 $13.59

TEV/Revenue 33% $39.26 $12.96

TEV/EBIT 33% $38.25 $12.62

Estimated Value 　 　 $39.17

ARW valuation

Recommendation

Current price: $37 Recommendation: Put on the watched list