Presentation

Abstract

Synnex Corporation is a leading provider of business process solutions to organizations in different parts of the world.The organization is headquartered in Fremont, California in the United States of America; it was founded by Robert Huang; it has existed for over 30 years and provides a variety of business solutions, including technological services, marketing, financial services, and supply chain improvement. The company has recorded tremendous growth since it was founded in 1980 through both the acquisitions of clients in new markets as well as the purchase of other business solution providers in different markets. Currently, the company operates in more than 40 countries and has more than 600 clients. As of 2017, the organization had a net income of $301 million; it has 107,400 employees located in the countries where it has operations

Keywords: balance sheet, common size analysis, income statement, industry averages, financial report, performance of the corporation

Research on Synnex Corporation

Description of the Corporation

Synnex Corporation operates in the Data Processing Services industry, which has other organizations such as Avnet Data Solutions, Vertex Wireless and The Hackett Group among others. The Synnex Corporation offers a variety of business service processes to its clients that include supply chain management. Due to the variety of services offered, the organization has two operational segments, which are; technology solutions segment and Concentrix segment (Synnex Corporation, 2018). Between the two segments, technology solutions segment generates the highest revenues to the corporation.The company aims at improving the efficiency of its clients’ business processes by introducing new technologies that simplify business processes and result in cost savings. It offers specialized marketing services that are intended to improve the reach of its clients in different markets. In addition, the company also provides financial assistance that can enable its client to immediately take advantage of existing market opportunities. Due to the number of services offered to clients, the recent earnings released by the organization show its expansion both in market share and in revenue. According to projections made by the company, revenues are expected to grow by over $300 million to total $21.6 billion by the end of the third quarter of 2019 (Synnex, 2019). Among the corporation’s competitors, the biggest competitive is Avnet Data Solution, which has relatively fewer employees

History of the Corporation

Synnex Corporation has been in existence for the last 30 years offering services ranging from financial services, marketing, technological services, and supply chain management. Since, it was established in 1980, the organization expanded its product portfolio making it attract more clients. Consequently, it registered growth in income. Apparently, the organization has more than 600 clients located in more than 40 countries. Concisely, Synnex Corporation has had positive financial trend over the years. The organizations are in different industries including the healthcare sector, the banking and financial services, technology sector, automotive sector, the retail and e-commerce sector and the transport and travel industry among others (Synnex Corporation, 2018).

Net Income

The table below shows the net income of Synnex Corporation from the year 2016 to 2018.

The net income for the organization increased from $235,005,000 to $300,598,000 in 2018. However, the between 2017 and 2018, the net income of the company reduced from $ 301,173,000 in 2017 to $ 300,598,000 in 2018. Comparatively, the net income of the entire industry increased between 2016 and 2018 financial years. It shows that whereas Synnex Corporation has competitive in the sector, all competitors’ recorded positive growth in their net incomes. However, in terms of average growth Synnex Corporation registered a higher growth, which is attributed to its relatively high market capitalization, bigger market share and having a diversified product portfolio. Notably, organizations with diversified product portfolio re able to attract more clients in different sectors in need of different services compared to an organization offering only one type of product. In addition, Synnex Corporation is strategic in its investment; for instance, it acquired Convergys Corp in June 2018, which will help it to increase its consolidated revenue due to diversification. The acquisition also increased the organization’s market capitalization because the demand for the organization’s shares increased (Deroche&Penzenstadler, 2018). In the future, the industry will continue registering increase in net income.

Income Statement

The operating income recorded by the company increased from 3.2% of the revenue in 2016 to 3.5% of the revenue in 2018 (Synnex, 2019b,). The increase is attributed to the decrease in the operating expenses of the company as well as the growth in the total revenues earned by the company from 2016 to 2018.The depreciation expense recorded by the company increased steadily from 2016 to 2018, which means that the company has been investing in new equipment and machinery. The depreciation expense as a percentage of revenue increased from 0.46% in 2016 to 0.5% in 2018. The earnings made by the company also increased from 2016 to 2018. This is shown by the increase in the EBITDA of the company from 3.7% in 2016 to 4.1% in 2018. The increase is attributed to the growth in the revenues of the company as well as the reduction of operating expenses during the three years. The EPS of the company increased significantly over the three years. The EPS increased from 7.04 in 2016 to 10.89 in 2018, which indicates increasing profitability. The industry will register increased earnings per share because of the high demand for the services offered by the organizations in the sector.

Balance Sheets

The organization’s assets increased from $5,215,281 in 2016 to $11,480,434 in 2018; the assets increased by more than 100%. The organization’s liabilities increased from $3,239,483 in 2016 to $ 8,048,366 in 2018. The total equity increased from $1,975,798 to $3,432,068 in 2018. The results show that the organization expanded in terms of assets by acquiring new property, equipment, and gaining goodwill. However, the liabilities were controlled; hence, they did not increase drastically as to reduce the total equity. Whereas the liabilities of the organization increase, the liabilities of the competitors such as Avnet Data Solutions and Vertex Wireless did not increase at the same rate. The increase in the liability of the organization during the period could be linked to the acquisition of Convergys Corp, which partially was done by borrowing funds from banks. Other competitors have not ventured in serious acquisitions because they are relatively small with low market capitalization.

Conclusions

The financial report for Synnex Corporation shows that its expansion is due to strategic management that focused on increasing its efficiency that led to reduced expenses. In addition, the organization also engaged in acquisitions such as the acquisition of Convergys Corp; which is expected to boost the organization’s earning in 2019 financial year. Competitor organizations such as Avnet Data Solutions and Vertex Wireless also focused on reduced on their expenses as evidenced from their financial reports. However, due to the economies of scale enjoyed by Synnex Corporation, it was able to realize larger gains compared to competitors. Furthermore, the organization’s management was strategic in their business process, which led to increase in accounts receivable and invested in new property.

Recommendations

Based on the financial performance of the organization, it should continue to diversify its market portfolio in order to sustain the growth. Notably, in 2018, the net income was slightly lower than in 2017, which shows that it should be correct to avoid the reduction in net income. Furthermore, the organization should decrease its operating income by a bigger margin compared to the current reduction.

Summary

A common size analysis of the company’s financial statements indicates that the expenses of the company have been reducing steadily from 2016 to 2018. This indicates that management is efficiently managing internal processes and as a result, the operating expenses are decreasing. The operating income of the company has also been steadily increasing, as shown by the increase in operating income earned each year as a percentage of revenue. Comparatively, Synnex Corporation outperforms its competitors due to its vastness and strategic investments. Notably, by expanding its product offerings, it attracts more customers compared to competitors; hence, it enjoys economies of scale that translate to more profits and lower expenses.

When making the caparison between Synnex Corporation and rivals in the sector, analysisof financialreports was done. The use of financial information was necessary because it gives a authentic and reliable data that can be used. In addition, the industry has many organizations and the organization’s operations span through different industry; therefore, using financial reports made the analysis and comparison specific.

References

Deroche, G and Penzenstadler, B (2018). An Analysis of Best Practice Patterns for Corporate Social Responsibility in Top IT Companies.Technologies, 6(76), pp. 12-21.

Synnex Corporation (2019). FY19 Earnings.Web. Accessed on 10/8/2019 from http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_SNX_2018.pdf