Avnet's Chuck Delph Departs to Become President of Vallen Distribution

Chuck Delph, president, Vallen Distribution

Chuck Delph, Avnet Inc.’s president of Electronics Marketing for the Americas since 2016, is the latest Avnet veteran to depart the company. Delph has been named president of Vallen Distribution, effective April 9, 2018, and will be based in Vallen’s Belmont, NC, headquarters.

Delph is among a number of senior executives who have left Avnet in less than two years. In July 2016, CEO Rick Hamada, the handpicked successor to 13-year CEO Roy Vallee, was ousted by Avnet’s board of directors. Hamada was succeeded by current CEO and former Avnet board member Bill Amelio. Since the 2016 shake-up Gerry Fay, formerly Avnet’s president for Electronics Marketing, global; and Ed Smith, formerly senior vice president, global, for Avnet Embedded Solutions and former president for Avnet EM Americas, have also left the company. Delph, who worked at Avnet for 26 years, succeeded Smith as head of EM Americas.

Delph’s departure also leaves a gap in the management team headed by Phil Gallagher, who rejoined Avnet in April 2017 as president of Avnet’s Core Distribution Business. Gallagher retired from Avnet in 2014; spent some time away from the industry, and worked briefly for Texas-based distributor TTI Inc. Gallagher oversees Avnet’s distribution business, supplier relationships, global procurement and supply chain solutions business. Avnet is actively seeking Delph’s replacement and is considering candidates both inside and outside of the company, a spokeswoman said.

Gallagher and his team have—among other tasks — been working to solidify Avnet’s relationships with its suppliers and to forge new alliances. Distributor and supplier relationships have been in flux as semiconductor companies have merged and realigned their distribution channels. Merged suppliers often discontinue overlapping product lines, which can prompt shortages in the channel. Distributors that carry both suppliers usually end up doing more business through a single supplier partner; distributors that carry one or the other may gain business or lose a supplier entirely.

In 2017, Analog Devices Inc. (ADI) parted ways with Avnet and consolidated its global fulfillment distribution business under Arrow Electronics Inc. after ADI’s acquisition of Linear Technology. Avnet currently carries Microchip Technology Inc. that recently acquired Microsemi Corp., a line Avnet does not have. Texas Instruments Inc. impacted the entire channel when it discontinued its demand-creation business, which commands higher profit margins for distributors.

Delph has been instrumental in driving Avnet’s new business model which combines the demand-creation prowess of its catalog business Premier Farnell and the traditional fulfillment business of Avnet. Avnet acquired the Leeds, England-based Premier Farnell in 2016. Vallen Distribution also has an EU tie. Vallen, which distributes industrial supplies, is a division of the privately held Sonepar Group, headquartered in Paris. Sonepar, during the 1990s, had an alliance with U.S. distributor Marshall Industries, which was acquired by Avnet in 1999. Marshall had partnered with Sonepar in the EU to serve Marshall’s growing base of global customers.

Distribution’s efforts to provide the same products and services on a worldwide basis has spurred a number of foreign distributors—including Sonepar -- to establish headquarters in the United States. Taiwan’s World Peace Industrial Group opened in the U.S. in 2007. Germany’s Rutronik established a U.S. subsidiary in 2015. Vallen Distribution was formed through the merger of predecessor companies Hagemeyer North America and IDG, which joined forces in 2014. Industry sources say Vallen is an excellent opportunity for Delph.

“Chuck’s commitment to performance in all business environments, team building and delivering customer focused solutions makes him the perfect fit to lead Vallen,” said Halsey Cook, Sonepar USA president and CEO, in a statement. “Chuck understands and appreciates the unique talents and capabilities of our Vallen associates and will be an excellent leader to take the company to new heights.”

Delph holds a Master of Business Administration from Arizona State University and is a recipient of the Distinguished Service Award from Electronic Components Industry Association.

Avnet appears to be making headway after its reorganization and a business interruption following the implementation of its enterprise resource planning (ERP) system in the Americas. In January, Wall Street analyst Stifel said it was encouraged by Avnet's better-than-expected December quarter operating results, which benefited from above-seasonal revenue trends, continued cost-cutting efforts, and better execution in the North America business, which has been plagued by ERP issues.

Above-consensus guidance for the March quarter implies better-than-seasonal trends in all regions (Avnet’s book-to-bill was a strong 1.16), as well as a modest margin improvement. The company appears to be on track to hit 4 percent earnings before interest and taxes (EBIT) margin in FY19, but Stifel still sees heavy-lifting ahead with the global ERP implementation, and expressed concerns about a peaking semiconductor industry cycle. Stifel raised its estimates, but is maintaining its “hold” rating on Avnet.

Avnet reported September quarter (FY2Q18) revenue of $4.52 billion (down 3 percent quarter to quarter, up 6 percent year over year, and up 5 percent year over year in organic growth.) The December quarter increase was driven by further strength in the EMEA and Asia regions, as well as better-than-expected results in the Americas, which has been suffering from supplier share losses and ERP headwinds, Stifel concluded.