Phil Gallagher: Great explanation, Ken. And well, it is a good question. Apologize for a lengthy answer because it is complex, and we want to be transparent. And what brought some of these on is the breakdown in supply chain late over the last 3 years, and where customers got caught short as we all know, right, with the shortages and the stoppages and supply chain. So some of these opportunities even come those from our suppliers have being asked is beginning to be asked to do things that maybe is not in their core. So they bring it to us and we go work it together. So I’ll leave it at that, and then we can pick it up later, if you like.
William Stein: If I could just ask one follow-up. So I think you’ve made this explanation of the increased inventory from the from the supply chain engagements or supply chain as a service engagements, but I think you said that the — for the core EC and Farnell business, it was flattish and you were trying to bring it down. All the semi companies I cover have — or most of them have talked about a significant decline in channel revenue in the last couple of quarters. And I’m just trying to — obviously, I don’t cover every semi company in the world, but I’m wondering if you can help me sort of reconcile these data points when many of the larger semi companies are talking about channel sales being down any way that you might be able to reconcile that I can’t recognize, it’s not so obvious to me.
Phil Gallagher: Clarification, channel sales to the channel. Will, you are talking about our sales out and sales into us.
William Stein: In.
Phil Gallagher: Well, our sales out, I think we guided. I mean, so we hit the December. So we were pleased with that. So — and we believe we gained some share. Sales in all the suppliers are a little bit different. Obviously, there’s a few that probably need a little bit more help than others. But we’re — even when we’re up in inventory I’ve said this before. It’s not across all the suppliers. I mean we could use more inventory in a lot of areas that still might be a little tight. It’s in a handful of suppliers that might even be heavier ship in debit. So I think the important thing is we’re working on our suppliers, as we said in the script, I mean every day with our customers trying to balance the true demand as best we can see it in the outlook and we pipeline accordingly.
But overall, the behavior from the suppliers has been good. They’ve been good partners. And as we said, I think 2 calls good. There’s 1 or 2, we’ve had some opportunistic opportunities that we’ve taken advantage of, and it’s been a win-win.
Operator: Our next question is from Ruplu Bhattacharya with Bank of America.
Ruplu Bhattacharya: Phil, in the prepared remarks, I think you said that you can — your conversations with the CEOs have been showing that market softness in the last couple of quarters or through 2024. I think last quarter when we spoke, the thought was that the channel is going through an inventory correction, which is until the mid of 2024. Has your thought process on that changed as your viewpoint changed do you think that the inventory correction take longer? And do you see like — it just sounded like you think that the markets are going to be weaker longer. Just your overall thoughts on that?
Phil Gallagher: Yes. I think — I still think it’s somewhere around midyear. I might stretch into the September quarter, Ruplu. Things have changed. I mean, things changed in 90 days — from 90 days ago with some of the softness in industrial and whatnot, we pointed out, and our suppliers are pointing out. But I still think it’s mid-’24 into December for the inventory correction. And then we’ll see if there’s growth or statement remains flat through 2024. It’s just too far out to call that. But I do think as we bring our inventory down, which we believe we would do in the next several quarters. That would be a positive sign. We’ll spin off cash and we’ll go from there, and then we’ll see what kind of growth the market dictates at that point in time.
Ruplu Bhattacharya: Okay. Let me ask, Ken, a question on margins. I think you said EC margins in the guide can stay above 4%. So can you comment on what revenue level you need to see to keep those margins above 4%. And the same question on Farnell margins. How should we think about that trending over the next couple of quarters? What are the puts and takes there? I mean it was at 4% this quarter. Do you think there’s a chance that — how quickly can that recover? What do you need to see there?
Ken Jacobson: Yes. Maybe I’ll take the Farnell question first, Ruplu. I’ll just say I think in the December quarter, the Farnell sales were a little softer than we had anticipated, which kind of hurt the ability to provide a healthier operating margin. We have the expense actions ongoing. But I think the challenge with Farnell is really competitive pressures on the board components. Now that the on-the-board components are more available with lead times coming down, right, there’s less demand from the catalog or high service distributors. And then on top of that, the high service competitors have a lot of inventory, including Farnell having a lot of inventory, so that’s putting further pressure on the pricing. So we’re seeing those 2 headwinds.
