Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Brian Alexander - Raymond James.
Brian Alexander - Raymond James
Just on the margin pressure on the components business, my quick math suggests that the gross margins in your components business were down maybe 100 basis points sequentially and maybe even 200 versus a year ago.
Would you agree that’s kind of the order of magnitude we are talking about, and could you talk about how much of the margin decline in components is due to geographic mix versus competitive pressures? Finally, on that subject, is more of that competitor pressure is it coming from competitors or is it more coming from the supplier community? And then I have a follow-up.
Paul Reilly
Hey. It’s Paul. Thanks for joining us. Your numbers are in the ballpark, correct. When we look at sequentially and year-over-year, about 50% of that change is driven by geographic mix. So that is the first driver absolutely the first driver.
Another driver would be a change in mix in our product sets, which impacts that and then finally as you suggested there is margin pressure more at, what I would call the customer level than at the GP level. So more at what we compete at the customer than from the supplier.
Brian Alexander - Raymond James
So, I guess the follow-up would be Paul, what’s going to cause gross margins in the components business to rebound from where they are today? Do you need to count on supply demand imbalances, IE shortages to drive the gross margins higher? Or do you think even a gradual recovery could bring the gross margins back to where they were before? I’m just not clear how we get back to, where we were maybe three or four quarters ago? Thanks.
Paul Reilly
If we had a hard allocation, in fact GP would go well ahead of where it was just four quarters ago. So, for sure there are lots of different bits and pieces that are impacting the margins going back-up, but the first thing that would happen is we show a stability and growth in North America and in Europe even at a slower pace than Asia Pac, GP would back up.
The second thing would be that, the pace of recovery could impact GP. So if this was to be a D-type recovery, we’d see a rapid increase in GP and if it was to be more like U, we’d see a more gradual increase.
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