Arrow Electronics - Started on Radio Row selling used radios; lost thirteen of its leaders in one afternoon and rebuilt.

Arrow Radio opened in 1935 on Cortlandt Street, in the part of lower Manhattan known as Radio Row, selling second-hand radios and parts. Its founder was Maurice Goldberg. Two of his neighbours on that street were Charles Avnet and Seymour Schweber, and all three names ended up on distribution businesses - which is why Radio Row has a reasonable claim to being where electronics distribution started.

The company as it exists dates from 1968, when three recent Harvard Business School graduates working at a New York investment bank - B. Duke Glenn Jr., Roger E. Green and John C. Waddell - led an investor group that bought control for about $1M of borrowed money. They also bought a business that reclaimed lead from old car batteries, which tells you something about the state of the opportunity as they found it.

They were right about electronic parts distribution. By 1979 Arrow had acquired Cramer Electronics, then the second largest distributor of electronic parts in the United States at around $150M of annual sales, and was a serious national business.

On 4 December 1980 the senior management team gathered at a hotel conference centre in Harrison, New York for the annual budget meetings. A fire in the building killed thirteen of them. The dead included Glenn, by then chairman, Green, then an executive vice-president, and every department head of the electronics distribution division. Waddell survived because he was not there: he had stayed at headquarters to field questions about a two-for-one stock split announced earlier that day.

The day after the fire, Lynn Glenn - the chief executive's widow - came to the company's headquarters and spoke to the staff. She told them she did not know their faces but would know their names, because her husband had talked about them.

Waddell took over a company that had lost most of the people who knew how it worked. He recruited Stephen Kaufman from McKinsey in 1982; Kaufman became chief executive in 1986 and chairman in 1994, and led the consolidation of American electronics distribution and the expansion into Europe and Asia. Arrow recovered within about three years, and the episode produced changes in succession planning that a company only makes after it has needed them.

The 1988 acquisition of Kierulff Electronics shows the method: Arrow closed all four of Kierulff's warehouses, and the combined business went from a $16M loss in 1987 to $10M of operating profit within a year. That is distribution economics in one sentence - the value is in the network and the working capital, not in the buildings.

Read beside the other distributors here, Arrow is the oldest and the one whose history is least about strategy. Ingram Micro was founded by teachers, ScanSource by a thesis about transitional products, Westcon by acquisition and Network1 by being bought. Arrow's defining moment was an afternoon nobody planned for, and what it demonstrates is something no strategy document covers: that an organisation is not only its people, because this one lost thirteen of the most senior at once and still existed three years later - and also that it is nothing but its people, because rebuilding took three years and a stranger from a consulting firm.

The timeline

Incorporated under the name it still uses
Eleven years after the shop opened. By then it was selling new radios from RCA, General Electric and Philco at the front, and surplus parts over the counter from a department at the back - and the parts department was the part with a future.
The pivot that actually made it a distributor
In the early fifties, with franchises from manufacturers and a small field sales team, it began selling components to industrial customers rather than to hobbyists walking in off the street. That is the change from shop to distributor, and it happened roughly fifteen years before the purchase that is usually treated as the company's beginning.
One neighbour buys another
Among the fifty-odd distributors acquired during the consolidation was Schweber Electronics, through its parent Lex. Two shops on the same Manhattan street in the 1930s, and one of them eventually bought the other - which is the tidiest possible ending to the Radio Row story and took about fifty-five years to arrive.
Schweber appears in the company's own list of acquisitions as Lex (Schweber); the precise year of that transaction is not stated in the sources consulted.

Flagship products and solutions

Electronic componentsSemiconductors, passives and interconnect sold to the manufacturers who build things - the original business, still the larger one, and one where the customer is a design engineer rather than a purchasing department.
Enterprise computing solutionsServers, storage, software and cloud sold through resellers and integrators. A different customer, a different sales motion, and the reason this appears on a timeline about networks at all.
Design and engineering servicesHelping customers choose and integrate components before they buy them, which is what distinguishes a components distributor from a warehouse: the specification happens in the distributor's office.
Global logistics and supply chainThe unglamorous half - forecasting, buffering shortages, managing end-of-life parts. In semiconductors this is not a service around the product; during a shortage it IS the product.

Key innovations

Selling to the engineer before the purchase order existsA components distributor that helps design a board is present at the moment the parts are chosen, which is months or years before anything is bought and long before a price is negotiated. That position is worth more than any discount, and it is why this business could never be reduced to logistics.
Consolidation as an operating methodOver fifty acquisitions across the United States, Germany, Italy and China, run on a consistent principle: keep the customer relationships and the franchises, close the duplicated infrastructure. The entry above gives the arithmetic of one such deal, and it applied broadly - which is what turns a series of purchases into a strategy rather than a spending habit.
Two businesses that share almost nothingComponents and enterprise computing sit in one company and have different customers, different margins, different cycles and different competitors. Holding both is defensible as diversification and questionable as focus, and the argument has been running inside the industry for thirty years without resolving.

Main markets

Original equipment manufacturers, contract manufacturers and design engineers on the components side; resellers, integrators and managed service providers on the enterprise side. The company sits in the Fortune 500 and serves customers in most industrialised countries.

It competes with Avnet in components - a neighbour from the same street in the 1930s and still its principal rival ninety years later - and with the broadline technology distributors on the enterprise side.

Analyst standing

Component distribution is judged on franchise breadth, design-win registration and inventory turns, and the enterprise business on vendor authorisations and partner reach. They are separate assessments of the same company, which is itself the observation.
The rivalry with Avnet is worth noting for how old it is. Two businesses founded within a few doors of each other during the Depression are still, ninety years later, the two largest electronics component distributors in the world and still measured against one another. Very little else in this industry has been stable enough to sustain a rivalry that long.

Acquisitions

1979 Cramer Electronics
Then the second largest distributor of electronic parts in the United States, at around $150M of annual sales, strong on the west coast.
Arrow's first major industry acquisition and its route into western US markets.
1988 Kierulff Electronics
A competitor acquired as part of an explicit growth-by-consolidation strategy under Stephen Kaufman.
Absorbed - all four Kierulff warehouses were closed, and the combined business swung from a $16M loss in 1987 to $10M of operating profit within a year.

Arrow Electronics history ↗

From the company

Official site ↗

Sources