Investors love Dell Inc.'s direct sales model, but they've also got a weak spot in their hearts for well-managed distributors.
Just ask Ingram Micro Inc. The Santa Ana, Calif.-based distributor last week announced stellar results for its 4Q ended Dec. 31. Year-over-year 4Q income was an impressive $46.4 million vs. a net loss of $10.3 million in 4Q 2002. Moreover, year-over-year 4Q sales rose a healthy 15 percent to $6.76 billion. Ingram CEO Kent Foster credited record-breaking performance in Europe and the IT spending rebound in North America for the results.
Investors cheered the results and lifted Ingram Micro shares nearly 15 percent for the week ended Feb. 27. The rally extended to other distributor shares, pumping up Arrow Electronics Inc. (ARW, +4.64 percent), CDW Corp. (CDWC, +3.68 percent) and Tech Data Corp. (TECD, +1.97 percent). Tech Data is slated to announce 4Q results on March 10.
Despite the distributor rally, our weekly index rose only 0.26 percent to 1,140.53. Sell-offs at DiamondCluster International Inc. (DTPI, -7.09 percent), Unisys Corp. (UIS, -5.04 percent) and Electronic Data Systems Corp. (EDS, -4.35 percent) offset the distributor rally.
Still, our 30-member index is up 2.93 percent since Dec. 31 and 14.05 percent since its launch in October 2003.
(See complete index after the conclusion of this column.)
Next page: Long-term sentiment remains positive
Long-term sentiment remains positive
Long-term sentiment within the channel remains positive. One indication: Top channel executives are scheduled to speak at multiple financial conferences this week. The road shows kick off today (March 1), when Ciber Inc. CEO Mac Slingerlend speaks at a Wachovia Securities conference in Miami Beach, Fla., and Arrow Electronics CEO William Mitchell takes the podium at a Morgan Stanley conference in Dana Point, Calif.
At the Morgan event on March 2, Avnet Inc. CEO Roy Vallee will step up to the microphone while, his counterpart, Avnet CFO Ray Sadowski, will present at the Raymond James Institutional Investors Conference in Orlando, Fla.
So far, the current earning's season has yielded mixed results. BearingPoint Inc. on Feb. 26 announced preliminary results for its quarter ended Dec. 31. The McLean, Va.-based consulting firm says it will suffer a $117 million net loss for the period because of a "goodwill impairment charge" of $120 million, among other reasons.
Titan Corp., meanwhile, announced record 4Q revenue last week. Year-over-year quarterly sales rose 29 percent to $488 million, while 4Q net income was $4.1 million compared with a net loss of $0.8 million in 4Q 2002. CEO Gene Ray says Titan's strong focus on national security solutions fueled the results.
Next page: The full Ziff Davis Channel Zone Stock Index
The full Ziff Davis Channel Zone Stock Index
Hed: Stocks on the Rise
About this Column: The Ziff Davis Channel Zone Stock Index tracks 30 channel-related stocks on a weekly basis. We don't recommend buys, sells or holds. Rather, the index seeks to measure the channel's financial health. We launched the index on Oct. 24, 2003 with a value of 1000. Each stock in the index is equally weighted. For example, if one stock rises 5 percent and another falls 4 percent, the net result is a 1 percent gain.
Joseph C. Panettieri has covered Silicon Valley since 1992. He is editorial director of the New York Institute of Technology . Write to him at joe_pan5@yahoo.com.
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