Ingram Micro Expects Sharp Q1 Revenue Declines

By Jessica Davis  |  Print this article Print


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Technology distribution giant Ingram Micro reported a loss on lower revenues and said it expected Q1 revenues to decline 20 percent or more compared to last year's Q1. Ingram Micro blamed low demand and said it planned a total global work force cut of 8 percent in 2009.

Technology distribution giant Ingram Micro's North American sales declined just 1 percent in the fourth quarter, but the outlook for next quarter and the quarters to come weren't nearly as bright.

"We thought that was a solid quarter for North America," Ingram Micro CEO Greg Spierkel tells Channel Insider. "That doesn't mean the going forward outlook is as rosy. We're expecting negative growth year on year for the first quarter. That's pretty consistent with the large vendors as they are announcing their results right now."

Ingram Micro says it expects Q1 sales to be down 20 percent from last year's $10 billion during the same period. While 2008 may have been a difficult year, Spierkel says Ingram Micro "expects 2009 to be even more challenging." 

For Q4 Ingram Micro announced a net loss of $564 million, which included a non-cash charge of $743 million for the impairment of goodwill – taken because of Ingram Micro's eroded stock and company value following the stock market's steep dive over the past several months. Non-GAAP net income, excluding the goodwill impairment charge and related items, was $95.5 million.

Ingram Micro posted Q4 sales of $8.68 billion, 13 percent lower than the $10.01 billion it posted during the same period a year ago. While North American sales slid only 1 percent, sales in the company's other three regions experienced declines in the 20 percent range – a difference that can be attributed to the translation effect of weaker foreign currencies. If measured in their local currencies, those regions' sales declined at about the same rate as North America's 1 percent decline, Spierkel says.

In response to an analyst question during the post-earnings conference call, Ingram Micro executives said that inventories are clear and the revenue dip in Q4 and Q1 could be attributed to low demand.

Cost reductions
Ingram Micro announced the elimination of 300 jobs in North America earlier this week, including 150 at its headquarters and distribution facilities.

Spierkel told Channel Insider that those cuts would not be the last, and that the company was looking to reduce headcount by 8 percent globally in 2009, either through attrition or more layoffs. However, he said layoffs would be more likely in North America and Europe as workers in those geographies tend to be more likely to stay with their positions. Ingram Micro is looking for an annualized savings of $100 million to $120 million through the cuts.

Spierkel says that while the staff cuts will reach across the entire corporation, they will be heavier in back office operations and support groups.

"Those front line groups that are touching customers and vendors will be less affected," he says.

For the year, Ingram Micro reported revenues of $34.1 billion compared to $35 billion in the same period a year ago. Ingram Micro posted a worldwide operating loss of $332.2 million for the year.

Ingram Micro reported a net loss of $394.9 million for the fiscal year which included the goodwill impairment charge of $742.6 million. Non-GAAP net income excluding the charge came in at $264.9 million. That compares to $275.9 million for the previous fiscal year.

In the midst of a recession where no one has visibility to the end, Spierkel says Ingram Micro is in a solid position going forward with plenty of cash and the strongest balance sheet it has ever had.

"This is a time to do two things," Spierkel tells Channel Insider. "Hunker down on expenses and operating controls. You don't want to make mistakes and you want to be as frugal as possible.

"But because of our financial position, our strong cash position, we are in a good position to keep investing when others may be scrambling to keep things together."

Spierkel says Ingram Micro will continue to invest in key parts of its portfolio including POS data capture, small business, and services, including new services in its Seismic managed services offering. 


Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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