Ingram Micro Quarter Showcases Reseller RecoveryBy Jessica Davis | Posted 2010-02-18 Email Print
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Weathered by previous recessions, resellers fared better in the current recession, Ingram Micro's CEO tells Channel Insider, following the IT distributor giant's fourth-quarter earnings announcement. The churn rate among VARs was much lower this time around. And Ingram Micro sounded a positive note going forward, reporting higher sequential earnings and a sense of optimism among business customers.
IT solution providers and VARs fared better during this recession than the
one that followed the dot-com/Y2K boom and bust, Ingram Micro (NYSE:IM) CEO
Greg Spierkel has told Channel Insider.
He estimates that 20 to 30 percent of the VAR community went into bankruptcy due to the effects of the recession in 2002 and 2003. But this time around, while he has yet to see the concrete figures, he says he’s seen much less of a churn rate among Ingram Micro’s VAR customers, even though the dip was just as deep.
"We took some significant write-offs and our bad debt went up significantly, but we all managed very well through this recession," Spierkel told Channel Insider in an interview following the IT distributor’s fourth-quarter and year-end earnings announcement.
"This time our [VAR] customer community has evolved their business models," he said. "They’ve become more intelligent with service models and looking through to the credit worthiness of end-user companies. … The churn rate [for VARs] is nowhere close to where it was in the last recession." Rather, Spierkel estimates that it is up just a few points higher than it was just prior to the start of 2009’s recession.
Ingram Micro announced worldwide sales for the fourth quarter of $8.81 billion, a 1 percent increase year over year, and a significant increase over the third quarter’s revenues of $7.38 billion—the largest sequential quarter-to-quarter growth in seven years. Wall Street analysts had expected revenues of $8.35 billion, according to Reuters.
Net income for the quarter rose to $107 million, or 64 cents per share, compared with a loss of $564 million, or $3.48 per share, in the year-ago quarter.
"It’s a slingshot back in a very positive way, saying that the worst of the economic issues are behind us," Spierkel said. "The big question is now, so where does it go from here?"
IDC is forecasting growth of 3 percent to 4 percent for the year, but Spierkel says he believes that Ingram Micro’s growth will be stronger than that.
"Most companies at this early stage in the year are encouraged," he said. And they are looking at spending on how to improve productivity, protect business from security breaches and reap the benefits of virtualization.
While Spierkel doesn’t believe we are immediately headed to pre-recession spending levels, the patterns of purchase activity are on still on the way up, he said.
"The [PC/technology] refresh is starting to happen," he said. "Businesses are starting to get comfortable with the idea of investing in technology again."
For the year, Ingram Micro posted worldwide sales of $29.52 billion, a 14 percent decrease from the $34.36 billion posted for the previous year. Ingram Micro said the drop reflected the challenging economic environment. Net income for the year was $202.1 million, or $1.22 per diluted share, compared with a net loss of $394 million, or $2.37 per diluted share, which included a goodwill impairment charge of $742.5 million.