Ingram Micro CEO Greg Spierkel says that caution on purchases by small and midsize businesses is making for a more conservative Q3 for the world’s largest IT distributor.
Spierkel told Channel Insider that "the forecast for Q3 was more conservative than some would have liked. We are reflecting the reality of the market environment. It’s probably affecting 60 to 70 percent of the community we are working with."
Ingram Micro’s CEO spoke to Channel Insider soon after the distribution giant announced its Q2 earnings on July 24. Ingram Micro reported worldwide sales of $8.82 billion compared with $8.19 billion for the same period a year ago. The company said that the translation impact of the stronger foreign currencies had an approximate 6 percentage point positive effect on revenue growth comparisons to the prior year.
Ingram Micro posted net income of $58.9 million or 35 cents per diluted share. That compares with $52.4 million or 30 cents per diluted share for the same period a year ago.
Spierkel said growth in North America was solid for the quarter and showed improvement over Q1, and that South America growth exploded at 28 percent over the previous quarter. "The economic malaise has not been evident in Latin America," Spierkel said.
In terms of product lines, PCs and servers grew a little faster than the company’s global growth rate, with the rest of the product categories growing by 5 percent to 8 percent.
"Mobility products still remain strong, including laptops, navigation products, and networking to enable those types of products," Spierkel said. "We’ve also seen very good movement in virtualization to improve efficiency."
Spierkel views the strength in PCs and servers as coming from a business need for productivity gains and applications.
"It’s not so much a refresh cycle," he says. "It’s more about ‘I’ve got a Web app that I need to put in place.’ Those tend to be the biggest drivers. Companies are looking for a distinct competitive advantage based on service levels. They are looking for ROI guaranteed within a short period of time."
Still, SMBs are feeling the constraints of the current economic dip.
"A number of small and medium-size businesses are more cautious about the purchases they are going to make," Spierkel says. With the company less than a month into Q3, Spierkel says he already has solid visibility into the quarter. "We’ve been pretty accurate in our forecasts on our guidance range. This past quarter we ended up better in revenues and profitability than we expected."
But for Q3, Ingram Micro is expecting sales of $8.5 billion to $8.8 billion and net income of $52 million to $61 million or 31 cents per diluted share to 36 cents per diluted share. Analysts were looking for 40 cents per share on $8.79 billion in sales.
The company also said in its earnings statement that it would be evaluating additional expense-reduction opportunities.