Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

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

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

"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.