Ingram Micro Surprised by Q1 Softness

By Jessica Davis  |  Posted 2008-04-25

Ingram Micro, reporting earnings April 24, attributed its revenue softness to broad macroeconomic factors in some geographic areas, including North America and Europe.

Ingram Micro CEO Greg Spierkel told Channel Insider that the rising consumer prices and the real estate crisis in the United States are weighing on the market.

"There's the rise in the price of fuel, up 60 to 70 percent in the past year, and the price of goods around foods and consumer-oriented purchases are hurting the business environment," he said. At Ingram Micro, business typically picks up in the last five weeks of each quarter, but this time around it did not, Spierkel said.

Click here for full Ingram Micro earnings results.

"We were caught by surprise by the softness at the end of the quarter," he said. That said, Spierkel said Ingram Micro is still holding to a "fairly healthy" outlook for the current quarter, which ends in June. "I think the analysts on the [earnings] call were surprised that we could hold onto our seasonality from quarter one to quarter two. We are forecasting 4 percent to 7 percent growth," he said.

In response of the softening economy, Ingram Micro has initiated a cost-cutting program and has already cut 66 jobs in North America over the past two weeks. In Europe the cuts are still under evaluation and will happen over the next two quarters.

"Beyond that, we don't expect any more significant changes, unless things weaken further," he said.

As for inventory, Spierkel said Ingram Micro went higher than it had in a few years due to the softness at the end of the quarter that just ended. The company has two to three more days of inventory than it would like to have, according to Spierkel.

"There's been a commitment by the management team, and we feel good that we will get inventory back in the normal range within the current quarter," he said.

Unlike Avnet, which also reported earnings April 24, server sales were not lagging more than other products.

"There wasn't a large single product category that fell off the edge of a cliff," he said. But some product categories did show particularly strong growth.

They included point of sale, data capture, wireless printers used in certain solution sets and the company's managed services business.  Mobility products including laptops, PDAs and wireless products also showed strength in the quarter.