Ingram Micro Expects Sharp Q1 Revenue Declines

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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 posted Q4 sales of $8.68 (£6.05) billion, 13 percent lower than the $10.01 (£6.98) 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 annualised savings of $100 (£69.78) million to $120 (£83.74) 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 (£23.79) billion compared to $35 (£24.42) billion in the same period a year ago. Ingram Micro posted a worldwide operating loss of $332.2 (£231.82) million for the year.

Ingram Micro reported a net loss of $394.9 (£275.57) million for the fiscal year which included the goodwill impairment charge of $742.6 (£518.2)million. Non-GAAP net income excluding the charge came in at $264.9 (£184.85) million. That compares to $275.9 (£192.5) 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.