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Ingram Micro sees margins near top of range
August 25, 2009 / 7:46 PM / 8 years ago

Ingram Micro sees margins near top of range

* Ingram Micro current qtr gross margins range 5.4-5.8 pct

* CEO says gross margins will be “closer to higher end”

* Services growing, but total less than 10 pct of revenue

(Adds further quotes, detail)

By David Lawsky

SAN FRANCISCO, Aug 25 (Reuters) - Tech distributor Ingram Micro IM.N expects gross margins in the current quarter to be near the high end of a range between 5.4 and 5.8 percent, its chief executive told Reuters on Tuesday.

“If there was any kind of general messaging, you could read that it was closer to the higher end of that, because we’ve done a very good job of managing to the higher end of expectations over the last few quarters,” CEO Greg Spierkel said in the telephone interview. Spierkel also said that his company, which as the world’s largest tech distributors has operations in 150 countries, sees things getting better in Asia and North America, but Europe remains a question.

Ingram shares were up 1.8 percent to $16.78 in afternoon trading on the New York Stock Exchange.

Ingram, with high profile customers such as Intel Corp (INTC.O), IBM (IBM.N), Dell Inc DELL.O and Hewlett-Packard Co (HPQ.N), reported second-quarter earnings on July 30, with a gross margin of 5.87 percent. It gave no specifics in its outlook.

More recently, smaller rival Tech Data Corp (TECD.O) posted better-than-expected results, although its gross margin was less than Ingram’s at 5.19 percent.

Analysts have expressed concern that Ingram may be willing to sacrifice gross margin to take share from rivals.

“We do believe Ingram faces significant challenges in the quarters ahead as it tries to grow volumes as well as profitability in Europe and North America,” wrote Matt Sheerin of Thomas Weisel Partners in a note on Monday.


Spierkel told Reuters his company is cautious. “We are being very surgical in where we might want to grab some business back,” he said.

He said only a few customers in each country will be targeted and generally will be ones that spend 30 percent to 50 percent of their buying dollars with Ingram and provide relatively high margins.

Ingram has in its quiver both price cuts and attractive terms, Spierkel said. Also, vendors sometimes give Ingram rebates, helping it increase share without cutting margin.

    Sheerin said in his note that a better economic climate will increase hardware sales, but those “are likely to weigh on overall gross margin,” because they have a lower margin than services.

    Spierkel said high-volume services such as logistics continue to grow within the company, but overall contribute less than 10 percent of the company’s revenue.

    For example, Ingram handles the distribution of Apple Inc’s (AAPL.O) products to Apple stores.

    Because of the company’s international operations, Spierkel keeps close tabs on economic conditions around the world.

    He said that China now looks as it did before the downturn but that India, although it has experienced economic growth, has not had a matching increase in information technology sales.

    Spierkel called Europe a “question mark” because, despite negative growth recent gross domestic product, the numbers have improved in some countries. He said Mexico continues to be a problem.

    He said that in North America, although things are down from a year ago, “everything is starting to firm up.”

    (Reporting by David Lawsky; Editing by Tim Dobbyn)

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