Orange County Business Journal

Ingram Lowers Q3 Profit Target, Shares Sink

Chris Casacchia Tuesday, October 18, 2011

Shares of Ingram Micro Inc. fell Tuesday after the Santa Ana-based company lowered its third quarter profit projections based on recent challenges in its operations in Australia.

Ingram shares closed down 7% in Tuesday to a market value of about $2.7 billion on news of a lingering computer and software infrastructure glitch that has hampered earnings throughout the year.

Ingram is the biggest distributor of computers, software and other technology products in the world, and the largest public company based in Orange County. It said profits are expected to be in the range of $50.3 million to $53.5 million for the third quarter.

Wall Street analysts on average had forecast profits between $58.2 million and $69.2 million.

Ingram is projecting revenue in third quarter of $8.9 billion, in line with Wall Street expectations.

Executives cited continued problems implementing a systems overhaul in Australia and softening demand in Europe for the soured outlook.

“Most areas of our business are performing well, outside of the recovery efforts in Australia and the effects of the European economy,” said Chief Executive Gregory Spierkel.

The systems overhaul involved a software program designed to improve automation, operations and services for customers and vendors around the world, Spierkel said in earlier statements.

Ingram has completed the overhaul in seven countries and has 19 more on tap. The program began three years ago and has an expected companywide completion date of 2014.

The changeover went smoothly in Singapore, New Zealand, Chile, the Netherlands, Belgium and Indonesia.

Australia is a bigger market for Ingram, and problems on the overhaul started shortly after the installation of the new software system in February and March.

The Australian business had used the same software since Ingram acquired then-Tech Pacific in 2004 for $530 million from private equity firm CVC Asia Pacific Ltd. and Dutch computer distributor Hagemeyer NV.

A year earlier, Ingram installed a proprietary warehouse management system in Australia as well, adding complexity to the system’s communications network.

When the company installed the new system, it didn’t communicate with the warehouse system, causing a backlog and other logistical problems internally and for customers.

Ingram spent most of the second quarter fixing the problem.

The company also expects to record a tax charge of $29 million in the third quarter from continued losses at its Brazil operation and a $4 million charge related to changing its loan structure, executives said.

Ingram is scheduled to report third quarter earnings Oct. 27.