Headquarters: 1600 E. St. Andrew Place,
Santa Ana
Employees: 14,500; 865 in OC
Business: Technology distributor
Market value as of April 1: $2 billion
Revenue for 12 months ended Dec. 31: $34.4 billion, down 2%
Net loss for 12 months ended Dec. 31: A loss of $395 million, down from a profit of
$276 million
Year in review: OC’s biggest public company and the industry’s largest distributor of technology products is wrestling with a global slowdown in demand for computers, software and consumer electronics.
The big theme for 2008 and the first few months of this year was belt-tightening.
Ingram has been focusing on cutting freight expenses and exiting unprofitable businesses around the world.
The company also started restructuring plans for Europe and North America designed to save up to $120 million annually. Some 300 jobs were cut in North America with roughly half coming from Santa Ana.
Last month Ingram said it’s shuttering some of its Scandinavian operations. It will sell or close businesses in Denmark, Finland and Norway and focus on operations in Sweden, where it gets better profits.
The company already found a buyer for its distribution business in Denmark.
“We still have more work to do here, but we’re on the right track,” Chief Executive Gregory Spierkel said in a conference call with analysts.
2008 sales were roughly flat after posting solid revenue growth in recent years. Ingram reported yearly sales of $34.4 billion, down slightly from $35 billion in 2007.
Ingram has been working to diversify in search of profits and to mitigate the effects of a slowdown.
It continued to push services this year, offering its network of 170,000 tech resellers help with a variety of logistics, marketing and financing tasks.
It also offers help managing inventories, tech support and getting more money out of product warranties.
What’s ahead: Shrinking sales and crimped profits for the first half of the year.
Ingram’s Spierkel doesn’t mince words,it’s tough out there for a business that nets pennies on the dollar.
“All of our regions are experiencing economic sluggishness, business and consumer confidence are the weakest in decades, and most economists do not expect a turnaround anytime soon,” he said in a call with analysts. “I would not be surprised to see negative growth for another three to five quarters, making this the longest contraction in the history of our industry.”
The company expects first-quarter sales to be off about 20% from last year’s $10 billion in revenue for the same period, implying sales of about $8 billion or less. It didn’t give a profit outlook.
Falling prices and the need to maintain profits or find new sources of them again will be factors for Ingram this year.
One area is its relatively new business selling barcode scanners, printers, card readers for cash register checkouts and radio-frequency identification systems for warehouses.
Ingram got into the market in 2004 through a series of five acquisitions in the U.S., Asia and Europe.
“We’ve grown faster than the market for these products,” said John Soumbasakis, general manager of strategic divisions for Ingram Micro North America. “The reason that Ingram went into this business to begin with is the higher margin and higher growth potential.”
Wall Street’s take: Analysts say that Ingram will weather the storm, but recovery could take a while.
“Although Ingram Micro clearly will be one of the survivors of the current macroeconomic maelstrom, we believe that the company has the greatest challenges from a cost perspective of the three technology distributors under our coverage,” said Richard Kugele, an analyst at Needham & Co. in Boston.
In January, Kugele downgraded the stock to a “hold” from a “buy” rating.
He said that further cuts could keep the stock price depressed as Ingram pays out expenses for its big cost-cutting efforts.
Shares are roughly flat since the start of the year, but off 35% from a peak last summer.
“We fear a spiral of cuts is likely over much of 2009 from Ingram and more aggressive pricing,” Kugele said.
Other analysts see the cost-cutting as hampering growth in the short run but helping in the long run.
“We commend management for making changes that will likely improve the company’s long-term profitability, although in the short-run growth and margins will be hampered until these activities are complete,” said Brian Alexander, an analyst at Raymond James & Associates Inc. in St. Petersburg, Fla.
For the current quarter, analysts on average are expecting sales of $28 billion, down 18% from 2008, and profits of about $149 million, down 43% from last year.
,
Sarah Tolkoff
WHO’S IN CHARGE
GREGORY SPIERKEL
Chief executive, Ingram Micro
Joined company: 1997
Education: bachelor’s from Carleton University, Ottawa; master’s in business from Georgetown
Career: Prior to Ingram, spent 11 years at Canada’s Mitel Networks Corp. Got his start in 1979 at Bell Canada, working on one of the first e-mail systems.
Notable: Participated in hockey and curling until age 17. Says he wasn’t “NHL material.” He worked for a time in iron ore mines, doing a number of duties including driving giant mining trucks. His uncle is the founder of Cirque du Soleil.
