After trimming nearly 1,000 jobs company-wide since January, Ingram Micro Inc. Chief Executive Kent Foster says more cuts could be coming, and many could be in Orange County.
The computer products distributor has been conducting a review of its procurement business, nearly all of which is based in Santa Ana. The company has been looking for ways to make it more efficient, including cutting jobs, Foster said. Ingram Micro employs nearly 3,000 at its Santa Ana headquarters.
“We’re targeting procurement and looking at how we can become more cost-efficient,” Foster said. “We’re taking some significant actions.”
Foster said the review doesn’t necessarily include layoffs, but it likely could. He declined to comment on how many jobs could be cut, pending a final review of operations. In April, Ingram Micro announced it plans to close its Fullerton facility, a move expected to cut 42 OC jobs in coming months.
Ingram Micro already has seen a half-year of cost cutting in which Foster has pushed to make the company more efficient as prices for personal computers continue falling and the economy sours.
So far, Ingram Micro is eking out more profit but faces declining sales. This month, the company said it earned $26.4 million in the first quarter, compared with $24.7 million last year. But sales slipped to $7.2 billion from $7.8 billion a year ago. The company cited the severe slowdown in the technology market as the culprit in its revenue decline.
“We began to experience a decline in demand late last year, which continued into this quarter, especially in the U.S.,” said Michael Grainger, president and chief operating officer. “Nevertheless, we made measurable improvements in other vital areas.”
The company reduced its inventory by $608.4 million or 21% from the end of last year, to $2.31 billion. Ingram also has started consolidating some of its Fullerton operation and moved jobs to a new mammoth facility in Mira Loma.
Calling the immediate future “cloudy,” Foster said he expects second quarter profits of $11 million to $18 million on sales of $6.3 billion to $6.7 billion.
“We will continue to improve operating efficiencies and manage gross margins while capturing additional market share. We have already made significant strides in tapping new customer segments,” Foster said.
While Wall Street has smiled on the moves the company has made, the overall technology market is a thorn in Ingram Micro’s side.
“While management has begun to correct some of its prior operational issues and has done an excellent job of increasing product margins the overriding issue is the weak sales momentum in the face of a general slowdown,” said Chase H & Q; analyst Walter Winnitzki. “On this point, we note that demand in most of the company’s major end markets, especially in the U.S., remains weak.”
Winnitzki said cost reduction efforts should begin to improve the company’s bottom line in the second half. n
