The longtime rivalry between Santa Ana’s Ingram Micro Inc. and Florida’s Tech Data Corp. is pitching toward Ingram these days.
Earlier this month, Tech Data said its second-quarter profit, due Aug. 25, could be half of what it earlier expected due to problems with a massive restructuring abroad.
That’s in contrast to Ingram, which last month reported a doubling in second-quarter profit from a year earlier to $49 million. To boot, Ingram raised its third-quarter forecast, driven largely by its European operations.
Ingram is the world’s largest distributor of technology products, followed by Tech Data. The two often have seen their fortunes move in tandem. Both have bulked up on acquisitions of smaller companies and have expanded abroad in recent years.
The recent quarterly results have analysts and investors,who normally see the two companies swayed by economic forces rather than internal missteps,wondering if Ingram is pulling further ahead.
The answer seems to be in Europe.
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Murai: “We have not stumbled the way some of our competitors have” |
Tech Data’s European operations grew in the past decade by way of acquisitions that created a workforce there that trumps its North American operation.
The company has been trying to untangle its European operations since cutting hundreds of jobs and consolidating operations.
At the same time, Tech Data has been installing software to help manage logistics, which has added to the company’s distractions.
“This is an execution business,” said John Coyle, an analyst with JMP Securities in San Francisco. “In the end, you can’t do all that without it having some effect.”
Ingram seems to be running on all cylinders in Europe. The credit goes to Gregory Spierkel, Ingram’s chief executive who took the helm in June.
Most of Spierkel’s time at Ingram has been spent in Europe and Asia. He joined eight years ago as president of the company’s Asia-Pacific business. He moved from there to Ingram’s Europe operation in 1999.
In Spierkel’s time abroad, he’s played a key role getting Ingram to go after acquisitions, including last year’s buy of Australia’s Tech Pacific Ltd.
He also played a role in Ingram’s 1997 buy of Singapore’s Electronic Resources Ltd.
Spierkel put together the management team that created what the company calls “best practices” software that the company credits with its success in Europe. It’s basically a database that helps the company cross-sell products to customers and better manage customer relationships.
“Our overall business is very solid right now,” said Kevin Murai, Ingram’s chief operating officer and president. “The main difference between us and peers is the relative performance in Europe. We’re focused not just on building better control process. We’ve invested in better customer relationship management infrastructure.”
Analysts call Spierkel a shrewd operations manager,something he credits to the time he spent in Europe and Asia.
Spierkel has said he hopes to roll out some of the changes from overseas in North America, which has posted the smallest profits of all the regions Ingram operates in.
The real test might be coming.
Earlier this year, Spierkel told investors at a J.P. Morgan technology conference in San Francisco that business in Europe was slowing,a trend likely to persist for the near term.
“There is some talk of economic stoppage in Europe,” Murai said.
Even with slower going in Europe, Ingram stands to gain customers there, according to analysts. Only 35% of Ingram’s $28 billion in yearly sales come from Europe, compared to 55% of Tech Data’s, Coyle said.
“How much share is the question,” he said.
Richard Kugele, an analyst at Needham & Co., recently raised his rating on shares of Ingram to “buy” from “hold,” saying the company could gain in Europe.
“It comes down to pure execution,” Murai said. “We have not stumbled the way some of our competitors have. What we see is share gain.”
