Kent Foster’s new business cards list his official titles as Ingram Micro’s president and chief executive officer, but as far as the 56-year-old former telecom executive is concerned, they should probably add “Corporate Huckster.”
“I’m going to be joining our PR staff as a spokesman,” he jokes, acutely mindful of just how big a job that could become for the struggling company.
Foster, who was named to his new post last week, will have a tough sell as he convinces Wall Street that the distribution company can thrive in the cutthroat industry that continues to slice away already-thin margins. Despite steadily rising sales, the Santa Ana company’s earnings dropped from $245.2 million for its 1998 fiscal year to $183.4 million in its most recent financial statement. The company’s share-price decline,exacerbated by the exodus of at least 20 top-level executives over the last year,has been even more dramatic, from more than $31 per share in the summer to around $7 per share late last week.
In Search of Stability
The former GTE president and Air Force captain says the predicament will change as his appointment brings stability and as investment community sees the opportunities e-commerce and outsourcing are creating for Ingram. While e-commerce has long been a revenue driver for the company, the services business is a newer direction.
Under the traditional supply-chain model, distributors purchase products from vendors in hopes of selling them to retailers and other resellers at a profit. Under a strategy put in place by retiring Ingram Micro chairman Jerre Stead,Foster will add that title in May,the company is betting on a new model in which vendors and resellers pay a straight fee for warehousing and logistics services. The new paradigm takes out the risk inherent in purchasing products for resale, while creating a more predictable revenue stream.
“The game was always buy low, sell high and be the most efficient in between,” Foster says. “Well, this is not your father’s distribution company.”
Still, it isn’t clear how enthusiastically manufacturers or resellers will take to the idea, especially when it essentially duplicates some services distributors have provided indirectly for free.
But Foster says vendors are eager to get out of warehousing and logistics entirely to concentrate on their strengths in manufacturing and packaging, a logical development in an outsourcing wave that has affected most other industries.
For-fee services make up about 10% of Ingram’s revenue now, a figure Foster expects to become as much as 80% of the mix over the next few years. He compares the task to steering a 100-mph train through a 90-degree turn while keeping every car on the track.
The company also will play up its role in e-commerce in an effort to dispel the notion of “disintermediation,” or the phenomenon of the Internet making the middleman obsolete. Although direct sales over the Internet have forced changes in the supply chain, distributors are as essential to the process as ever, Foster said.
No one agrees more than the retiring Stead.
“When you get something from Buy.com, you’ll notice a Fullerton address on the box,” Stead says, referring to the Aliso Viejo e-tailer. “Do you see a Buy.com building anywhere near Fullerton? That’s us. It doesn’t arrive at your door through your phone line.”
Even direct sellers such as Dell Computer use Ingram Micro to handle logistics and shipping, a distinction Stead says has been lost on investors and the media.
More E-Commerce to Come
In addition to its existing e-commerce activities, the company hopes to get into e-commerce more directly with an online hub for business-to-business transactions using the RosettaNet standard it spearheaded two years ago.
Stead, 57, vowed that he would not “play CEO anymore” to keep a promise to his wife, but like many retired Orange County tech executives he will lend a hand to several growing technology startups in the area. He declined to name them, but said he wouldn’t become involved in already-successful companies or startups that simply wanted the credibility of his name on their boards of directors.
Foster, meanwhile was scheduled to begin the European and Asia legs of his meet-and-greet tour for employees and partners. Last week, he visited the U.S. and North American operations.
The 29-year telecommunications veteran says he turned down several jobs after he left GTE but took the Ingram Micro job because of the opportunities he saw. At GTE, he was credited with shifting the company from a stodgy old phone monopoly to an Internet-centric data-services firm.
He wouldn’t outline any changes he had in mind for the Ingram Micro and was reluctant to predict what mark he would leave on the company. For now, he says, his job will be listening and learning.
Still, hinting at a plucky management style, Foster said companies threatened by “big, fast powerful forces” can’t accept incremental change.
“You have to jump,” he said.
But ultimately, he added, predictions he makes now about his effectiveness are meaningless.
“Anybody can say anything about what they haven’t done yet,” he says. “I can tell you that Ingram Micro is not broke. It’s a powerhouse.” n
