Santa Ana-based Ingram Micro Inc., the biggest distributor of computers, software and other technology products, has gotten over a glitch on an overhaul of its Australian operations that soured earnings the last two quarters.
Now comes the challenge of regaining key customers lost to other competitors in the region.
“We have to win those customers back,” Ingram spokeswoman Ria Carlson said. “They have gone to other distributors.”
Ingram executives have declined to give an outlook on the current quarter. They concede the lingering effects of the disruption will hurt sales in Australia once again.
“Australia sales will not be at the level they were in the prior year,” Carlson said.
The systems overhaul involved a software program designed to improve automation, operations and services for customers and vendors around the world, Chief Executive Gregory Spierkel said in earlier statements.
Ingram has now done 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 Micro, 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.
The company spent most of the second quarter fixing the problem.
“That has now been resolved,” Carlson said.
• Headquarters: Santa Ana<br >• Business: information technology products distributor<br >• Founded: 1979<br >• Ticker symbol: IM (NYSE)<br >• Market value: about $2.6 billion<br >• Notable: Stumbled with new software system in Australia; says problem is fixed
Ingram Takes Hits
In the meantime, the company has taken some hits on Wall Street.
The disruptions in Australia were largely blamed for a first-quarter performance that missed Wall Street’s expectations.
Ingram posted a first-quarter profit of $56.3 million, down 20% from a year earlier.
Analysts were forecasting a profit of $76 million.
In the second quarter, Ingram saw operating income in the Asia-Pacific market, which includes Australia, plummet nearly 45% to $16.5 million compared with a year earlier. Executives blamed the decline on “complications migrating to a new enterprise system” and said without Australia, the region grew sales at a double-digit clip.
Ingram built its logistics system in the 1980s when it was still a relatively young company.
It has since expanded throughout the world, acquiring dozens of companies along the way.
“We really needed to modernize our enterprise system,” Carlson said.
Ingram wanted consistency in each of its markets, viewing it as a spur to faster decision making and a way to build a detailed customer database accessible in real time. The goal was to have a system that would allow a dock worker in Singapore and an executive in Santa Ana the same access to information on orders and shipping.
“Everyone at the organization will have the same foundation,” Carlson said. “All that information will be at their fingertips.”
Ingram is the county’s largest public company with nearly $35 billion in sales in 2010.
It runs on the slimmest of profits, making pennies on the dollar.
Analysts on average are forecasting profits in the September quarter of $69.2 million on revenue of $8.9 billion, up on both counts from a year ago.
Ingram is slated to report earnings in late October.
