Ingram Micro sees bleak times ahead

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Ingram Micro sees bleak times ahead

Paul Kunert

Ingram Micro has predicted the recession will be the worst in the history of the industry as it plans to hack off 8% of its total workforce, with the axe largely falling on operations in North America and EMEA.

Fiscal Q4 ending 3 January 2009 saw the distributor's global sales fall 13% year-on-year to $8.6bn as it made a loss of $564.3m including a goodwill impairment charge of $742.6m - excluding this charge profit was $95.5m.

For the year sales at $34.4bn were short of its record 2007 revenues of $35bn, profits for the 12 months were $410.5m excluding the write down and gross margin of 5.92% was at its highest in a decade.

"The performance during trying times does not mean the [twelve months] was without challenges, demand weakened in our two largest regions (North America and EMEA) early in the year," said Greg Spierkel, Ingram CEO.

Sales in North America and EMEA fell 1% and 21% to $3.8bn and $2.95bn respectively, while revenues in Asia Pacific fell 23% to $1.49bn and 5% in Latin America to $455m.

The depressed economy and falling ASPs, combined with the weaker currency translations had a negative impact on revenues, Ingram said.

In fiscal 2008, Ingram embarked upon cost reduction programmes in North America and EMEA that will save around $20m a year, but the bleak outlook for the market is forcing the distributor to take further action, it said.

"Business and consumer confidence are at their weakest in a decade," said Spierkel. "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".

"Demand for this quarter is weak across the board and the stronger dollar is creating translation headwinds internationally we expect first quarter sales to decline in percentage terms in the low to mid twenties [year-on-year]," he added.

The company continues to make "inroads" toward aligning its cost base but admitted it may not be able to keep "fully up to pace with the expected sales decline in the first half of the year".

Spierkel said it was taking "additional action to address the anticipated market dynamics" and would look to "reduce our workforce by approximately 8%" within four months, primarily impacting North America and EMEA.

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