Ingram, Arrow Earnings Will Offer Glimpse Into Where IT Is Headed

Analysts expect both Ingram Micro and Arrow's sales to be off more than 20 percent for the second quarter compared to the year-ago quarter. It's a sign that the IT industry is still struggling. But what both companies say about the third quarter should foretell whether the economy, at least in the IT industry, is beginning to stabilize.

In an e-mail note, Raymond James & Associates is forecasting Ingram Micro's second-quarter sales to be in line with consensus expectations of $6.69 billion for the quarter, down more than 20 percent compared to the year-ago quarter.

Ingram Micro should see "mild improvement" in Asia Pacific and North America, where IT demand has stabilized to offset a weaker Europe, according to Brian Alexander, managing director of equity research at Raymond James.

"Despite recent optimism expressed from other IT 'bellwethers,' we expect management commentary to reflect normal seasonality in most regions, with a more cautious tone about European demand, which does not appear to have bottomed," Alexander wrote.

Raymond James doesn't expect Ingram Micro to be optimistic about results from a PC upgrade cycle for corporate customers, despite the introduction of Windows 7 this fall. "Software and hardware upgrade cycles have become increasingly decoupled," Alexander wrote.

Meanwhile, Raymond James expects Arrow and Avent, which reports Aug. 5, to report financials near the midpoint of management's revenue expectations and the low-end of expected earnings per share.

"Margins should be disappointing due to ongoing demand weakness in higher margin segments (notably European components) and supplier-induced pressures in the components segment," wrote Alexander in another report. "We expect Arrow and Avnet to provide a top-line outlook that is in line with normal seasonality for the September quarter, with pockets of strength in Asia and stabilizing demand in North America, offset by continued softness in EMEA."

The enterprise computing market likely performed OK in the quarter, according to Alexander.

"We do not see any meaningful revenue shortfall in the computing segment, which is always a key concern for investors given the back end-loaded nature of the June quarter," he wrote. "Our channel checks indicate that demand trends remained relatively stable through June, which is consistent with our findings in the 2Q '09 IT supply chain survey."

Raymond James also believes that Sun Microsystems lost some market share in the channel in the second quarter, noting that while IBM's hardware growth was down 22 percent year over year in local currency, it was up 21 percent sequentially.

"Sales in the distribution-heavy [IBM] p Series were also relatively resilient at -8 percent year over year, which is a positive for Arrow and Avnet," Alexander wrote. "We would also expect results in emerging categories such as software, services and storage to outpace core server sales, which gives us confidence that both companies should deliver results between the low end and the midpoint of previously issued guidance."

In other news, Avnet Technology Solutions has rehired Scott Look as vice president of technology infrastructure solutions sales. Look previously worked for Avnet for 13 years starting in 1994 but left the company to join Ingram Micro, where he launched that company's infrastructure technology solutions division in 2007.

"I'm pleased to be returning to Avnet and to have the opportunity to work with many of my longtime colleagues, suppliers and customers," Look said in a statement.

Scott Zahl, Ingram Micro's vice president of vendor management, systems and peripherals, will be heading Ingram's ITS division on an interim basis, according to the distributor.