Ingram CEO: Windows 7 Refreshes Could Slow Sales Declines

New product releases such as Microsoft's Windows 7 operating system could lead to PC refreshes and ultimately help slow sales declines for Ingram Micro, said the distributor's CEO Thursday after the company disclosed year-over-year dips in both revenue and income for its third quarter.

An improvement in the economy and business climate, as well as the distributor's investment in bringing some new technologies to market are helping cut the rate of decline, said Gregory Spierkel, CEO of Ingram Micro, Santa Ana, Calif., during a conference call with financial analysts Thursday.

The arrest in the fall of sales is expected to continue as new products, including Microsoft's new Windows 7, Office 2010, and SharePoint 2010 take hold and help push a possible PC refresh and other technology upgrades, Spierkel said.

"Off the back of what Microsoft is doing, there will be a lot of upgrades, such as new firewalls, new security and so on. There's a lot of pull-through," Spierkel said in an interview with Channelweb.com following the conference call.

Ingram Micro reported revenue for its third quarter, ended October 3, of $7.4 billion, down about 11 percent from the $8.3 billion the company reported for the same quarter a year ago.

The company also reported earnings for the quarter of $42.3 million, or 25 cents per share, down from the $46.4 million, or 27 cents per share, that it reported for the quarter last year.

Third-quarter sales in North America dropped to $3.2 billion, accounting for about 44 percent of Ingram Micro's total business. That represents a 10-percent decrease from the $3.6 billion the company reported last year.

Spierkel said that while North American sales dipped over last year, the rate of decrease was slower than it has been. The slowdown in the decline of sales was helped in part by Ingram Micro's adoption of new predictive tools to help partners and vendors improve sales, as well as new business intelligence tools to help partners get new business from the U.S. government's economic stimulus plan, he said.

Ingram Micro is starting to see positive results from improvements in the economic environment, said William Humes, senior executive vice president and CFO, on the conference call.

For the third quarter, the year-over-year decline in sales fell as a percentage every month, Humes said. "Things are showing directionally that the down-draft is getting lower and lower," he said.

Alain Monie, president and COO of Ingram Micro, said in response to an analyst's question that the company is still trying to compile market share data, and so is not able to discuss how market share is changing.

However, Monie said that Ingram Micro's quarter-to-quarter growth exceeded that of other distributors as a whole, although he said he is not sure if that is because of a growth in Ingram Micro's market or something specific that the company did during the quarter.

For the fourth quarter, Ingram Micro expects sales to drop in the single-digit percentage range, Spierkel said.

However, Spierkel declined to give specific guidance. "We're still living in a volatile world ... It's still a little choppy out there," he said.

Ingram Micro has been investing in new technologies for its partner and vendor communities, Spierkel said. For instance, he said an expansion in the distributor's Seismic services offering, along with growing unified communications and data center technologies, will all play a part to help Ingram Micro. "While a stronger economy will bring a welcome tailwind, we are not waiting for it," he said.

Ingram Micro has been active in the mergers and acquisitions arena, buying four companies last year and three this year, Spierkel said. The last two acquisitions were focused on the data cente market.

Ingram Micro has been trying to build its data center expertise over the past few quarters, and vendors have been very supportive, especially with below midmarket-sized customers, which is where the distributor is most strong, Spierkel said.

And, while it already has a good data center presence in Asia and other markets, this is almost a greenfield opportunity for Ingram Micro in North America, Spierkel said.

"This is part of a longer-term voyage, in part because we're being pulled by the vendors, but in part because of the opportunities," he said.