Bell Micro Earnings Shed Light On IT Recovery Process

At $527 million, Bell Microproducts' Q4 revenues were up 8 percent sequentially, but down 3 percent from the same period a year ago. Still, revenues for 2001 as a whole reached a record $2 billion, up 11 percent from the previous year.

Net income, on the other hand, may give some cause for concern: For the quarter, the distributor's net income was just $157,000, which, when compared with $5.2 million in the fourth quarter of 2000, paints a somber picture. But when you compare the positive $157,000 with the company's net loss of $3.3 million in the third quarter of 2001, there are definite signs of improvement. Gross profit margins also increased in the fourth quarter, to 8.6 percent compared to 8 percent in the previous quarter.

How are other distributors faring? Similarly. Ingram Micro, Santa Ana, Calif., reported Q4 net sales that were nearly $2 billion less than the same period the year before. Net income for the distribution industry's goliath was only $5.7 million for the quarter, compared to $57.9 million in the same period a year ago.

As a result, distributors have been hunkering down and cutting costs. They're reassessing the relationships they have and what their costs of doing business really are. And, in Bell Micro's case, they're buying up companies during the downturn that will complement their strategic objectives as the market heats up again.

While the company's financial picture doesn't look rosy today, Don Bell, president and CEO at Bell Micro, said in a statement that the company's strategic initiatives--growth in higher margin storage systems and services coupled with its 2001 acquisitions of Total Tec, TTP and Forefront Graphics--position the company well for future growth.

In addition to the acquisition of TTP, which distributes IBM's line of enterprise storage systems throughout central Europe, Bell Micro also forged new alliances in the fourth quarter with IBM Storage Systems in the U.S. and earlier in the year with EMC in Northern Europe. The company also expanded its relationship with Compaq in the fourth quarter to include Proliant server and StorageWorks sales in the United States.

Additionally, Bell Micro launched a software licensing initiative in the U.K. early in the year, which paid off in a 24 percent gain in software sales from the fourth quarter of 2000 to the fourth quarter of 2001. The program will be expanded to Europe and the Americas in 2002.

The numbers are clear. Distributors are suffering right along with the rest of the IT industry. But modest improvements are lighting the way to the end of the recession's tunnel, and shedding a new light on the time it's going to take for this industry to bounce back in full.