Ingram Micro Ups Income, Acquires Nimax

For the quarter ended July 3, the Santa Ana, Calif.-based distributor reported worldwide sales of $5.72 billion, an 11 percent increase from the same period one year ago. Ingram Micro raised net income for the quarter to $25.9 million, 16 cents a share, compared to $11.5 million, or 8 cents per share, one year ago, and displayed solid financial results across its regions and operations. The company also benefited from stable IT demand around the world and some improvement in demand for North America, which had been lagging behind Europe and other regions in previous quarters.

"We continue to build on our current strength by pursuing profitable growth opportunities in every region, with an ongoing focus on working capital management," said Ken Foster, chairman and CEO of Ingram Micro. "From everything we're seeing, demand is stable around the world with the exception of North America, which is improving."

Foster, however, did address some concerns, including what he called "intense competition" in North America that has affected pricing and margins.

"We expect competition in North America to remain intense in the short term," Foster said, "yet we're confident that our new customer programs and growth initiatives will give us a market advantage when fully implemented."

Part of that plan includes Ingram Micro's expansion into the point-of-sales/automatic identification and data-capture (POS/AIDC) technology market. To that end, Ingram Micro this week purchased privately held Nimax, a San Diego-based specialty distributor in the POS/AIDC market. Terms of the deal were not disclosed, but Ingram Micro agreed to purchase nearly all assets of Nimax, which generated approximately $72 million in sales for 2003, and operate the company as a separate division of Ingram Micro.

Kevin Murai, president of Ingram Micro, said Nimax will allow the distributor to capitalize on a growing technology market that is ripe for the channel.

"We've been looking at adjacent markets like POS/ADIC for more than a year," Murai said in an interview with VARBusiness following the earnings call. "This is a space that is projected to grow faster than the overall IT market, and there's more vendors going to market through the channel like Symbol and Zebra."

The acquisition won't lessen the competitive pressure Ingram Micro is feeling; Tech Data, Ingram Micro's chief rival, has recently expanded its POS/data-capture business, which has been one of the more successful areas for the Clearwater, Fla.-based distributor, while ScanSource, a specialty distributor in the POS/AIDC market based in Greenville, S.C., has recorded record sales in recent quarters. Still, Murai said the market growth will present plenty of opportunities for Ingram Micro's news venture.

"I think there's enough business in POS/AIDC to go around for all of us," Murai said.

For the third quarter ending Oct. 2, 2004, Ingram Micro is projecting sales in the range of $5.7 billion to $5.9 billion, with net income ranging from $25 million to $30 million, or 16 cents to 19 cents per share. Foster said the guidance reflects the company's expected sales growth of between 9 and 13 percent, which will be affected by historical seasonal buying patterns.

"Overall, our business is strong and the third quarter is tracking to our expectations," Foster said. "Our focus is on profitable growth and a strong return on capital."