Ingram Micro Sales Tumble Due To Low Device, Data Center Spending

Soft demand in Ingram Micro’s high-volume product categories resulted in another double-digit sales drop leading up to the proposed sale of the distributor to Tianjin Tianhai. The distributor had seen sales fall 13 percent in fourth-quarter 2015.

The Irvine, Calif.-based company said revenue for the quarter ended April 2 declined 12.2 percent to $9.34 billion. That fell way below Seeking Alpha projections of $10.08 billion.

Non-GAAP net income also plummeted 22.9 percent, from $68.2 million last year to $52.6 million this year, or 35 cents per share, missing Seeking Alpha estimates of 53 cents per share.

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’IT spending was muted in the first two months of the year, particularly for high-volume categories including PCs, smartphones, servers and storage,’ Alain Monie, Ingram Micro’s CEO, said in a statement. Ingram Micro did not hold an earnings call due to the pending $6 billion sale of the distributor to Chinese conglomerate Tianjin Tianhai.

The distributor’s stock was up 0.2 percent in trading Friday to $35.17 per share, which is nearly 10 percent below Tianjin Tianhai’s offering price of $38.90 per share. Earnings were announced before the market opened Friday.

Ingram Micro’s North American sales fell 12.6 percent, from $4.44 billion last year to $3.88 billion this year. Roughly $100 million of that drop stemmed from the distributor’s July 2015 decision to dump one-third of its Verizon mobility business, which was insufficiently profitable due to significantly higher-than-expected rates of handset returns.

The distributor’s North American practice also experienced declines in its PC, tablet, data center and networking infrastructure sales, which was partially offset by growth in advanced and specialty solutions. Ingram Micro said it’s also continuing to gain traction in North America around cloud and commerce and fulfillment solutions, albeit from a small base.

HP Inc. and Hewlett-Packard Enterprise continue to be Ingram Micro’s largest vendors, accounting in combination for 14 percent of the distributor’s sales in the most recent quarter, down from 15 percent the year prior. Apple continues to be Ingram Micro’s second largest vendor, though it slipped from accounting for 12 percent of the distributor’s sales at this time last year to 11 percent this year.

And Cisco Systems came in as Ingram Micro’s third largest vendor, accounting for 10 percent of the distributor’s sales in the first quarter after falling below the 10 percent threshold the year prior.

In Europe, Ingram Micro’s sales declined 13.4 percent, from $3.07 billion last year to $2.66 billion this year, due to softness in Germany, the United Kingdom and France. German sales struggled due to reduced demand for smartphones and PCs, as well as the decision to exit some high-volume, low-margin business.

The United Kingdom was afflicted with continued weakness in PC demand as well as the loss of a large retail customer, but benefited from growth in smartphone, tablet and networking sales. France saw lower demand for PCs and smartphones, but was aided by growth in its advanced solutions practice.

Ingram Micro’s Asia-Pacific sales fell13.8 percent in the quarter, from $2.54 billion last year to $2.19 billion this year. Australia, China and India all struggled under the weight of reduced PC, tablet and smartphone sales, plus the distributor opted to focus on higher-margin business in Australia.

Latin America was the distributor’s one bright spot, with sales climbing 2.6 percent, from $584.3 million last year to $599.8 million this year. Brazil and Chile enjoyed growth in their advanced solutions and consumer businesses, which was partially offset by lower government IT spending in Mexico and reduced components demand for Miami export.