Ingram Micro Sees Q3 Revenue Growth, Profit Decline

Ingram Micro reported strong worldwide revenue growth for its third quarter ended Oct. 1, but the world's largest IT distributor experienced a decrease in net profit after one-time charges.

Ingram Micro's sales for the quarter rose 16 percent from one year ago to $6.96 billion. Net income, however, fell to $48.4 million, or 29 cents a share, down from $77.3 million, or 49 cents per share, in the third quarter of 2004. The distributor incurred charges that included major program and integration costs of $7.2 million related to the company's outsourcing and optimization plan in North America and the integration of Tech Pacific, which the company acquired in November 2004. Net income was also negatively impacted by a $8.4 million charge related to the company's redemption of all its senior subordinated notes and termination of related interest-rate swap agreements.

Still, the company reported strong sales growth overseas and increased its operating margins in North America. While sales in North America improved just 1 percent from a year ago, European revenue increased 10 percent, Latin American sales jumped 21 percent, and Asia-Pacific sales exploded for 112 percent growth to reach $1.21 billion for the quarter. In an interview with VARBusiness following the earnings call Thursday, Ingram Micro president Kevin Murai said the vast majority of the Asia-Pacific region's growth was because of the company's acquisition of Tech Pacific.

Murai said another Ingram Micro acquisition, consumer electronics and home-networking distributor AVAD, is also seeing strong growth.

"The AVAD business is doing great. The high end of the consumer-electronics market where they play is seeing strong double-digit growth in the range of 35 percent, so we expect AVAD to continue growing as well," Murai said.

As for pricing pressure, Murai said the North America environment has been stable for the past three months or so.

"It hasn't improved any, especially around products like PCs and printers," Murai said, "but it hasn't gotten any worse."

For the fourth quarter ending Dec. 31, 2005, Ingram Micro is expecting sales in the range of $7.75 billion to $8 billion with earnings between $78 million or 47 cents a share, and $84 million or 50 cents a share.