Ingram Micro CEO: The Wait For Vista Is Not Stalling SMB Sales

Windows Vista operating system

Spierkel told Wall Street analysts that he expects record fourth-quarter sales despite fears that customers could hold off buying systems in anticipation of the Vista launch early next year. "We have not seen anything at all in a negative fashion this year or in the current quarter [with regard to the Vista delay]," said Spierkel.

Spierkel said he expects the distribution powerhouse to post sales for the fourth quarter of $8.4 billion to $8.65 billion, up 9 percent from the $7.45 billion in the year ago period. What's more, he said, Ingram expects net income of $85 million to $92 million, or 50 cents to 54 cents per share.

The upbeat fourth quarter forecast came after Microsoft announced it will begin Oct. 26 a Vista coupon upgrade program aimed at preventing customers from holding off PC purchases in anticipation of Vista and Office 2007. That program includes a system builder initiative along with a program aimed at the major computer makers.

In an interview after the earnings call, Spierkel said VARs are finding that "most small businesses are not in a hurry to be the first out of the gate to try it [Vista]. They want to wait a number of months or quarters before they have to jump into Vista."

Small and midsize businesses continue to invest in IT infrastructure for a "lot of other reasons beyond Vista whether it is around security or Internet solutions," said Spierkel. "Our sales of systems from PCs, laptops to servers were just really robust in the quarter we just finished. There is really no hold back from what we are seeing. People might hold back on getting an Xbox or [Xbox] 360, but I don't see them holding back for Vista before making a choice on Office 2003 or something else. There isn't that sort of compelling factor at play here."

That said, Spierkel said he sees Vista having a positive impact next year particularly with regard to memory sales as more customers upgrade their systems to run Vista.

Spierkel said one reason for Vista not stalling the SMB market is the intense services and solutions focus in that market segment. "There is no question there has been a bias toward solutions beyond basic operating systems," he said. "Where we have had real strength in the last year and half is people putting in security services, internet protection services, regulation tracking for data around HIPAA or government requirements. Those things don't necessarily ride off the back of the applications or operating systems."

Spierkel's Vista comments came after the world's largest distributor of computer products posted much better than expected results for its third quarter ended Sept. 30. Those results included the best operating income performance in eight years and the best third quarter sales performance since the dot.com meltdown in 2000.

Ingram reported net income of $58.5 million, or 34 cents per diluted share, on an 8 percent increase in sales to $7.51 billion. The Wall Street mean estimate was 32 cents per share on sales of $7.42 billion, according to a survey of analysts by Thomson Financial. In after hours trading, Ingram shares were up 58 cents or 3 percent to $20.40.

Spierkel said Ingram continues to outperform the overall information technology market with robust growth in the SMB focused VAR segment and less business in the enterprise space over the last five years. He said the VAR business segment of the market is growing faster than 9 percent. "Our core VAR business is still the bread and butter of the company and it is still very healthy, very robust growth." Ingram also had better than 9 percent growth in its consumer electronics retail segment.

Comparing the quarterly results with broadline competitors, Spierkel said Ingram is posting higher sales growth than rival Tech Data, while Synnex has grown slightly faster than Ingram. Spierkel noted that is also performing well against distributors such as ScanSource in point of sales.

Spierkel said the launch of the company's new North American Services division and a blockbuster deal casting LPI Level Platforms as its managed service provider platform is already paying off with dozens of VARs signing up for the new Ingram managed services offering. "This makes us more relevant with the reseller base and it takes cost out of their business," he said. "It puts the burden on us to pay for that infrastructure so they can be more successful with their customers. If they are more successful with their customers because of some tools we are giving to them at a lower price than they could otherwise buy, it engenders them to buy from us."