Ingram Micro will cut its global workforce by 10 per cent as it battles to compete in an environment that has become even more cut-throat since the start of the year.
Revealing a restructuring operation that will see 1,400 jobs axed worldwide, the distribution giant confirmed that it had lowered its forecasts for the first quarter of 1999 as a result of a market that had 'dramatically changed' during the period.
Jerre Stead, chief executive of Ingram Micro, insisted changes in pricing conditions and not changes in the way computers were being brought to market, had affected the distributor. 'This is a result of broad changes in the market - a mismatch between supply and demand. It has nothing to do with the gossip about the internet or Compaq going direct,' he said.
Highlighting the US domestic market as being the hardest hit, he claimed the blame rested firmly with distributors that were competing on price alone. 'The current pricing skirmishes will end quickly as the competition realises we will not relinquish market share. It is time to stop this nonsense of selling on price and not value.'
Stead said although Ingram expects record revenue in the first quarter of between $6.5 billion and $6.7 billion, net income would be below target at $40 million to $45 million, or $0.27 to $0.30 per share. Analysts had expected earnings per share of $0.42.
The cost of the redundancies, which will be achieved through attrition, a cut in contracted and part time work, and the closure of the distributor's consolidation centre in California, is expected to be about $10 million.
Responding to the announcement, Peter Rigby, director of marketing and communications at CHS Electronics, said: 'Ingram has used a similar excuse before. You have to question its ability to keep growing at 30 per cent a year.'
Infrastructure provider says international sales now make up 51 per cent of its revenue
Suzanne Chappell of TMS plans sailing venture after selling Oxfordshire-based TMS to acquisitive Chess
Withdrawal of credit insurance by some providers a 'reflection' of current challenge facing IT sector, according to MD Steve Soper
SMART's UK managing director joins Lenovo to boost SMB business