Ingram Micro's profit fell 25 per cent in the first quarter of thisdistibutor dollars 6.2 million. year as the distributor counted the cost of restructuring and executives hinted that the pricing pressures that have kept margins at all-time low levels could be receding.
The distributor posted a dollars 42.3 million pre-tax profit for the three months ended 3 April, showing a decline of 25 per cent from dollars 56.5 million a year ago and slightly ahead of market expectations. Sales jumped 31 per cent in the period to dollars 6.73 billion, up from dollars 5.15 billion in the same quarter last year.
The results included a dollars 6.2 million restructuring charge following the distributor's announcement in March that it would lay off 10 per cent of its global workforce to stay competitive, although this was offset by an extraordinary pre-tax gain of dollars 6.2 million on the repurchase of debentures (PC Dealer, 17 March).
Net sales in the US were dollars 4.14 billion, a 20 per cent rise, with operating income before exceptional costs of dollars 71.8 million, or 1.74 per cent of sales. European net sales were up 49 per cent at dollars 1.75 billion, with an operating income of dollars 10.3 million, or 0.59 per cent of sales.
Jerre Stead, chairman and chief executive of Ingram, said the pricing environment was 'less intense' in the first quarter than in the last quarter of 1998, especially in Europe, where 'margins were more stable than for some time'.
He stated: 'The market share battle is changing from selling on price to selling on value. We have a more cost-effective operating model in place which will help us reduce global operating costs to 3.5 per cent by the end of 1999.'
Stead added that resellers' outsourcing reconfiguration and fulfillment to distributors, vendors outsourcing logistics services as well as consolidating their distribution channels, and the growth of channel assembly had all contributed to higher sales.
Reacting to the resignation of Eckard Pfeiffer from Compaq and the appointment of Ben Rosen as interim chief executive, Stead said: 'We have met with Compaq and all our programmes with it are on track. Compaq will do what is best for partners, customers and shareholders, although not in that order. I feel our relationship will improve.'
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