Insight Enterprises downbeat on EMEA prospects

Reseller warns of 'continuing softness' in Europe as profits from the region fall sharply

EMEA sales fell two per cent in local currencies but profits dropped away sharply

Corporate reseller Insight Enterprises has refused to call a bottom to the EMEA market, as it posted a 17 per cent year-on-year drop in worldwide turnover.

The Nasdaq-listed outfit logged revenues of $969.9m (£586m) for its third quarter to 30 September, down from $1.165bn a year earlier.

GAAP profit from operations fell from $14.95m to $11.9m although this included a whopping $4.5m severance and restructuring bill in North America, most of which related to the departure of former chief executive Rich Fennessy in September. Insight also recorded $560,000 in one-off professional fees and costs from trade credit restatement issues.

While US sales nosedived 19 per cent year on year, EMEA revenues fell just two per cent in local currencies to $248.4m. However, Insight was unable to achieve its internal profitability targets in the region, as EMEA GAAP profit from operations sank from $5.55m to a disappointing $1.48m year on year.

The UK punched above its weight, registering a 16 per cent and five per cent rise in software and services sales respectively, and a five per cent fall in hardware sales.

In a conference call, a transcript of which can be found on Seeking Alpha's web site, interim chief executive Tony Ibargüen claimed that Insight had gained market share in the EMEA public sector and mid-market during the quarter.

But he admitted that the high expense of reducing headcount on this side of the Atlantic had impacted its bottom line in the region.

"We are not yet able to call a bottom to the economic and IT spending declines in EMEA. Despite the fact that we've performed reasonably well on the sales line in this environment, we've not had the flexibility to reduce our costs as aggressively as we have in North America," he said.

"Given the expense associated with resource action in this region, combined with our strategy to pursue market share in key countries in 2010, we will look to improve our profitability in EMEA by continuing to outpace our competition in sales while controlling our costs and incremental investments as the market recovers."

Ibargüen, who has been in the hot seat for just over 50 days, also highlighted web sales as a growth area for Insight. In the US it currently conducts 40 per cent of sales over the internet.

The stronger-than-expected third-quarter performance, moderated by anticipation of continuing softness in EMEA, led Insight to revise its profit forecast for the year. The reseller now expects diluted earnings per share from continuing operations to be between $0.83 and $0.88 for 2009.