Ingram Micro to shed unprofitable business
Despite higher sales and an increase in prices, distributor Ingram Micro saw its second-quarter profit fall by more than a third compared with the same period last year.
Despite higher sales and an increase in prices, distributor Ingram Micro saw its second-quarter profit fall by more than a third compared with the same period last year.
For the quarter ended 1 July, Ingram reported profit of $33.2m (£22m), a 34 per cent drop from the $50.3m reported for the same period last year.
Turnover for the quarter was up seven per cent to $7.3bn, compared with $6.8bn last year. Sales in the US grew by four per cent to $4.46bn and European sales grew seven per cent to $1.71bn. The results were slightly higher than analysts' predictions.
Kent Foster, Ingram's chairman, said he was pleased with the stability of the company despite reduced profit. "We grew last year, but did not produce profitable margins. We think we now have the pieces in place to start improving the business," he said. Foster also said that the company would get rid of unprofitable business partnerships.
Last year, Ingram struggled as a result of moves from vendors, such as Compaq, selling more machines directly to customers on the web instead of through distributors, said Foster.
Competition has eased because lower prices forced some rivals to shut down. With fewer competitors, Ingram has been able to raise prices to boost profitability.
Long-term growth is expected from the company's European distribution centres, he predicted. The company will also continue to emphasise attracting ecommerce and dotcom companies as customers, Foster said.
Last year, Ingram lost 20 top executives and had lower profit or missed forecasts in three quarters.
Joel Pitt, analyst at Credit Suisse, said: "We believe Ingram has chosen the right course in tightening its operations and pursuing profit rather than share. Even though [profit] is down, the real key is that Ingram is getting pricing up and improving its operating structure. The turnover will follow."
Ingram Europe was unavailable for comment at the time of going to press.