Ingram margin fall blamed on pricing

Cut-throat conditions in Europe offset distributor's record revenue.

Ingram Micro posted a 35 per cent growth in earnings for the thirde. quarter, but falling margins in Europe reflected the cut-throat conditions that continue to plague the computer distribution business.

Net income for the three months to 3 October at the Santa Ana, California company was $59.8 million, up from $44 million in the period ended 27 September 1997. Global net sales were $5.71 billion, up 40 per cent on the $4.09 billion recorded in the previous year.

Jerre Stead, chairman and chief executive of Ingram Micro, said in a statement that although he was 'very pleased' with the results, pricing pressures were continuing to drive down margins, especially in Europe.

Operating margins in Europe fell to a tiny 0.44 per cent of revenue during the period, down from 0.71 per cent this time last year.

Stead cited one UK competitor that was selling desktop personal computers at 'wholesale cost plus one pound'. Although he declined to name the rival, he said such price tactics were prevalent throughout Europe and showed no signs of letting up.

So far, Ingram has resisted the temptation to sell PCs and other products at or below cost to secure business. Overall, margins for the group fell to 2.09 per cent of revenue, down from 2.14 per cent in the same quarter a year ago.

US revenues, which account for two-thirds of the distributor's global business, grew 40 per cent to $3.76 billion, while European sales jumped 103 per cent to $1.4 billion.

Revenue from Canada and Latin America grew by 27 per cent, a slower rate that reflected currency translation effects.

Ingram Micro UK was not available for comment.

Meanwhile, the distributor announced that it had completed ownership of its Mexican subsidiary, Ingram Dicom. The company purchased the 30 per cent minority interest from Dicom founders Jose Luis Rodriguez and Manuel Saenz, following the retirement of Rodriguez, with immediate effect.