Ingram Micro is a major tech player with a minor public profile
Standing between 1,300 product manufacturers and hundreds of thousands of retailers and businesses is Ingram Micro Inc., the world’s largest wholesale distributor of computer hardware and software.
The 34-year-old Santa Ana company buys technology products from such manufacturers as Microsoft Corp., Samsung Electronics Co. and Cisco Systems Inc., then sells them to retailers and other middlemen, which in turn sell the gadgets and the applications to consumers and small businesses.
As the ultimate middleman in the $3.6-trillion information technology industry, Ingram is the place to go for thousands of U.S. and foreign resellers and retailers that find it much easier to restock their shelves by going to one source instead of 1,300 manufacturers.
“The value-added resellers rely on us to provide not only the hardware and software but also the logistic solutions,” Ingram Micro Chief Executive Alain Monié said. “And the vendors don’t have the ability to deal with this many buyers.”
Ingram Micro’s roots go back to 1979, when Geza Csige and his wife, Lorraine Mecca, were hawking educational software. They left the company in the 1980s.
A series of mergers and acquisitions propelled the company to global prominence, and it went public in 1996 at the leading edge of the dot-com boom. Since then, Ingram Micro’s shares have remained in the $15-to-$20 range.
Nearly a third of the products it sells comes from Hewlett-Packard Co. and Apple Inc. Most of Ingram’s sales are in North America and Europe, and 80% of its worldwide sales come from resellers, middlemen that sell to small businesses.
The latest
Since taking over in January 2012, Monié has added new services to match changing industry demands.
He acquired a wireless device distributor and computing business, boosted the slate of cloud-computing services it offers and pitched Ingram as a mover of more than just tech gadgets. For a fee, the company now fulfills shipments for several major online retailers.
In October, Ingram Micro acquired wireless device distributor BrightPoint Inc. for about $840 million.
Monié said BrightPoint’s appeal was that it did more than shuffle boxes. It also helped cellphone carriers with planning purchases, activating devices and tracking sales. With the acquisition, Ingram Micro should top $40 billion in revenue this year, analysts said.
To eke out more profits, the company is expanding its higher-margin and less capital-intensive distribution service.
Half of the boxes that pass through Ingram Micro’s U.S. warehouses don’t contain an IT product. Instead, Ingram is shipping such things as kayaks, teddy bears and pet food for companies that want to get their products out to consumers.
Accomplishments
Ingram Micro was the first major IT distributor to reach $1 billion in sales, adopt bar codes on products and use laser-printed shipping labels, according to its website.
The company has built a global sales and distribution network in North and South America, Europe, Asia, the Middle East and Africa.
The company reported a record $10.3 billion in revenue for its fiscal first quarter, which ended March 30.
Challenges
More manufacturers are cutting into the distribution business by selling directly to consumers and small businesses.
But Monié said Ingram still has a leg up on competitors.
“We can work for manufacturers everywhere around the world, or they can go to 10 of our competitors to have the same distribution,” he said.
In emerging markets, such as Indonesia and Brazil, local upstarts with lower prices could crimp Ingram’s growth. The company operates in 37 countries but sells in 160. Additional capital could help Ingram, and Monié wants to lift what he said is its undervalued stock within three years.
“Information technology distribution is seen as a business that doesn’t have a lot of sex appeal,” Monié said. “We’re being valued as an industry of middlemen rather than as individual companies.”
Analyst views
Analysts find Monié’s strategy encouraging. But they have short-term concerns about souring economic trends, including the slowdown in Asia and the lack of growth in Europe.
Raymond Jones analyst Brian Alexander said Ingram has the potential to pivot with the tech industry. Cloud-computing providers such as Amazon.com Inc. and Rackspace US Inc. could eventually turn to Ingram to reach new customers, he said.
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