Ingram Micro Shares to Debut
Ingram Micro Inc.’s long-delayed but hotly anticipated public stock offering was priced Thursday at $18 per share as the world’s largest computer products distributor prepared for its trading debut today on the New York Stock Exchange.
After months of turmoil, including the hasty departure earlier this year of the company’s longtime chief executive, Ingram Micro stands to collect about $360 million from the stock sale, minus underwriting fees, to help pay off debts and finance expansion.
Analysts said the extra cash merely strengthens a company that already out-muscles the competition.
“Ingram is already the gorilla in the industry,” said Van Baker, an analyst at Dataquest Inc. in San Jose. “Most of their competitors are either so much smaller or in so much disarray that no one is going to rise up and challenge them.”
With estimated sales of more than $10 billion this year, Ingram Micro is a rarity among technology-related stock offerings these days: an established company with a proven track record.
But the Santa Ana firm has built an empire in a corner of the industry that has little in common with the cutting-edge software and Internet companies whose stock offerings have captured headlines and captivated investors in the last few years.
Companies such as Netscape and Yahoo! enticed Wall Street largely because of the unmeasurable potential of their innovative products. Ingram Micro, on the other hand, is a known quantity in a competitive and mature industry that prizes performance, not potential.
Ingram takes the products made by others and delivers them to resellers and retailers in about 120 countries. It is the leading distributor for industry giants such as Microsoft and Compaq Computer.
Ingram, formed from the combination of two smaller resellers in the early 1980s, became dominant through its pursuit of efficiency. The company’s longtime chief executive, Linwood A. Lacy, is credited with assembling the industry’s most talented team of managers, as well as distribution systems that competitors envy.
Lacy “pushed the company to become absolutely superior in operations, logistics and systems,” co-Chairman David Dukes said in an interview earlier this year. “We’re the only company that can receive orders until 5 p.m. and ship it the same day. We do that 99.7% of the time.”
But the company, known for being smooth-running, has taken an uncharacteristically bumpy path to Wall Street.
Lacy abruptly resigned earlier this year in an apparent feud with Martha Ingram, matriarch of the close-knit and powerful Tennessee family that owns Ingram Micro’s parent company, Ingram Industries Inc. His departure is still regarded as a chink in the Ingram Micro armor by some analysts.
“Chip’s leaving was a major blow,” said one. “I think people may have forgotten that.”
Undaunted, Ingram proceeded to make plans for its offering while searching for a new CEO. In August, it hired former AT&T; executive Jerre Stead, who declined a salary and instead based his compensation package exclusively on stock options.
If the company meets certain goals, Stead will wind up with options to buy 2.8% of the company’s stock at $18 per share.
The offering, talked about for more than a year, was further delayed until the company received a ruling from the Internal Revenue Service that said members of the Ingram family would not have to pay taxes on the spinoff of Ingram Micro unless they later sold their shares.
After the offering, Ingram Micro will no longer be part of Ingram Industries. But the Ingram family, whose Class B shares each hold 10 times the voting power of the Class A shares to be sold today, still controls the company. After the offering, family stockholders are expected to hold 70% of the equity in Ingram Micro and 81% of the voting power.
Ingram has grown from sales of $2 billion in 1991 to $8.61 billion last year. But huge sales don’t go as far in the distribution industry, where profit margins are paper-thin. Net income was $84.3 million last year, compared with $30.2 million in 1991.
Ingram’s sales are roughly double those of its closest competitors, Merisel of El Segundo and Florida-based Tech Data.
The absence of Lacy and the recent slide in the value of some stocks in the computer retailing market could dampen demand for Ingram Micro shares. CompUSA has seen the value of its stock plunge about $15 per share to $46 in recent weeks on news that computer sales in the company’s stores have been sluggish.
But Ingram’s offering price of $18 per share was raised by $3 earlier in the week by underwriters led by Morgan Stanley & Co., a sign that demand for the issue is strong.
David Menlow, president of the IPO Financial Network in Springfield, N.J., said he expects the price of Ingram Micro shares to jump by 22% in early trading today.
Ingram Micro doesn’t have the potential for an “exponential growth curve” associated with hot tech stocks of recent years, Menlow said. “But [Ingram] is the best at what they’re doing. It’s not as exciting, but steadier and less prone to wild fluctuations.”
