Ingram Micro Profits Narrow, but Analysts See a Recovery

Ingram Micro Inc. reported smaller second-quarter profits and somewhat anemic sales growth Tuesday, but analysts said the results show a company in recovery.

The world’s largest computer product distributor has raised prices and shaved costs in recent months, dramatically improving gross margins shattered last year by an industry price war.

“They are running their business better,” said Joel Pitt, an analyst at Credit Suisse First Boston. “The revenues will come.”

By more conventional measures, the Santa Ana company’s results were mixed for the three months.

Ingram posted a profit of $33.2 million, or 22 cents a share. That beat analysts’ per-share estimate by a penny, but represented a 34% drop from last year’s second-quarter earnings of $50.3 million, or 34 cents a share. Sales rose 7% to $7.3 billion.

Ingram actually sacrificed sales growth to improve profitability, turning away customers who would not accept price hikes or switch to a new fees-for-service system, Chief Executive Kent Foster said.

“Last year, we had tremendous [sales] growth, but we didn’t make much money,” Foster said. “These are very small victories, but important ones.”

Long term, Ingram hopes to move beyond its old-fashioned wholesaling business by offering back-office services to manufacturers and retailers selling products online.

In June, the company shifted half of its U.S. employees into a new division geared to handle back-end tasks for Internet stores. It also announced it would venture beyond computer products to distribute consumer electronics for Internet superstore Buy.com Inc.

These moves, coupled with increased financial discipline, seem to have helped Ingram regain Wall Street’s confidence. Five analysts have upgraded its shares since March.

Ingram announced the quarterly results after the close of regular trading on U.S. markets.

Its stock, which bottomed out last October at $10 a share, has rebounded somewhat, although it remains far off its $52 high set in late 1998. The shares gained 63 cents Tuesday to close at $18.75 on the New York Stock Exchange.

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Coming Back

Wall Street is looking more favorably at Ingram Micro these days. The stock, which sank to $10 a share late last year, has moved up in recent months. Daily prices:

Tuesday’s close: $18.75

Source: Bloomberg News