Ingram Micro Inc. said Wednesday that it may dip into the red in the second quarter amid weak technology demand from U.S. companies and a softening in its international markets.
The Santa Ana company, the world's largest distributor of computer products, said it will break even or post an operating loss of up to $10 million as demand for computer products sags.
The company's warning came on the heels of lowered estimates from tech heavyweights such as Hewlett-Packard Co., Juniper Networks Inc. and Broadcom Corp., Ingram Chief Executive Kent B. Foster said during a conference call with analysts.
Foster said sales to U.S. customers were softer than expected in May and early June.
While the company had expected a seasonal decline in Europe, sales fell more rapidly than normal in May and failed to improve in June as a slowdown that started in the United Kingdom began spreading to the Nordic countries and Germany, he said.
Sales will total $5.8 billion to $6 billion, the company said, down as much as 20% from revenue a year earlier. Last month, the company had estimated that quarterly sales would range from $6.3 billion to $6.7 billion.
The company was expected to have profit of 9 cents a share, according to eight analysts surveyed by First Call/Thomson Financial.
Foster, who said the U.S. market appears to be stabilizing, declined to give a forecast for the second half of the year.
"We've been seeing about the same level of sales for roughly the last six weeks in the U.S. . . . Things could change tomorrow, but that's a decent period of time to have roughly the same level of sales," Foster said.
Last week, Ingram Micro said it would eliminate 1,000 jobs, about 6% of its work force, to cut costs.
Ingram Micro shares fell 11 cents to $14.06 on the New York Stock Exchange. The company made the announcement after U.S. markets closed.
The company also said it had completed the cash repurchase of approximately $225 million of its convertible debentures, which will result in an extraordinary loss of approximately $3 million in the quarter. That loss should be more than offset by gains from prior purchases, the company said.
"The immediate future may not be pretty, but we're using this time as an important transition period," Foster told analysts.