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October 31, 1999

Ingram Posts Depressed Q3 Profit in Line With Warning

By CBR Staff Writer

Ingram Micro Inc, the world’s-largest wholesale computer distributor, reported third-quarter profits 71% down on the year-ago, in line with market expectations downgraded in September when executives warned pricing pressures would crimp earnings.

Profit from operations for the three months to October 2 fell to $17.6m, or 12 cent a share, from $60.7m, or 40 cents a share, in the corresponding period last year. Revenue rose 18% to $6.71bn. Santa Ana, California-based Ingram issued a profit warning for the quarter on September 8. It said earnings would fall between $15m and $21m, equivalent to 10 to 14 cents a share. Analysts at the time had been predicting that the firm would post a net profit of 41 cents a share. The firm has faced tumbling PC prices and price undercutting from rivals, such as CHS Electronics Inc and MicroAge Inc’s Pinacor distribution arm.

At the time of the warning Jerre Stead said he would step down as chief executive officer, remaining as chairman. And earlier this month Ingram’s president and chief operating officer, Jeffrey Rodek, resigned to become chairman and chief executive of analytical applications provider, Hyperion Solutions Corp. The executive departures are said to have disturbed Ingram’s focus on the market.

Stead, who remains chairman and CEO pending a replacement added that as well as a harsh pricing environment, the firm experienced reductions in vendor rebates and incentives, primarily in the United States during the quarter.

For the nine months to date of fiscal 1999, Ingram has posted net income down almost 37% on the year-ago period at $108.4m, Earnings per diluted share fell to 73 cents from $1.15. Net sales for the company grew 28% to $20.24bn over the three quarters.

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