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Earnings More Than Double at Ingram Micro

Technology: Increased prices, new fee structure pay off for Santa Ana distributor of computer products.

October 27, 2000|From Times Staff and Wire Reports

Ingram Micro Inc. in Santa Ana, the world's biggest computer products distributor, said Thursday its third-quarter earnings more than doubled as sales and profit margins rose.

Net income rose to $38.9 million, or 26 cents a share, from $15.8 million, or 11 cents a share, a year ago. Sales rose 13% to $7.56 billion. Analysts polled by First Call/Thomson Financial expected the company to earn 25 cents.

Ingram is reaping the benefits of changes installed in the second quarter when it raised prices and shifted some clients to a more profitable fee-for-service system, Chief Executive Kent Foster said.

"We felt the overall profit margin in the industry was too low at the beginning of the year," Foster said. "We've done a good job of pricing our product efficiently."

The company's approach was risky--customers could have rejected it and fled to Ingram's competitors. It also took effect just as the market for personal computers and some of their components weakened this spring and has remained slow.

Instead, Ingram has gained market share, Foster said. On Thursday, the company announced a deal to expand its distribution business with GE Capital IT Solutions, for example.

The company's efforts to update itself from traditional wholesaler to new-economy service provider also are beginning to pay off.

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 online retailer Buy.com Inc.

The company's revenue from these activities is up 13% from last year, Foster said.

Ingram Micro said it expects fourth-quarter earnings of 38 cents a share and sales growth as a percentage to be in the "low double digits" from a year ago.

Despite the rosy news, the company still has a way to go to impress investors, who decimated its stock last year. Its shares are up less than 1% for the year and remain far off their high of $52 in late 1998. Ingram's stock rose 38 cents Thursday to close at $13.56 on the New York Stock Exchange.

The company announced its results after the end of regular trading.

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