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Non-Tech : Ingram Micro

IM 38.89

0.0%

Dec 13 4:00 PM EST

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To: Judy Muldawer who wrote (157)	7/9/1997 11:05:00 PM
From: Scott Patrick Adams	of 576

I hope you are right. I decided on waiting a little longer to see what Compaq's big announcement will be on Thursday after earnings. It may or may not effect Ingram short term. I hope Compaq has its build to order capability ready and it includes Ingram. I worked for MicroAge for 11 years and NEC for three years I know this industry pretty well and I have to say that now being on the the factory side of things there is appsolutly a 12 to 20% increase in the cost of PC's in a three tiered distribution system. We the manufactures of PC's are losing a cost battle with DELL. The problem is Compaq sells to Ingram, TechData, MicroAge based on forecast. When the forecast is wrong inventory sits. When prices drop Compaq pays for the price protection on inventory for lastm 30 days. When forecast is wrong on the other side Compaq loses orders for not having the right equipment in stock and does not have the ability to quickly retool manufacturing to build that particular model. In addtion, when a PC reseller sells a Compaq computer how many hands does it travel from? The manufacture (Compaq) to a distributer (Ingram) to the reseller (Joes PC Shop) to the ultimate customer (End user) thats four businesses. At each juncture there is cost and markup. DELL on the other hand looks like this: Order first - then it is built to order and shipped directly to customer. Dell does not build anything until it is sold therefore they turn inventories twice as fast as Compaq. This does not even take into account the cost of Marketing development funds 3% to 5% the cost of money 1% per month freight to the channel (free) 1%. I think intermediate term looks good however long term I think we will need to watch. Your particular business area is always important - the selling process and the consulting process of computer hardware and software are here to stay but with new technologys like the WEB and direct hardware sales, the three tiered distribution channel will have to find other ways to add value to their customers. Not to mention hard looks at electonic software distribution. Microsoft is one sure thing to watch in this channel. If Microsoft decides to go with electronic softare distribution anc Compaq builds to order and ships direct to end user that would represent 60% of Ingrams business. Scott

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