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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: kemble s. matter who wrote (141796)	9/9/1999 8:22:00 PM
From: Bandit19	Read Replies (1) \| Respond to of 176387

Kemble, Hi! It sounds like Michael's making all the right moves here...can't wait to see him on the TV adds...He's a natural to tell America the DELL story! Saw this in today's IBD...DELL sure is hard on the competition's top brass... Ingram Micro Falls Victim To Direct PC Selling Craze Date: 9/9/99 Author: Matthew Benjamin The troubles in the computer-products distribution business hit home Wednesday when the largest player in that field produced two shockers. Computer wholesaler Ingram Micro Inc. says its profit this quarter will be a fraction of what was expected. It also says its chief executive will leave as soon as a replacement is found. The company says third-quarter per-share earnings will be 10 to 14 cents. Analysts polled by First Call Corp. expected earnings of 41 cents a share. In the year-ago quarter, Ingram reported a profit of 40 cents a share. Jerre Stead, the CEO since 1996, will remain chairman, the company says, but he'll leave as day-to-day chief. 'As we prepare to enter a new century, we must have the best possible leadership in place,' Stead said in a statement. Until recently, many company observers thought of Stead in that role. 'He's a great strategist and also just an excellent guy day to day,' said Brett Miller of A.G. Edwards Inc. in St. Louis. 'He's really been a morale builder at Ingram Micro, and to see him move off into a less visible role is not positive at this stage.' Investors sent shares reeling. Ingram stock fell 6 to 13 5/16, a 52-week low. The resignation surprised analysts - but so did the earnings disappointment. '(Stead) probably wanted to move to (being strictly chairman), but the earnings expectations brought it on faster,' Miller said. Not so, says Kim Strohm, vice president of investor relations at Ingram Micro. She says Stead, 56, planned to be chief executive only for a couple of years. A Changing Industry But she adds that this is a good time for a change. 'It's important, as we go through massive industry changes, to bring the new person in now as we reformulate who we are in the new world,' Strohm said. 'There is an urgency as we redefine ourselves.' Analysts blame Ingram's lowered earnings on changes in the computer wholesale industry and within Ingram Micro itself. As both PC makers and retailers look to cut costs, wholesalers - and their profit margins -are being squeezed. Manufacturers are cutting the number of wholesalers they use, often from dozens to two or three. Wholesalers in turn must scramble to stay connected to important computer-products makers such as Apple Computer Inc. and Compaq Computer Corp. Apple and Compaq have been among the big players cutting out many distributors. At the same time, selling directly to buyers is becoming more popular, championed by hugely successful computer maker Dell Computer Corp. Such a business model cuts wholesalers out of the loop completely. Too Much Going On In its statement, Ingram Micro blamed a price war among wholesalers and fewer rebates from computer makers for its gloomy earnings outlook. The company added that before-tax profits this quarter could shrink by 1.5 percentage points to less than 5% of sales. Even in a traditionally low-margin business, that's thin. The company also said its efforts to raise prices on some items drove customers to rivals such as Tech Data Corp. Some of these problems aren't new to computer distributors. In the past, Ingram Micro's large size and wide distribution web have let it weather such storms. 'Basically, they took their eye off the ball this quarter,' said Miller. The company has been reorganizing to adapt to industry changes, while at the same time striking new supply deals and adding new services for select customers. 'They just had too much going on,' Miller said. Ingram has lost some top executives during its latest reorganization, several of them to rival wholesaler Merisel Inc. 'It's been like a parade,' said Janet Waxman, an analyst with market researcher International Data Corp. in Framingham, Mass. That's one reason analysts question Stead's resignation. A respected industry veteran like Stead should be as well-equipped as anyone to deal with this turmoil, several analysts say. Stead took Ingram Micro from $12 billion in revenue in 1996 to over $22 billion last year. He's also well known for taking no salary, instead wrapping his compensation entirely in stock performance to express solidarity with investors. He also purportedly uses the title of 'Head Coach' on his business cards instead of CEO or chairman, in an attempt to foster teamwork. ------------------------------------------------------------ Best, Steve