Eric and Thread,
You planted a seed recently, Eric. I took a peek at some of your recommendations and felt that IM was a reasonable value-oriented play. The "revenue" and EPS growth rates upto and including the quarter ending January 1999 have been outstanding. The last 4 quarters have indicated that one of the wheels has fallen of the cart and IM is stumbling. The fact that the last earnings report was so convoluted has lead to a loss of institutional support. The frustration of the analysts following IM is so palpable at this point. The only thing that could repair this situation would be reassuring guidance from the CEO or CFO during the c.c. They should have been prepared to answer (confidently and without hesitation) a simple question like...
"Give us a ballpark estimate of your true EPS for the quarter once one time gains/losses/adjustments are removed from the mix."
The remarks of some of the analysts indicate that the direction given during the c.c. was as clear as mud. Thus, IM is dead in the water for the next several quarters. No one will buy or upgrade IM until visibility is clear or a clear cut turn-around quarter is realized.
from a WSJ release...
On the conference call following the report, analysts asked Ingram Micro executives to provide a number for "normalized" operating earnings. But they wouldn't. Chief Financial Officer Michael Grainger gave analysts an idea of what inventory and bad-debt provisions would be in an average quarter. At one point on the call, Grainger appeared to endorse a back-of-the-napkin calculation made by Kevin McCarthy, an analyst for Donaldson Lufkin & Jenrette Securities Inc., of earnings per share for the quarter in "low to mid 20-cent range." But later on the call, he appeared to back off. "Our comment was, (McCarthy's estimate) seems relatively in the range, plus or minus something. We don't know what would happen without this, because it happened," Grainger said.
After Ingram Micro's conference call, analysts were scrambling to find a reasonable estimate on their own.
On the conference call, Ingram Micro officials also gave a mixed message about its business outlook. On the one hand, it gave first-quarter earnings guidance of 13 to 17 cents a share, well below the Wall Street consensus of 29 cents.
On the other hand, Chairman and Chief Executive Jerre Stead said gross margins will steadily improve throughout 2000, as the company implements price increases.In an interview, Stead said Ingram is no longer faced with severe price competition from ailing vendors in the U.S. and Europe. The company is planning to implement price increases, and it has cut out unprofitable services, but there is some risk that revenue will suffer if the increases draw customers away to other distributors.
On a positive note, IM has demonstrated impressive performance in the past and they may be given only a brief parole period. If, in fact, they stumble again I believe that IM will be left for dead.
One of the reasons I was interested in IM was the recent announcement by Lexar Media indicating that they have selected IM as a key link in their sales channel.
from the IM news link===> siliconinvestor.com
Lexar sells most of its product (CompactFlash memory cards for digital cameras) at CompUSA or through OEM arrangements with prominent manufacturers such as Kodak and Nikon (bundled with digital camera sales). In my region, CompUSA is under stiff competition from BestBuy. In fact, CompUSA is absolutely hurting here. Several stores have large excesses of Lexar's product even after a banner Christmas season for digital cameras. Also, Lexar's main competitor, SanDisk, is currently requesting an injunction due to patent infringement which could lead to a recall of Lexar's product. Too bad for CompUSA.
Or is it???
FROM LEXAR'S REGISTRATION STATMENT...
Revenues: Total revenues increased 284.2% from $7.6 million in 1998 to $29.2 million in 1999. This increase was the result of continued increases in sales of our digital film and connectivity products, including our USB-enabled CompactFlash digital film and the JumpShot product introduced in the last half of the year. In addition, in 1999, we added several new customers that generated significant sales, including Best Buy, Nikon, Tech Data and Wal-Mart. Product sales in 1999 were predominantly to customers in the United States (72.4%), Japan (14.6%) and the United Kingdom (11.7%). Product sales in 1998 were predominantly to customers in the United States (78.1%) and Japan (19.3%). Four customers, Ingram Micro, Kodak, Impact Peripherals and Tech Data, accounted for 12.8%, 11.4%, 10.0% and 8.8% of product sales in 1999. Four customers, Kodak, ADTEC, Ingram Micro and Viking, accounted for 24.6%, 18.1%, 13.2% and 10.6% of product sales in 1998. We believe that a substantial majority of the products we sold to Ingram Micro and Tech Data were resold by those parties to CompUSA.
Given the vast array of manufacturers that Ingram Micro is representing it is clear that they cannot have insight as to the popularity (or lack there of) of any given product. I also don't believe that IM should position itself to absorb the costs for large inventory stockpiles or losses due to unsellable, "stale" electronics goods that will never be unloaded on resellers. Likewise, if a retailer were to return product due to lack of popularity, then it is the manufacturer that should absorb the costs, not IM.
IM needs to rethink how it does business. It is providing a valuable service to both the manufacturer and the reseller. As such it should not have to assume the risk of the transaction between these two parties. The purchasing agreements between OEM's and IM or between IM and the reller should not be burdensome.
This leads me to the last point. What are revenues to IM really. Revenues are, in some way, just a rough estimate of the amount of freight they handle. I am in favor of cutting back on revenues if it means that more favorable terms with the remaining channel participants can be achieved.
Ausdauer |
