Ingram cuts jobs in wake of weaker sales

It hasn’t been such a great week for Ingram Micro. Before the formal announcement of its fourth-quarter financial results yesterday afternoon, the distie laid off 300 employees in North America, including about 50 in Canada. And it’s not expecting growth over the next three to five quarters.

So what does this mean for the channel? Ingram says the layoffs won’t affect VARs and their customers, but that will depend on how the transition is handled.Ingram posted a net loss of US$564 million for Q4 2008 (compared with a profit of US$114 million in Q4 2007), due to weaker global sales. Revenue fell 13 per cent from the previous year to US$8.7 billion.

Cost-cutting actions did help Ingram post higher than expected earnings, but clearly, it wasn’t enough to return to profitability.The last quarter, though, was a tough one for many companies. And it’s impossible to say what will happen this year – companies are changing their forecasts on a regular basis, as the markets jump up and down and all over the place.

But Ingram’s CEO Greg Spierkelbelieves 2009 will prove even more challenging, and as a result, the distie is looking for annual savings in the range of US$100-$200 million. Part of that will come from a reduction in staff. The distie, however, does not plan to cut back on its vendor relationships or product offerings.

Overall, it’s laying-off 300 North American employees, about half of that from its distribution centres. Ingram says it’s working to ensure partners don’t experience any service disruptions – so a number of associates are being asked to stay on during the transition period.It may sound like a good idea, but I’m not sure how motivated I’d be to help my employer through a transition that involved getting rid of me. Then again, I’d probably be grateful for some extra time to job hunt. Still, that will be a tricky situation to manage because it involves staff morale and oh-so-fun change management.

This really shouldn’t come as a big surprise, though. Ingram first announced its “optimization” plan back in December, which involved cost-cutting actions – and probably set off some red flags to employees. Then there was its attempt to avoid layoffs in January through a four-day “Winter Break” for employees in Santa Ana and Buffalo, as well as a “Volunteer Time” initiative where employees could voluntarily shift to part-time work.

If VARs didn’t experience any service disruptions during Winter Break, that bodes well for the distie. If they did, that’s another story.

In slightly more upbeat news, while GE Capital in the U.S. has exited “selected programs” that were less active, including Tech Data, it remains active in financing the technology market and continues to provide financing solutions to distribution partners and the channel here in Canada (as well as other programs in the U.S.).

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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