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Ingram delivers a memorable Valentine’s Day card

Distributor scored a lucky 13 per cent increase in worldwide sales in 2005

Although it released its latest financial report on Valentine’s Day, Ingram Micro didn’t see red.

Instead, it was solidly in the black.

The broadline distributor reported a record fourth quarter of net income for the period ending Dec. 31 yesterday, with worldwide sales of $7.96 billion (all figures US). That allowed it to chalk up sales for the fiscal year of $28.81 billion.

The unaudited figures project a $362 million profit (operating income) for the year.

Although weak European currencies created a drag on income despite a strong fourth quarter, because Ingram reports in US dollars, the company still totaled a 13 per cent sales increase over 2004. That was led by a 27 per cent hike in sales from the Asia Pacific region. North American sales (which accounts for 41 per cent of Ingram’s revenue) were up 4 per cent from a year ago.

Even Latin American sales were at an all-time high of $420 million, an increase of 25 per cent over 2004.

CEO Greg Spierkel attributed the performance to managing costs – including outsourcing millions in backoffice functions to service providers in India and the Philippines – as well as a diversification strategy which saw it buy Tech Pacific, a distributor serving Asian and Pacific countries, and Avad LLC, a U.S.-based distributor of high-end home theatre products.

Looking to this year, Spierkel told analysts on a conference call that the company will continue with its diversification strategy, including “adding a richer offering of services and private label products.”

Ingram COO Kevin Murai told CDN those services, which VARs would resell, could be an expansion of Ingram’s Services Network (IMSN) and include network design and engineering as well as providing vendor warranty service. IMSN already delivers break-fix services and the just-announced Office Pack warranty services.

However, a fledgling program for system builders won’t be coming to Canada fast. Ingram is starting to organize System ArchiTechs, similar to its VentureTech Network of solution providers, to bring white box builders closer to hardware manufacturers.

Murai said the company is targeting 700 system builders in the U.S. as potential members who want to take advantage of vendor training and marketing to expand their businesses.

These will be VARs who “want more than having the right product at the right time” from component manufacturers, he said. “They’re looking for opportunities to enhance their businesses with better technical training, and perhaps facilitating co-ordination with some of their peers.”

Vendors who have already signed on include Intel, AMD, Western Digital, Kingston Technology, Hitachi GST, Microsoft, Antec and Adaptec.

But “we haven’t determined yet” when it will come north, Murai said. “We want to get our feet wet in the U.S. first.” VTN didn’t come to Canada “for a couple of years,” he noted. It might not take ArchiTechs that long to get here, he added. However, when pressed he wouldn’t say if the program will start in Canada this year.

Although Ingram doesn’t break out performance by country, Murai said its business here “did very well.” Canada “ was a very strong contributor” to the distributor’s numbers.

And while North America generates the largest chunk of its revenues, that won’t be for long thanks to booming economies in China and India, he said. In three to five years the Asia-Pacific region will account for over 20 per cent of sales , up from 16 per cent today, and that will keep going as the area grows faster than the rest of the world.

While operating income growth for 2005 was up 43 per cent – or more than three times the sales growth – Spierkel said “there’s still plenty of opportunity to grow and improve our performance.” That growth will come from signing new vendors (last year it sign Juniper Networks to an exclusive deal) and finding new technologies to exploit.

Murai told analysts that Ingram will take increasing advantage of its purchase of point-of-sales specialist Nemax and Avad (which has yet to come to Canada). China, he added, “holds immense opportunities,” including possible deals with Acer and Lenovo.

Murai, who called the results “stellar,” said this year will be “more of the same,” meaning about a 4 per cent growth in North American sales.