Distribution giant Ingram Micro has hit hard times.
Amid growing uncertainty in the US computer sector, Ingram warned Thursday that first-quarter earnings would fall short of analysts' estimates, and said it would cut 1,400 jobs as part of a corporate realignment.
The Santa Ana, California-based company said it expected income for the quarter to range from US$40 million to $45 million, or $0.27 to $0.30 per share, before any one-time costs for reductions in work force. Analysts had expected the company to earn $0.42 per operating share, according to First Call.
Fears that a build-up of personal-computer inventory could smother first-quarter growth have caused some investors to unload computer stocks in recent sessions. And indeed, Ingram Micro said recent market conditions had accelerated its streamlining and realignment efforts.
The company cited Y2K fears and continuing economic issues that have created cautious buying trends in Europe, Latin America, and Asia. Intense margin pressure, primarily in the United States, that was directly related to increased price competition was another factor, the company said.
In the United States, Ingram said it will close its California-based consolidation center, realign its sales force, and create a merchandising organization that integrates its purchasing, vendor sales, and product marketing functions. Those steps will result in 1,400 job losses, the company said.
Last week, Compaq Computer, the world's largest PC maker, said industry sales of commercial PCs had been soft for the first six weeks of the first quarter in Europe and North America. Shares of Intel, the world's largest chipmaker, fell earlier this week amid market rumors that the company would pre-announce a first-quarter earning shortfall.
The current market environment has been likened to the situation in 1998 when a supply glut resulted in a wave of price cuts to clear inventory, yielding softer earnings.
Copyright© 1999 Reuters Limited.
