CEO Will Step Aside at Troubled Ingram Micro : Computers: The move comes as the leading distributor of PCs struggles with shrinking profit and sagging morale.
Ingram Micro Inc., the world’s largest computer distributor, said Wednesday that Chief Executive Jerre Stead will step down as the company struggles with diminishing profit and sagging morale in the wake of layoffs, a reorganization and the departure of more than a dozen executives in recent months.
The Santa Ana company also warned that its fiscal third-quarter profit will fall far short of forecasts, saying that it had mishandled the reorganization of its U.S. operations and that the company management had taken on more than it could handle.
Stead will continue to lead the company until a new chief executive is found. He will retain his title of chairman of the board.
The announcement sent the company’s shares into a tailspin in heavy trading on the New York Stock Exchange. The stock slumped 31%, or $6 a share, to $13.31, an all-time low. A total of 8.16 million shares changed hands, 12 times the average daily volume in the last three months.
Stead, 56, has led the company for three years, taking over just before Ingram first sold shares to the public.
“I’ve been very consistent from the time I joined that it was a three-to-five-year assignment at the most,†he said. “This is the 20th year that I’ve headed a large group or company, and that’s a lot.â€
During his tenure, the company’s annual revenue has increased from $12 billion to $25 billion. But the internal turmoil and a slump in personal computer prices apparently have taken a toll.
The company said it will earn between $15 million and $21 million, or 10 cents to 14 cents a share, for the quarter ending Oct. 2. Wall Street analysts had been expecting 41 cents a share, according to a survey by First Call Corp.
This would be the company’s third consecutive quarter of declining profit. In last year’s third quarter, Ingram earned nearly $60 million, or 40 cents a share.
“They’ve got some pretty significant internal problems to resolve, with big holes in the top management team,†said Kurtis King, an analyst with Banc of America Securities. “The problems are correctable, but the company will need some time.â€
Ingram’s announcement of diminished earnings comes a week after rival Tech Data Corp. announced earnings in line with Wall Street expectations, including an 82% jump in sales.
Ingram officials pointed out that Tech Data’s figures were for a different period, but analysts said that Tech Data had expressed optimism about the current quarter as well, with accelerating sales in the U.S., an area where Ingram is experiencing difficulties.
“In large measure, Ingram’s earnings figures reflect real execution problems,†said Joel Pitt of Credit Suisse First Boston. “The company was going through a lot of changes in terms of management and staff reductions and we believe that’s probably the major source of the shortfall.â€
During a conference call with financial analysts Wednesday, company officials appeared to blame Phil Ellett, the former head of Ingram’s U.S. operations, for the current stumbles, saying that the company had failed to execute its strategies.
“As leaders of our company, we made many mistakes in the implementation of our reorganization, particularly in the U.S.,†Stead told analysts. “The size and speed of change in the industry is even larger and more rapid than we had anticipated. We did not respond quickly enough to certain changes.â€
Last week, the company said Ellett was leaving to “pursue other opportunities.†He could not be reached for comment Wednesday.
In March, the company announced a major reorganization, eliminating 1,400 of its 14,000 employees. Since the beginning of the year, more than a dozen senior executives have left, complicating the transition.
The management departures this year were mostly the result of enticing offers from Internet companies, people getting weary of the distribution business and others taking advantage of stock options that had matured, industry watchers said.
Ingram’s company’s strategy has been somewhat haphazard recently, some analysts said, attempting to hold up margins while the rest of the industry cuts prices to gain market share, a tactic historically employed by Ingram.
After Ellett’s departure last week, there were rumors that there would be at least one more high-level departure, but few expected that Stead would move aside.
“Jerre’s change very definitely was a surprise,†said Robert Anastasi, an analyst with Raymond James.
“There’s no question the company is fundamentally sound. It still leads the industry. It is still financially very, very solid, and it’s generally the leading distributor of any major vendor in the world.
“There’s no question that it’s in an excellent long-term position,†he added.
