Inacom Shares Tumble In Wake Of Q4 Shortfall - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


Inacom Shares Tumble In Wake Of Q4 Shortfall

Inacom Corp. expects a $100 million shortfall in the company'sreseller distribution business for its fourth quarter ending December 26. The news hit as the second half of a double whammy that started Tuesday night when distribution giant Ingram Micro Inc. disclosed a surprise $500 million shortfall for its fourth quarter.

Strength in Inacom's corporate direct and services businesses did not offset a 30 percent year over year reduction in revenue for its reseller business, Inacom's chief financial officer David Guenthner told analysts in a call Wednesday morning. The news knocked Inacom shares down 25 percent Wednesday to $14.31.

Guenthner attributed the shortfall to a loss of revenue in the company's reseller business which "obviously impacted margins as well as the vendor rebate dollars."

Inacom chairman Bill Fairfield said the company's woes were not necessarily due to a slowdown in demand, echoing statements made Tuesday night by Ingram chairman Jerre Stead.

Omaha based Inacom has been trying to reduce its reliance on pure distribution, focusing more on direct sales to end user. The fourth quarter numbers "probably had less do to with the marketplace than with our conscious effort to change the mix...we may have turned the throttle down too much and shut off resellers a little more than we expected. It doesn't mean that the indirect business is down [as much], Fairfield said.

Analysts were puzzled by this assertion, especially in light of less than stellar results from several corporate resellers.

"My first take is there's a shift away from these distributors and that's the assumption you've got to go with.....the next shoe to fall is that demand is falling," said Benny Lorenzo, general partner with Aspira Capital Management, Fort Lee, NH.

Jeff Matthews, partner with RAM Partners,a Greenwich, Conn. hedge fund, agreed: "Either PC demand is falling way short or the channel is in trouble."

"Stead says the corporate reseller channel is healthy with volumes up , that it's just that Ingram's volumes with those resellers are not up because they're going direct. Yet, Vanstar's volumes are down, CompuCom's volumes are down. So who are these large corporate resellers who are doing well?"

Robert Anastasi, managing director of The Robinson Humphrey, Co., Atlanta said "The general improvement in availability from OEMs and their improved turnaround probably means a little less opportunity for second sourcing, plus there is probably some shifting of market share [among channel players] but you've got to ask yourself if there is a slowdown in demand? We didn't think so two weeks ago."

Inacom executives, like their counterparts at Ingram, reassured analysts that these market conditions are temporary. Fairfield suggested that even if PC makers are incenting corporate resellers to buy direct, it is in the vendors' long term interest to reduce the number of direct partners they service. "It's fair to say that all manufacturers want to reduce the number of people they want to deal with directly. IBM probably has 30 direct relationships and they'd love to get that to less than ten," Fairfield said.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
2020 State of DevOps Report
2020 State of DevOps Report
Download this report today to learn more about the key tools and technologies being utilized, and how organizations deal with the cultural and process changes that DevOps brings. The report also examines the barriers organizations face, as well as the rewards from DevOps including faster application delivery, higher quality products, and quicker recovery from errors in production.
Think Like a Chief Innovation Officer and Get Work Done
Joao-Pierre S. Ruth, Senior Writer,  10/13/2020
10 Trends Accelerating Edge Computing
Cynthia Harvey, Freelance Journalist, InformationWeek,  10/8/2020
Northwestern Mutual CIO: Riding Out the Pandemic
Jessica Davis, Senior Editor, Enterprise Apps,  10/7/2020
Register for InformationWeek Newsletters
Current Issue
[Special Report] Edge Computing: An IT Platform for the New Enterprise
Edge computing is poised to make a major splash within the next generation of corporate IT architectures. Here's what you need to know!
White Papers
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll