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
The State of IT & Cybersecurity Operations 2020
The State of IT & Cybersecurity Operations 2020
Download this report from InformationWeek, in partnership with Dark Reading, to learn more about how today's IT operations teams work with cybersecurity operations, what technologies they are using, and how they communicate and share responsibility--or create risk by failing to do so. Get it now!
10 Cyberattacks on the Rise During the Pandemic
Cynthia Harvey, Freelance Journalist, InformationWeek,  6/24/2020
IT Trade Shows Go Virtual: Your 2020 List of Events
Jessica Davis, Senior Editor, Enterprise Apps,  5/29/2020
Study: Cloud Migration Gaining Momentum
John Edwards, Technology Journalist & Author,  6/22/2020
Register for InformationWeek Newsletters
Current Issue
Key to Cloud Success: The Right Management
This IT Trend highlights some of the steps IT teams can take to keep their cloud environments running in a safe, efficient manner.
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