Ingram Micro Reports Q2 Loss, Plans Layoffs In $100 Million Cost-Cutting Program

Ingram Micro reported a $34.3 million loss for its fiscal second quarter Thursday and said it is slashing up to 540 jobs as part of a $100 million cost-cutting program.

The Santa Ana, Calif.-based distributor reported revenue of $10.55 billion for the quarter ended July 4, which was down 3 percent year over year, and missed Wall Street's consensus estimate of $10.9 billion.

Sales in North America climbed 1 percent on a constant currency basis to $4.62 billion.

[Related: New Verizon Partnership, Cloud Expansion Yield Sales, Profit Boom for Ingram]

Ingram Micro reported adjusted earnings of $87.5 million, or 55 cents per share. Wall Street analysts were expecting 54 cents per share. Ingram Micro shares closed Thursday trading down 29 cents at $24.50.

"Our strategies are working," Ingram Micro CEO Alain Monie said during the call. "We're successfully evolving our mix into faster-growing, higher-margin services."

Ingram Micro notified this month most of the employees slated for pink slips about the impending layoffs. A company spokesperson said that less than 2 percent of the global workforce will be impacted; Ingram Micro employs the equivalent of 27,000 full-time workers, according to a company spokesperson, meaning as many as 540 people could be laid off.

The cuts will cost between $50 million and $60 million and are intended to deliver quarterly cost savings of $25 million starting in 2016, the company said in a press release.

Monie said in May that the cuts would take place across multiple geographies and lines of business, with a company spokesperson adding that the majority of those affected work in noncustomer- and nonvendor-facing regional and corporate functions.

Ingram Micro cut 116 jobs in the past quarter, spending $8.39 million on severance packages, according to a filing Friday with the U.S. Securities and Exchange Commission. Most of the layoffs are expected to take place by the end of September, the company said.

Ingram Micro also is dropping one-third of its Verizon mobility practice in North America, a portion of business that contributed $600 million of sales in the second half of 2014, Paul Read, Ingram's president and chief operating officer, said on the call.

Ingram Micro signed an agreement in April 2014 with four of Verizon's largest national dealers to distribute handsets and supply chain services, and joined the Verizon Enterprise Solutions partner program in February.

But the Verizon dealer agreement has been fraught with problems, with the level of actual handset returns deviating significantly from what Ingram Micro had initially projected, Read said.

The portion of the Verizon business being retained by Ingram delivered $1 billion of sales, Read said.

Ingram Micro has also halted its plan -- first initiated seven years ago -- to install an SAP enterprise resource planning (ERP) system to manage its operations throughout the globe. It said it's taking a one-time non-cash, pre-tax charge of $116 million stemming from this decision.

Monie said the company concluded that combining Ingram's legacy systems with the already-installed SAP systems would be cheaper and provide more flexibility than installing SAP units at every location in the world.

For the next quarter, Ingram Micro is projecting earnings per share of 60 cents to 68 cents on sales of $10.5 billion to $11 billion. Thomson Reuters estimates 67 cents per share on revenue of $11.3 billion.

PUBLISHED JULY 30, 2015