Ingram Micro CEO: Small Business Still the Company's 'Drumbeat'

After Ingram Micro announced its first quarter earnings on Thursday, CEO Greg Spierkel sat down with CRN to talk about where the distributor is heading, as well as the future of small business and enterprise markets as virtualization and managed services pick up steam in the channel.

CRN: Where did you see growth in the U.S. market?

Spierkel: The growth in the U.S. came off the back of a couple of things. Our focus and ongoing commitment remains to the VARs in the SMB market. We saw growth in that in North America this past quarter. That still remains the drumbeat for the company.

From a product point of view, like every quarter there are some product categories that are doing a little better than others. In the most recent quarter that we just finished, our networking business and related wireless products were strong -- stronger than our overall growth rates of the Nnorth American operation.

We also had also good growth and we did say this, we had good double digit growth in our two specialized divisions that are getting a lot of attention and support from us: point of sale/data capture products, which used to be called the Nimax division, and our high-end consumer electronics business division, AVAD. Those are the kind of catalysts by product, division and customer.

CRN: Were there any technology areas where you saw a slowdown you didn't expect?

Spierkel: A slowdown, no. I would say that systems, which are PCs and servers, were softer. They were growing, but they were growing at a slower rate than last year. So there was growth, in units, over last year, but with average selling prices coming down at a little higher rate than the growth rate of the units. That product area was relatively flat in North America over the past quarter. Was it way off what we expected? Not necessarily, because IDC and others that we were talking to gave us a sense that was probably what we could expect there. I would say broad categories -- in the peripherals area, probably in the printer area -- units were moving at a much higher rate than last year, but selling prices are down also on last year, and that means very modest growth, flat growth, in revenue terms in that broad product category.

CRN: Where is the market strongest?

Spierkel: Our overall North American business, which your readership is mostly focused on, did very well with controlling our core business, which is the majority of our revenue. But we did very well in improving our profitability in North America. Our revenue after some of these adjustments was only 2 percent growth in North America, but we had a 10 percent improvement in our operating profits and an improvement in our operating margin. Our growing businesses contributed favorably, particularly the new divisions that we've been putting emphasis and focus on.

CRN: How is your managed service offering being received by your customers?

Spierkel: Generally, pretty good. There has been a lot of interest from both the customer base as well as vendors that are not providing a managed service solution at this stage, and they're coming to Ingram Micro. I can't be specific with names, but there are a number of vendors that are saying, "I like what you're doing here. We recognize you're on the leading edge of investments here. Most of your peer group is not necessarily investing as much as you are here, and we like what you're doing, so we want to talk to you. We want to understand how we can provide connectivity or a solution or a part of a solution into your overall offering here." It has been generating a lot of interesting dialogue, and it's also allowing us to sign up new customers as well as improve our position with existing customers as they buy into the managed services offering.

When we come up to our next [VentureTech Network] event, there will be more information on what the progress has been. I don't want to steal [vice president of services for Ingram Micro North America] Justin Crotty's thunder, but it has been pretty encouraging across the board, both from what we're doing with sign-ups and how the customers are feeling about the capability, but also with the vendors that don't have much in this space.

It's the early days, and we'll be adding to the portfolio over the next year or two. This is a long-term investment, but I'm pretty pleased at this stage after essentially just six months of doing this.

NEXT: What Ingram Micro is doing to spur growth in the SMB market.

CRN: Is there anything specific Ingram Micro is doing to spur growth in the SMB market?

Spierkel: Managed services are part of the point there. We can go to a broad base of our customers -- and obviously the more we sign up, the better we'll feel about this -- but the ones that have signed up are finding they can put a network operating center in place off of our expenditure and backbone, and then they can provide better services, uptime and diagnostics to their end-customers.

That's helping the SMB reseller base that we have pretty significantly. {C}The other thing is that we're constantly working with our key vendors. Are you putting programs in place? Are you bundling networking or an overall mobility solution? Are you bundling a good solution around digital signage? Are you putting together good enterprise print solutions for small and medium customers? There are a lot of day-to-day block-and-tackling things that are going on programwise that we're doing a lot of work on. The majority of our marketing and project spending with our customer base is all around providing those types of day-to-day solutions.

Again, that's part of what we talk about when we get to VTN. There is a great deal of exposure to a number of initiatives that we have in play, so in any quarter we could have half a dozen programs that are launched, some of which we'll go public on. Others we're just putting in place to the customer base through regular communication with them.

CRN: What trends are you seeing in the enterprise space?

Spierkel: The enterprise space, if you follow other companies -- namely the Arrows and the Avnets of the world, which are the biggest players in enterprise computing and solutions for North American customers -- it has been a little more quite in the most recent quarter. The corporate/enterprise server space, if you follow IDC, again the volume of units year-on-year is very low, single-digit growth in units. The marketplace there is just a little quieter on actual units being sold.

Software going into that space is still very strong, so there is a lot of virtualization going on that optimizes your servers and your small mainframes. That's a very hot space. Companies like VMware continue to grow at a blistering pace, and we're doing very well with them just like everybody is. That may be having a bit of an impact on the overall investments that are going on in the enterprise space. A lot of people are feeling comfortable leveraging more off of servers rather than bigger-end systems right now, so there may be a bit of a lull in part created by the server optimization solutions that are doing quite well.