Ingram Micro 2006 Annual Report Download - page 18

choose Ingram Micro over a competitor. Throughout the year, our novel “customer communities” created
industry-leading connections, providing a one-stop solution for many companies that want to build new
market opportunities more efficiently and effectively. Our service offerings have proven to be of such
differentiating value that we will continue to accelerate their development, exploring and testing options for
the future, including software-as-a-service, business process outsourcing and marketing services. Our work
here is unmatched in the industry.
We are pleased that Hitachi Data Systems selected us as their global distributor of enterprise-grade storage
solutions. This is significant as the mid-range storage space is expected to grow at a double-digit pace
through the end of the decade due to demand driven by data growth, complex applications and records
retention requirements. It’s also further recognition of our ability to open new growth opportunities for our
vendors and gives us a competitive advantage with them through global contracts in the future.
Each of our four regions contributed to the year’s success. Our North American region consistently outperformed the
market in 2006, generating 43 percent of our revenues at $13.6 billion. With sales growth of 11 percent and
operating income up 22 percent, the region delivered strong operating leverage. Success was primarily due to
three factors. One, superior operations and customer service drove revenue higher than the overall market.
Two, the outsourcing program launched a year and a half ago drove down expenses in the core business.
And three, redeployment of these savings provided additional capital to invest in new initiatives that are
enhancing our margins and diversifying the business. These initiatives include a line-up of professional
staffing/recruiting services and a stand-alone business unit for mobility. In recognition of these efforts, key
industry magazine VARBusiness named Ingram Micro “The Most Important Distributor” for the third year in a
row, further reflecting our commitment toward executing better than any other source.
Our Latin American region was also a standout success once again, posting stellar results in 2006 with dou-
ble-digit sales growth and operating profit growing 40 percent. The region generated five percent of our rev-
enues at $1.5 billion with operating margins surpassing the 200 basis point level for the year. Much of the
region’s strength came from Mexico, where we recently created a specialized business unit to focus on the
needs of small-to-medium enterprises, while other operations excelled with more traditional IT lines such as
components and systems. Whatever the country, we remain in tune with each market, customizing our portfo-
lio to meet the individual needs of our local customers.
Moving on to Europe, the region remained solidly profitable despite the challenges it faced in 2006. During
the first half of the year, certain vendor actions forced downward pressure on margins, but we managed
through these obstacles and delivered a record third quarter. Later, our migration to new warehouse manage-
ment system in Germany proved to be more cumbersome than we expected, causing disruptions that nega-
tively affected operating results. While this has been a difficult transition, the enhanced automation will make
our German operations more productive and efficient in the future. Our geographic diversification helped to
offset the negative impact of these challenges and as a result, Europe generated 34 percent of our revenues
at $10.8 billion, with operating margins of 118 basis points.
While our diversification efforts added value all year long, our core business
continued to grow and profit, led by the new vendor and product additions
to our portfolio. Our expansion in the mid-range storage market, as well as
further penetration into network security are examples of opportunities to
grow our core business.