Ingram Micro 2008 Annual Report Download - page 18

We compete against broad-based IT distributors such as Tech Data and Synnex Corporation. There are a
number of specialized competitors who focus upon one market or product or a particular sector with whom we
compete. Examples include Avnet, Arrow, and Bell Microproducts in components and enterprise products; D&H
Distributing, ADI, ArchBrook Laguna and Petra in consumer electronics; and ScanSource and Bluestar in
AIDC/POS products. While we face some competitors in more than one region, others are specialized in local
markets, such as Digital China (China), Redington (India), Express Data (Australia and New Zealand), Intcomex
(Latin America), Esprinet (Italy and Spain), ALSO and Actebis (both in Europe). We believe that suppliers and
resellers pursuing global strategies continue to seek distributors with global sales and support capabilities.
The evolving direct-sales relationships between manufacturers, resellers, and end-users continue to introduce
change into our competitive landscape. We compete, in some cases, with hardware suppliers and software
publishers that sell directly to reseller customers and end-users. However, we may become a business partner
to these companies by providing supply chain services optimized for the IT market. Additionally, as consolidation
occurs among certain reseller segments and customers gain market share and build capabilities similar to ours,
certain resellers, such as direct marketers, may become our competitors. As some manufacturer and reseller
customers move their back-room operations to distribution partners, outsourcing and value-added services may be
areas of opportunity. Many of our suppliers and reseller customers are looking to outsourcing partners to perform
back-room operations. There has been an accelerated movement among transportation and logistics companies to
provide many of these fulfillment and e-commerce supply chain services. Within this arena, we face competition
from major transportation and logistics suppliers such as DHL, Menlo, and UPS Supply Chain Solutions.
We are constantly seeking to expand our business into areas closely related to our IT products and services
distribution business. As we enter new business areas, including value-added services, we may encounter increased
competition from current competitors and/or from new competitors, some of which may be our current customers.
Seasonality
We experience some seasonal fluctuation in demand in our business. For instance, we typically see lower
demand, particularly in Europe, in the summer months. We also normally see an increase in demand in the
September to December period, driven primarily by pre-holiday impacts on stocking levels in the retail channel and
on volume of business for our North American fee-based logistics services.
Inventory Management
We seek to maintain sufficient quantities of product inventories to achieve optimum order fill rates. Our
business, like that of other distributors, is subject to the risk that thevalue of our inventory will be affected adversely
by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the products
comprising the inventory. It is the policy of many suppliers of technology products to offer distributors limited
protection from the loss in value of inventory due to technological change or a supplier’s price reductions. When
protection is offered, the distributor may be restricted to a designated period of time in which products may be
returned for credit or exchanged for other products or during which price protection credits may be claimed. We
take various actions, including monitoring our inventory levels and controlling the timing of purchases, to maximize
our protection under supplier programs and reduce our inventory risk. However, no assurance can be given that
current protective terms and conditions will continue or that they will adequately protect us against declines in
inventory value, or that they will not be revised in such a manner as to adversely impact our ability to obtain price
protection. In addition, suppliers may become insolvent and unable to fulfill their protection obligations to us. We
are subject to the risk that our inventory values may decline and protective terms under supplier agreements may not
adequately cover the decline in values. In addition, we distribute a small amount of private label products for which
price protection is not customarily contractually available, for which we do not normally enjoy return rights, and for
which we bear certain increased risks. We manage these risks through pricing and continual monitoring of existing
inventory levels relative to customer demand. On an ongoing basis, we reserve for excess and obsolete inventories
and these reserves are appropriately utilized for liquidation of such inventories, reflecting our forecasts of future
demand and market conditions.
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