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Insight: Tech market's stabilising, time to start hiring again

Q3 sales and profits up - but not enough to hit certain vendor rebate targets

It was a mixed bag of a third calendar quarter for reseller titan Insight Enterprises: sales shot up, as did operating profit, but gross margin was slapped by lower vendor rebates and overheating admin expenses.

The US-based biz reported year-on-year sales growth of eight per cent to $1.24bn; rising four per cent in North America to $891.3m, up 19 per cent in EMEA to $313.6m to jumping eleven per cent in Asia Pacific to $32.7m

Operating costs jumped to $143.1m from $139.9m due to hiring sales staff and techies in the US and in Europe, but severance charges were way down on a year ago, coming in at $308k versus $2.42m.

Consolidated gross profit increased two per cent to $171.8m with consolidated gross margin decreasing 80 basis points to 13.9 per cent.

“This gross margin performance was driven by the previously announced partner program changes in the software category and lower vendor funding from the data center product sales in the hardware category,” said CEO Ken Lamneck.

He told analysts on a conference call that Insight did not get the forecasted sales “velocity” to hit certain partner thresholds. “We had lower partner income than we had anticipated”.

The sweeping changes Microsoft exacted on fees paid for enterprise license sales has been a constant factor that Insight has had to balance in recent times.

Lamneck did not list specific vendors that it fell short with in the quarter, but added:

“The programs of course do change from quarter-to-quarter, you’ve got to be pretty nimble. And I think we could have executed a little bit better... higher demand would certainly always help mitigate that.”

Ops in North America posted growth across large enterprise, the mid-market and public sector, with bounces in hardware, software - security and virtualisation - and services.

The business in EMEA “improved sales execution in discipline” and reported double digit gains in products and services – though services still remain a small component of the Insight portfolio sales mix in the region.

“By country, we saw nice top-line growth in the UK, Germany and France and even stronger growth in smaller markets like Italy and Spain,” said the CEO.

The XP factor is no longer driving PC refreshes to the same order, Insight claimed.

The exec said the market was stabilising, giving it confidence to add more heads to “take advantage of the IT spending”, and revealed it was focused on business in specific verticals – and, of course, the cloud.

Earnings from operations for the group climbed to $28.3m from $26.2m but this comparison was flattered by a weak Q3 a year ago when the firm coughed millions of dollars for restructuring and severance.

A bunch of the old guard that ran Insight have left or been made redundant in the last year, as new president Wolfgang Ebermann wielded the corporate broom. ®

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