Ingram Micro gets 'negative' mark for risky Brightpoint slurp
Fitch Ratings: See me after class
Fitch Ratings has downgraded its outlook for Ingram Micro from stable to negative due to the "risks" the distie might face once the acquisition of Brightpoint gets the all-clear.
The ratings agency revised the scoring to triple-B-minus – just a hair's breadth away from the junk bond rating of BB+ – late last week.
The reason is that Ingram's proposed $650m acquisition of wireless and mobile device distie Brightpoint "carries several financial and operational risks".
This is because Brightpoint has "significant exposure" to ailing handset giants Nokia and RIM and held high stock levels over the last few quarters that could result in "write-downs and margin compression in the future."
This could only get worse over time as Apple and Samsung consolidate their market standing, heaping additional margin pressure on vendors contained in Brightpoint's portfolio.
The size of the integration task - Brightpoint is Ingram's largest acquisition to date - could also capture the attention of senior management and distract them from the core volume IT sector.
Fitch also flagged up the costly botched ERP roll out at Ingram and "razor-thin margin in the face of significant competition" as other factors of concern.
In the last set of results for its fiscal Q1 ended 31 March, Ingram grew profits nearly 60 per cent to $89.97m on sales of $8.64bn, a decline of 1 per cent.
Ingram Micro was not available to comment. ®