Back to top

Analyst Blog

Ingram Micro Inc. (IM - Analyst Report) adds to its portfolio every now and then. After announcing a bunch of cloud offerings last week, the information technology (IT) distributor has now expanded its range of digital signage offerings through a new distributor agreement with multi-media software solutions provider Scala Inc. Financial terms of the deal were not mentioned.

Pennsylvania-based Scala’s software suites are broadly used in digital signage, interactive video, TV, presentations, streaming TV into large LAN and WAN, and other communications media. Its digital signage solutions are used by big shots such as McDonald's Corp. (MCD - Analyst Report), Warner Bros., Royal Dutch Shell (RDS), Esso, Ericsson and Bloomberg Television.

Per the agreement, Ingram will deal in Scala’s entire range of digital signage and display solutions. The IT solutions provider will market and provide technical support to Scala’s products like Scala Designer, Scala Content Manager and Scala Quick Start.

The need for digital signage is increasing across the world. It is one of the cheapest ways of delivering content or messages electronically via different media. Digital signage solutions generate recurring revenue streams, which actually lure distributors to win the dealership. Research firm IHS ISuppli has projected a growth of 12.6% in the signage and professional displays market this year. Moreover, the firm predicts worldwide shipment of roughly 17.3 million units in 2012, up from 15.4 million units and 13.5 million units in 2011 and 2010, respectively.

The tie-up with Ingram will open opportunities for Scala in the U.S. market. Also, Ingram will be able to witness continued revenue streams through the growing demand for digital signage solutions.

Ingram is one of the biggest players in the IT distribution business. The company’s geographical diversity makes it a logical choice for manufacturers seeking to increase their international exposure. The channel partners also get exposure to various technology providers’ offerings under one roof. Moreover, Ingram’s continuous product enhancement and partner addition activities will keep it ahead of peers such as Avnet Inc. (AVT - Analyst Report), Arrow Electronics Inc. (ARW - Analyst Report) and Tech Data Corp. (TECD - Analyst Report).

We find Ingram Micro’s first quarter results impressive as the bottom line was well ahead of the Zacks Consensus Estimate. The company has provided a positive but cautious second quarter guidance. But we believe that support from its Australian venture and the improving IT spending trend will help Ingram post better results going forward.

We remain fairly optimistic about Ingram Micro’s strategic relationship with network giant Juniper Networks Inc. (JNPR - Analyst Report), as well as tech giants such as Hewlett-Packard Company (HPQ - Analyst Report), IBM Corp. (IBM - Analyst Report) and Microsoft Corp. (MSFT - Analyst Report).

The company’s growing SMB exposure and improving profitability is encouraging, but its significant European exposure and debt burden are concerns.

Currently, Ingram Micro has a Zacks #3 Rank, implying a short-term Hold rating.