Tough times are here again for the on-premise infrastructure providers with Insight Enterprises the latest to report top line slippage.
The global reseller filed sales of $1.17bn for calendar Q1, down four per cent year-on-year, as declines in European and Asia Pacific ops wiped out the slight progress made in North America.
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CEO Ken Lamneck noted falling demand for bit barn kit and and sounded a note of caution about the wider product business this year in the US and Canada after regional profits fell short of its forecasts.
He said the profit miss was “related to a combination of a higher percentage of [lower margin] large and public sector clients as well as a shift in product mix resulting in lower data centre sales.
“This could be somewhat cyclical, but market data suggests softer demand for data centre solutions, and we are cautious about recovery in our product mix over the balance of this year,” Lamneck added.
According to Gartner’s forecast, data centre systems are expected to expand by a small digit percentage in 2016 to $171bn worldwide, but these things can be seen as moving feasts, so to speak.
Insight turned over $826.9m in North America during the quarter, up one per cent, as hardware grew three per cent; software fell six per cent and services jumped 11 per cent. Operating profit fell 44 per cent to $10.5m.
The state of the bottom line forced Insight to roll out “several cost reduction initiatives” across the US division to cut its cloth to match the “profit performance”. Savings of $20m a year are expected.
In EMEA, sales fell 15 per cent (down 11 per cent in constant currency) to $303.4m; hardware dropped 18 per cent; software 12 per cent; and services by eleven per cent. Operating profit in the region was up 57 per cent to $2.72m, presumably due to a tighter focus on bigger ticket items.
The relatively small APAC offices brought in $38.7m, down eight per cent.
Severance charges across the group went up 88 per cent to $1.35m - almost entirely in North America, leaving operation profit at $13.63m, down 33 per cent and after tax, net profit was down 37 per cent to $6.8m. ®