Ingram Micro Inc. IM recently inked a distribution deal with FireEye Inc. FEYE to market, sell and support the latter’s security products across the United States and Canada. FireEye offers a platform for enterprises and governments to facilitate web security, email security, file security and malware analysis.
Data volumes are increasing at an exponential rate with higher number of devices storing and using data. Moreover, the demand for data storage has increased manifold, with the proliferation in both business and household users. Therefore, without proper data backup, disaster recovery and security solutions, it would be nearly impossible to counter malware and cyber attacks.
Further, the demand for cyber security is on the rise. With the advancement in technology, more organizations are adopting the bring-your-own-device policy. While the policy has enhanced employee productivity with anytime, anywhere access, enforcing data security measures has become all the more necessary for organizations.
Moreover, per Gartner IT, worldwide spending on IT security in 2014 was about $70 billion and is likely to reach $76.9 billion in 2015.
Looking at this enormous opportunity in the IT security space, we believe that the recently expanded deal with FireEye will boost Ingram Micro’s revenues over the long haul.
Ingram Micro has been signing distribution deals with a number of original equipment manufacturers, thus expanding the product portfolio. The company’s exposure to the cloud computing segment is also expected to remain the key growth driver.
Additionally, management’s focus on high-margin markets and strategic acquisitions to grow market share should help.
Separately, Ingram Micro has been gaining from increased orders from small & medium business (SMB) organizations in Europe, particularly Germany and the U.K. The company is now targeting the SMB segment in a more comprehensive way, not only in Europe but globally.
Though Ingram Micro’s high debt burden is a concern, we remain fairly optimistic about its strategic relationships with network giants such as Juniper Networks Inc. JNPR, Cisco and International Business Machines Corp.
However, the technology distributor is currently facing some headwinds. While its services business is seeing solid growth, the company remains largely dependent on the PC market where shipments are sluggish. Gartner’s latest forecast of a 7.3% drop in PC shipments in 2015 — worse than the earlier prediction of 4.5% decline — paints a rather gloomy picture.
Ingram Micro currently carries a Zacks Rank #3 (Hold).
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