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Ingram Micro sees drop in sales

The largest distributor of tech products becomes the latest company to warn that the economic slowdown has hit home--and is spreading.

Ingram Micro on Wednesday became the latest tech-related company to warn that the economic slowdown has hit home again--and is spreading.

After market close, the largest distributor of technology products said it now expects to report revenue of $5.8 billion to $6 billion for the second quarter ending June 30. That's less than the $6.2 billion predicted by earnings tracking firm First Call.

The new target represents a year-over-year decline of 18 percent to 20 percent. Ingram Micro previously expected second-quarter sales would fall 8 percent to 14 percent from the year-ago period.

Ingram Micro could lose up to $10 million in the second quarter, and it expects break-even results at best, executives said. First Call consensus was predicting a second-quarter profit of 9 cents per share.

"As many in our industry reported, the demand slump is no longer isolated to the U.S.," said Ingram CEO Kent Foster. "We're now experiencing slow markets throughout the world."

Sales in every part of the world were weaker than expected in May and early June, said Ingram President Michael Grainger.

European weakness started in the United Kingdom, spread to Scandinavia and is now hitting Germany, Grainger said during a conference call with analysts. Sales in the United States were also weaker than expected, although U.S. sales may have stopped declining, executives said.

"We've been seeing about the same level of sales for roughly the past six weeks in the U.S.," Foster told analysts. "We're not predicting anything, but up until that point, we had not had a period where we thought that we could even predict what might happen the next day. Things could change tomorrow, but that's a decent period of time to have roughly the same level of sales."

Shares of Ingram Micro fell 11 cents to $14.06 in Wednesday's regular trading ahead of the news.

Wednesday's warning comes a week after Ingram Micro announced cost-cutting moves including 1,000 layoffs. And in late May, Ingram's closest rival, Tech Data, told analysts to trim their earnings forecasts.

Some companies that make the products that Ingram Micro sells, including Hewlett-Packard and Compaq Computer, have also recently warned of continued softness.

Ingram Micro's cost-cutting moves, Grainger said, will keep its gross margins about the same as in the first quarter, when the company boosted gross margins to 5.34 percent even though revenue fell 8 percent year over year.