Culture

Ingram to break out of the white-box market

Ingram Micro plans to move beyond being a supplier of generic PCs by selling branded boxes with Intel chips.

Ingram Micro, the world's largest computer distributor, is gearing up to ship its first branded PCs, called Everest, on August 16.

The move opens the door for Ingram Micro, a supplier of computer systems and components to dealers, to tap the lucrative market for supplying small- and medium-size businesses.

It also potentially puts the distributor at odds with computer manufacturers such as Compaq Computer and IBM, as well as its computer dealer customers.

Ingram Micro has supplied white boxes--unbranded PCs built by a distributor or dealer--for about five years. But branding them with the Ingram Micro name marks a strategic shift for the company.

Unbranded PCs are most popular with small- and medium-size businesses, where value often means more than brand. White boxes accounted for 8.2 million of the 36.1 million PCs sold in the United States last year, according to market researcher Dataquest. Analysts estimate that more than 75 percent were purchased by small- and medium-size businesses.

By comparison, PC leaders Compaq and Dell sold 5.8 million and 4.6 million PCs, respectively, in the United States last year.

"It's better to have a white box with a brand on it than have no brand at all," said an Ingram Micro spokesperson.

Besides looking for value in a box, many smaller businesses lack technical expertise and the resources to hire a full-time systems staff. Computer dealers typically fill the role of retailer and service provider, which is where they make most of their profit.

Ingram Micro's venture does carry some risk, said analysts. "The issue for distributors pushing into this market is that it can put them in competition with their existing customer base, who are building machines themselves," said Charles Smulder, a Dataquest analyst.

Ingram Micro executives see it differently. "Our resellers are looking for a brand identity to differentiate them from the traditional brand identity," said Guy Abramo, senior vice president of worldwide marketing for Ingram. "We recognized small resellers needed a brand that would give them a competitive edge" in the market.

Smulder sees another strategy at work that will benefit the distributor: Ingram Micro can increase the number of white boxes it sells and also cut into the branded market.

"The white-box activity as Ingram branding a box can also be used as leverage against the branded vendors to some extent," said Smulder.

Lindy Lesperance, an analyst with Technology Business Research, sees the move as something of a paradox. "Vendors contribute to the ramping up of these distributors with world-class manufacturing and the ability to deliver high-quality products. It's the manufacturers that are enabling the distributors to be more competitive."

Ingram Micro will initially offer three Everest brands: a Pentium III-based T3300, a Pentium II-based T2200, and J1700 with a Celeron processor. The company hopes that having Intel inside will further differentiate Everest from other white-box systems.

Although the company is aiming for an August launch, sources close to Ingram Micro said the ship date could slip further into the third quarter, due partly to the departure of Doug Antone, an executive vice president and the project's leader.