PC Connection will report a net loss of 2.7 million for fourth-quarter 2008, as well as net income of $10.4 million for the year, when it releases its full financial figures.
According to a release accompanying its preliminary numbers, the company experienced further declines in sales in January and February 2009, and management expects first quarter revenues to decline by at least 20% from the prior year quarter. PC Connection reacted to these shortfalls with a number of cost-reduction activities, including a workforce reduction of approximately 6%. Its first-quarter results will include $600,000 in costs related to severance pay.
“Customers are taking a wait-and-see attitude toward IT spending as they try to determine what their own demands, technology budgets, and staffing levels will be for the year,” said
chairman and CEO Patricia Gallup in a statement. “Sales are lower than expected, and we need to bring our cost structure in line with current revenues. The actions we are taking are expected to result in additional cost savings of up to $16 million in 2009.”
PC Connection sells technology through its PC Connection Sales Corp.; MoreDirect, Inc.; and GovConnection, Inc. units. The company relies on catalogs, publications, telesales and field sales reps.
The Analyst’s Take: The company has hinted which of its sectors are responsible for its woes – small- and medium-sized businesses and government market activity will result in an $8.8 million goodwill impairment charge during its fourth-quarter 2008, while the large-account unit’s goodwill was not impaired. It’s no surprise that consumers and small businesses aren’t spending, but it’ll be interesting to see how PC Connection accounts for its growth areas, and what it will say about its marketing strategy going forward to play to its strengths and weaknesses.
