Merisel Courts Government Customers
Merisel Courts Government Customers By Richard McCaffery Staff Writer After three years of losses, consolidation and finally a buyout, Merisel Inc. is out from under a crushing debt load and making a play to grow its government business. The El Segundo, Calif., distributor of computer products is forming a unit dedicated to federal, state and local governments, and hiring a manager to head its new Government Access Division.
Merisel Courts Government Customers By Richard McCaffery After three years of losses, consolidation and finally a buyout, Merisel Inc. is out from under a crushing debt load and making a play to grow its government business. The El Segundo, Calif., distributor of computer products is forming a unit dedicated to federal, state and local governments, and hiring a manager to head its new Government Access Division. Analysts think the company has solved its debt problem but still must prove it can compete against giants like Tech Data Corp., Clearwater, Fla., and Ingram Micro Inc., Santa Ana, Calif. "It boils down to management execution," said Dale Leshaw, co-director of investment at Imperial Capital LLC, a Beverly Hills, Calif., brokerage firm. "The market is there. It's growing. But these guys have not been able to convince everybody they have completed the turnaround." The company still must get its cost structure in line with competitors like Tech Data, Jenson acknowledged as much. "The biggest hurdle from our point of view is to gain customer and investor confidence and to improve profit margins," which declined from the first quarter of 1996 to the first quarter of 1997, Jenson said. "I think that the rest of the business will fall in line now that the restructuring is behind us." Merisel's profit margins slipped from 6.2 percent in the first quarter of 1997 to 5.6 percent in the first quarter of 1998. The company is focusing on markets in the United States and Canada, which accounted for 80 percent and 20 percent, respectively, of its 1997 sales. Merisel has added vendors like Lucent Technologies Inc., Murray Hill, N.J., and Raytheon Co., Lexington, Mass., as well as services such as leasing packages to its portfolio in an effort to attract resellers. The company is also configuring computer systems in-house to reduce costs, monitor quality and increase the number of services it offers. Merisel's fortunes showed signs of improvement last quarter. It reported earnings of 5 cents a share on net income of $3.6 million. The company has reduced its cost of operations by automating its warehouse and is counting on the installation of new business software this year to further improve efficiency.
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