PC Connection Misses 3Q Expectations

The Merrimack, N.H.-based solution provider earned $2.2 million, or 9 cents per share, on sales of $349.4 million in the third quarter. That compares with $2.2 million in net income, or 9 cents per share, on sales of $341 million for the same period last year.

Thomson Financial/First Call analysts' consensus had projected earnings of 10 cents per share.

Through the first three quarters, PC Connection earned $5.2 million, or 21 cents per share, on $954.5 million in revenue vs. $400,000, or 2 cents per share, on $869.3 million in revenue last year.

Notebooks and PDAs accounted for $73 million in sales for the quarter--20.9 percent of the total--compared with 16.9 percent of the total in the year-ago quarter.

Desktops and servers accounted for $49.7 million in sales, or 14.2 percent of the total, vs. $46.2 million last year.

The average selling price of computers fell 18 percent from the year-ago quarter.

Software accounted for $37.6 million, down 30 percent from last year's $54 million.

Sales to SMB customers accounted for $179.6 million, up 3 percent from the year-ago quarter, and sales through GovConnection, a public sector-focused unit, were $103.6 million, a 7.6 percent increase from last year. MoreDirect, a large customer-focused unit, reported $66.3 million in sales, a 5.7 percent decrease.

PC Connection appears to be losing market share, despite aggressive pricing, said Brian Alexander, vice president of equity research at Raymond James & Associates. "By segment, SMB sales declined 4 percent sequentially," he said. "CDW increased 4 percent sequentially. Public sector sales increased 8 percent year over year; CDW increased 16 percent."

Shares of PC Connection were trading at $10.50 Thursday morning, down 36 cents, or 3 percent.