Microage has been forced to postpone its plans to expand in Europe after the Var and distributor made a disappointing $5.4 million quarterly loss because it misjudged inventory.
Jeffrey McKeever, Microage chairman and CEO, said the US dealer giant will concentrate on sales for the next quarter and will lay off an undisclosed number of staff. Microage will restructure its organisation, rather than press ahead with expansion plans.
During the company's first quarter to 1 February, Microage lost $5.4 million, compared to a $5 million profit in Q1 last year on turnover of $1.2 billion, up 31 per cent over the same period.
McKeever admitted Microage made 'a serious strategic mistake' by not joining vendor buy-in programmes in a bid to cut inventory. When it eventually needed products, channel assembly schemes were not ready and dealers had begun buying from other distributors, leaving Microage with expensive excess inventory.
'Our financial results were adversely impacted due to lower than anticipated sales, pricing pressures and reduced rebates,' McKeever said.
The restructuring has raised the threat that Microage will split into two distinct companies - one for distribution and one for integration, he admitted.
McKeever said acquisitions by Microage's integration unit led to a 36 per cent fall in turnover, which contributed a quarter of the loss.
In March 1997, Microage was signed up to assemble Sun Microsystems Ultrasparc servers, which the company hoped to duplicate in its European subsidiaries, but this has not yet happened (PC Dealer, 13 March 1997).
Microage already assembles Digital PCs, and has other OEM systems deals with vendors, including Apple, Compaq, Hewlett Packard and IBM, at its US integration centre. The company also holds a 25 per cent stake in UK-based Genysis.
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