Insight downgrades Action share value

Boxshifter's share price dips by third after return to LSE.

Action Computer Supplies has seen its shares devalued by acquisitor Insight Enterprises after admitting its business had slowed down.

As exclusively revealed in PC Dealer (28 July), Action temporarily suspended the share price on the London Stock Exchange at its own request. The shares were restored at 9am on 28 July.

In a statement issued to the Stock Exchange last week, the company stated: "A material adverse change in trading conditions is being experienced by Action which has deteriorated materially since the merger was announced.

Large customer spending had a further impact due to the slowdown in ordering ahead of the year 2000."

The revised terms revealed that Action stock has been devalued against Insight's for the share swap deal, so that Action shares are now worth 0.12 of an Insight share, instead of the previous 0.16.

After Action's listing was restored, its shares started to drop from the 1999 high of 307.5p before going into freefall, losing nearly a third of their value. The shares closed at 200p on 2 August.

Although Action is valued at £93m in the revised deal, £1m more than before, this is due to the increased value of Insight's shares on Nasdaq.

Action shareholders' stake in the whole company will be decreased from 18.1 per cent to 14.2 per cent.

George O' Connor, analyst at Granville, said: "Although at first it looks as if there's more money going into Action's pocket, it means there will be a lower proportion of the whole company going to Action shareholders.

Action has not done as well as its business plan forecast, making it less attractive, but Insight's shares have done extremely well."

INSIGHT Q2 RESULTS SHOW UPTURN IN PROFIT

Insight's results for its second quarter ended 30 June, revealed profit up 68 per cent to $7.9m and turnover up 54 per cent to $365.2m. The web operation showed a 222 per cent increase, representing 8.7 per cent of total turnover.

The first six months' figures showed profit up 63 per cent to $14.7m on sales of $703.4m, up 58 per cent.

Timothy Crown, president of Insight, said: "We have tremendous confidence in our international growth strategy. We believe we will see increased net sales and efficiencies from our subsidiaries in the UK and Germany as they move fully to Insight's outbound sales model."