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Shareholders’ lawsuit pushes Merisel $21m into the red

Years of legal scrapping take its toll on results

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Merisel has blamed its $20.5 million loss on years of legal wrangling with shareholders. First quarter net income for the US distributor was $491,000 without the charge. Sales for the quarter rose to $1.3 billion. This compared to the previous quarter’s $1.1 billion turnover and net income of $3.6 million. The company stated that it had entered into an agreement to dismiss the litigation pending between itself and certain shareholders and former shareholders. The fight is understood to have been running for years. Merisel also said it was discussing the possible reimbursement of legal costs with its insurers. Merisel chairman and CEO Dwight Steffensen said putting the litigation behind them would: "Serve to eliminate major uncertainties and management distraction". The company said expenses including higher operating costs to ensure Y2K compliance, and asset depreciation from its new SAP system, would effect its finances for the rest of 1999. "Given current margin pressures in the channel, we are driving initiatives that focus on increasing efficiencies, reducing costs, driving additional growth with existing infrastructure and differentiating Merisel from our competitors," said Steffensen. He added that Compaq’s decision earlier this week to keep Merisel as one of its four distributors in the US would help the company’s growth. ®

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