Feeds

CHS ‘evaluates strategic alternatives’, red inks $89.2m

For sale, one distie giant?

  • alert
  • submit to reddit

Secure remote control for conventional and virtual desktops

CHS has effectively put itself up for sale. The distie giant is to hire an investment bank to "evaluate strategic alternatives that would enhance shareholder value" -- the standard industry euphemism for "buy us". Times may be tough for distributors -- but times are tougher for CHS than most. It is paying the bills for its dash for growth -- the major reason for a spectacular Q2 net loss of $89.2 million. On an operating level (minus non-cash adjustments), the company lost $14.2 million for the quarter, compared with operating income of $22.8 million for Q2 1998. Throw in a heap of mostly non-cash charges (ie. they sit on the CHS balance sheet) and the company's operating loss was $73.2 million. Net loss was $89.2 million. CHS blames the disk drive price war for a "severe drop in pricing on margins in mass storage products in the second quarter of 1999" for a 1.5 per cent fall in gross margins in Q2. Tough competitive pricing in Europe, especially in Germany and the UK, also contributed to pressures on margins (down from 6.4 per cent in Q2 ,1998 to 4.9 per cent this time around), CHS says. Falling margins are not the root cause of CHS problems, but it makes it harder for the company to finance post-acquisition restructuring under its own steam. On the bright side, sales increased 32 per cent to $2.3 billion from Q2 1998's $1.8 billion. It's not clear how much of this organic growth and how much comes from new acquisitions. The company says it is on target with its expenses shaving -- shutting down warehouses, improving inventory turns, sacking staff and the like. The company has appointed Mark Keough, described as a "turnaround" specialist to the newly appointed post of chief operating officer. He will report to CHS top banana Claudio Osorio. So we can expect an acceleration of the company’s cost-cutting plans. And more divestments. First on the block is a "non-core" unit which distributes Sun Microsystems products in Germany, Austria, Denmark and Sweden for $50 million. CHS expects a pre-tax gain of $32 million from its share of the business (which turns over $70 million a year and makes $1 millions profits) and will use the cash for "debt repayment, payment of earn-out liabilities and working capital purposes". ®

Next gen security for virtualised datacentres

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Banking apps: Handy, can grab all your money... and RIDDLED with coding flaws
Yep, that one place you'd hoped you wouldn't find 'em
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
prev story

Whitepapers

A new approach to endpoint data protection
What is the best way to ensure comprehensive visibility, management, and control of information on both company-owned and employee-owned devices?
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.