Feeds

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

For sale, one distie giant?

  • alert
  • submit to reddit

Bridging the IT gap between rising business demands and ageing tools

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". ®

Build a business case: developing custom apps

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple ran off to IBM
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.