Magic Quadrant for Enterprise Backup/Recovery

Insight Enterprises has scrapped its plans to buy Action Computer Supplies, causing Action's share price to plunge 60 per cent. The US company today said it had ended the agreement to buy the Middlesex-based reseller "in light of a deterioration in Action's operating results". In a statement to the stock exchange, it also blamed "the difficult near term trading conditions to which Action is exposed, particularly with the Millennium year end still to come". Action was told on Friday that the Insight board would not be able to recommend the deal to the company's shareholders. As reported here, Action then asked for its shares to be suspended pending a further announcement. As part of the proposed deal, Insight had the right to stop proceedings if the merger was not completed by 31 December 1999. On Friday, Insight stated it did not want to renegotiate or extend the agreement. Action today also announced an expected drop in pre-tax profit before exceptionals to £2.2 million, from £7.1 million last year, in its preliminary results for the year ended 31 August 1999. In the unaudited estimate, sales were forecast to increase to £276.6 million, from £249.6 million. Action said net exceptional items totalled £300,000, made up of £800,000 of costs from the proposed buy-out and £500,000 of recovered tax. Henry Lewis, Action chairman, stated that the board of Action was disappointed with the decision, saying Insight had acted ignored the long-term benefits of the deal. "In our opinion, the effects of recent short term weakness in the United Kingdom IT market should not have outweighed the strategic benefits of the merger." According to Lewis, spending from Action's biggest customers were continuing to fall below historic levels, reflecting companies' Y2K planning. But he said he expected "a gradual recovery during the first quarter of the New Year, with a consequent return to satisfactory trading for the company as a whole". Action saw Web sales continue to rise, up 37 per cent to £26 million for the year to August. It also said it would be launching a new Web site this month to encourage customers to use ecommerce. Action's shares dropped 112.5 pence to 65 pence in the first one and a half hours of this morning's trading, after being restored to the listing at 7.55 am. In July, they peaked at over 300 pence. ®

Magic Quadrant for Enterprise Backup/Recovery