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September 29, 1998

PC CONNECTION SHARES PLUMMET AFTER Q3 WARNING

By CBR Staff Writer

Shares of PC Connection Inc plunged more than 50% Tuesday after the direct marketer of computer products warned that its third quarter results would fall short of expectations. The Milford, New Hampshire company said it anticipates earnings per share to be between $0.18 and $0.22 for the quarter ending September 30, when Wall Street analysts had been expecting earnings of $0.25, according to Zack’s Investment Research. Revenue will be in the range of $165m to $170m, compared to $139.1m in the year-ago quarter. After the announcement, the company’s shares dropped $10.703, or 51.9%, to close at $9.9375 after hitting a low of $9.75 in the session. The stock was also downgraded from buy to hold by NationsBanc Montgomery Securities. PC Connection said third-quarter revenues were negatively affected by both lower- than anticipated product availability levels and the conversion of its sales order management and fulfillment software to a new enterprise software system. The availability issues are being blamed on changes in Intel Corp’s processor manufacturing schedules, which resulted in lower supplies of certain models throughout the channel. The company expects the availability to improve during the fourth quarter. The software conversion – carried out to enable future expansion to facilitate year 2000 compliance – caused some lost sales in the first half of the quarter as the company failed to meet some delivery expectations. It said it concentrated on maintaining its more lucrative relationships with long-term customers at the expense of some short-term sales. PC Connection said strength in its core business indicates that annual revenue growth for fiscal 1998 will still exceed 30%. The company is scheduled to release its full third quarter results the week of October 26th.

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