Bell Micro: Fiscal 1Q08 Preliminary Results

Bell Microproducts Inc. announced preliminary revenue for the first quarter ended March 31, 2008. Revenue for the Company’s first quarter was in a range of $1.01 billion to $1.02 billion, an increase of approximately 2% from revenue for the comparable quarter of 2007. The Company experienced revenue growth in Latin America and in its North American Enterprise business units, partially offset by revenue declines in the Company’s North American and European distribution business units.

Revenue and product mix for each of the three major geographies consisted of the following:

• North American revenue increased 3% compared to the first quarter of 2007 and comprised approximately 42% of total revenue in the quarter. The North American Enterprise groups, including ProSys, Rorke Data, and Total Tec, generated 26% revenue growth during the quarter as compared to last year’s first quarter. This growth was primarily driven by several large orders at lower margins to clients in the telecommunications and healthcare market sectors. There was growth in the Industrial/OEM sales channel offset by declines in the commercial and system builder accounts. By product category, the Company’s North American Solutions products revenue increased 11% from the same period last year, driven primarily by storage systems, storage networking products, software, and services. Partially offsetting these growth areas were lower revenues in the U.S. commercial sales channel due to the continued focus on more profitable business opportunities and slower market conditions. As a result, Components and Peripherals products declined 6% during the quarter, compared to the first quarter of 2007.
• Latin America revenues increased 16% year-over-year and represented 16% of total revenue in the first quarter. Latin America revenue growth was driven primarily by strength in the Company’s Miami-based operations, and in-country operations in Chile and Brazil, particularly in the Solutions product category. Latin American Solutions product revenue increased by over 100% compared to the first quarter of 2007 due to growth in computer platforms and storage systems. Components and peripheral sales increased by 2% compared to the first quarter of 2007.
• The Company’s European operations posted a 3% year-over-year revenue decline and represented approximately 42% of total revenue in the first quarter. Excluding the positive impact of foreign currency translation, European first quarter revenue declined 4% as compared to the first quarter of 2007. The European Solutions product category declined 1% with strong storage systems growth offset by lower software sales. The Components and Peripherals category declined by 6% due to lower year-over-year disk drive and other components sales.

Revenue for the major categories of products and services consisted of the following:

• The Solutions category grew 8% to represent 55% of total revenue in the first quarter of 2008 compared to 52% in the first quarter of 2007, driven primarily by sales of storage systems, networking, tape drives, and services.
• The Components and Peripherals category declined 4% and represented 45% of total first quarter revenue compared to 48% of sales in the first quarter of 2007. Disk drive revenue, which is included as a portion of Components and Peripherals revenue, represented approximately 28% of total revenue in the first quarter of 2008.

Commenting on the preliminary revenue results for the first quarter of 2008, W. Donald Bell, President and Chief Executive Officer of Bell Microproducts, said, "We generated modest year-over-year revenue growth in the first quarter despite the economy and slower technology spending. In this softer environment, we believe that we maintained our market share in key product categories. We are pleased with our North American enterprise revenue in the quarter, although some of the revenue resulted from winning larger enterprise projects which carried lower gross margins. We also made modest gains in our OEM/Industrial business, but saw softness in commercial volume accounts. In Latin America we achieved both year-over-year and sequential growth where we believe technology spending continues at higher rates. In Europe, our revenue decreased slightly in both US dollars and local currency, primarily from our commercial accounts in the UK and on the Continent. As a result of lower than expected sales in certain product categories, we anticipate reporting a sequential decline in gross margins in the first quarter in part due to a decrease in supplier incentives. Although the economic environment may be challenging in the coming months, our focus remains on solid execution in our business and profitability through the balance of 2008."

The Company is unable at this time to provide additional quantitative information regarding its results for the first quarter of 2008 until the previously-announced restatement of its financial statements for certain prior periods, and the related audits and reviews, have been completed.

Bell Microproducts Inc.