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MicroAge beats Street

MicroAge posts profits that beat Wall Street estimates, as the company still weighs what to do with its distribution subsidiary Pinacor.

MicroAge today posted fourth-quarter profits that beat Wall Street estimates, as the company still weighs what to do with its distribution subsidiary Pinacor.

The Tempe, Arizona-based reseller reported net income for the quarter ending November 1 of $3.7 million, or 18 cents per share, on $1.57 billion in revenue. That compares with earnings of $7.4 million, or 39 cents per share, on $1.32 billion in revenue, a year earlier.

However, fourth quarter results did exceed Wall Street estimates of 15 cents per share, according to First Call.

For the fiscal year, MicroAge reported revenues of $5.5 billion, operating income of $26 million, and, after taking into account charges from a 1997 acquisition, a loss of $8.3 million. As a result of that loss, the company expects earnings for the first quarter of this year, ending in February, to be in the low- to midteens, compared with Wall Street estimates of 17 cents per share for the quarter.

MicroAge last year split into two units: the company's distribution arm, called Pinacor, which reported separate financial results for the first time this quarter, and the company's IT services and integration business, called MicroAge Integration, which posted $1.8 billion in revenue in 1998.

MicroAge is currently negotiating a deal about the future of Pinacor, which reported $5 billion in revenue in 1998. Company executives would not confirm whether Pinacor would be sold, spun off, merged with another company, or included in an IPO. MicroAge shareholders have speculated that the company could enjoy a big turnaround soon if the company sells Pinacor for twice its current stock market value. The potential spin-off comes amid consolidation and financial downturns in the PC distribution industry.

"Clearly they want to increase shareholder value by getting rid of Pinacor," said Charles Smulders, analyst at Dataquest in San Jose.

After a Pinacor deal, MicroAge will continue to focus on IT integration services, as the company is still struggling to tie together the some-25 small companies acquired to build up that business.

The company now has four offerings, including professional services, program and project management, desktop management, and product procurement services. Unlike end-to-end service and consulting giants such as EDS and Andersen Consulting, MicroAge provides companies with a piece of the pie, offering specific services such as hardware purchasing from OEMs at a fee or building a client's help desk.

MicroAge Integration's competition depends on who they are providing services to for a given contract, but ranges from Compaq to IBM Global to more niche systems integrators such as Entex, a corporate spokeswoman said.

The company's stock was trading at midday at 17.37 a share, down 0.62.