Slow AS/400 Sales Affect Savoir’s Third Quarter Revenue

By Jim Martin

For months, there have been whispers that Y2K will trigger a virtual halt of AS/400 related products and services in the last few months leading up to the new millennium.

Some of those whispers are already turning true, as Savoir Technology Group (Campbell, Calif.), a value-added distributor for global technology, has announced that it expects third quarter revenues between $180 million and $183 million and earnings of between $1.4 million and $1.8 million. The decrease in revenue stems directly from a slide in AS/400 product and service sales.

“During the first two months of the year, we were slightly ahead of our revenue plan, but starting in September we began seeing the effects of an apparent Year 2000 purchasing slowdown, primarily in our solution providers that service larger end-user accounts, most notably in sales of our IBM AS/400 mid-range products,” says Scott Munro, chairman and CEO at Savoir. “Fortunately, we are not finding a similar slowdown with our solution providers that service the middle market, as well as other segments of our business that are non-server related.”

The estimates are based on the previously announces cost reduction program, which will result in an approximate $13 million restructuring charge for the third quarter. According to Savoir, actual results are expected to be announced on October 26, 1999.

Despite the decline in AS/400 product sales, Munro does not see it as a sign of things to come. “We believe we are still positioned in the mid-range, value-added arena and have a strong partner in IBM,” says Munro. “We anticipate that once the year 2000 challenge subsides, we will return to our normal growth pattern in early 2000.”