PC Supplier Merisel, Amid Losses, Plans Layoffs, $10-Million Charge

Merisel Inc., one of the nation’s largest distributors of personal computer hardware and software, said on Thursday that it will lay off 61 employees and take a $10-million charge against earnings as part of a reorganization aimed at reversing losses.

While sales have been soaring, Merisel’s profit margins have shrunk as fierce price-cutting in the PC industry and changes in the distribution system have given customers more choices. The El Segundo-based company’s stock has plunged in recent months in reaction to disappointing earnings.

“The customers can go anywhere they want to get the product,” said technology industry analyst David M. Grossman at Montgomery Securities. “It’s become more openly competitive.”

Last month, Merisel reported a 1994 fourth-quarter loss of $2.5 million, versus a profit of $11.9 million in the final three-month period of 1993. For the year, Merisel’s profit plunged 62% to $11.6 million from $30.4 million the previous year.

On Thursday, Merisel stock, which recently fell to a low of $4.75 from $22.50 in 1994, rose 37.5 cents to $5.125 a share on Nasdaq.

Merisel has also been saddled with debt related to its acquisition of the franchise and distribution operations of Computerland stores. Merisel, which supplies Computerland franchisees, last year issued $125 million in debt to cover the purchase.

Grossman said Merisel needs to improve its balance sheet to keep the confidence of suppliers and offer attractive financing to customers. The cost-cutting effort is intended to “generate more cash flow and take down debt to remain competitive,” he said.

The company will close a warehouse in Rancho Dominguez, where about 20 employees work, said Susan Stillings, director of investor relations. She said the company, which employs about 3,100 people, expects no further layoffs to be needed.