Shares in Merisel Inc. of El Segundo plunged 40% on Wednesday on news that the computer hardware and software distributor's second-quarter earnings will be lower than expected.
Merisel Chief Executive Michael Pickett announced Tuesday that lower profit margins and unexpectedly high merchandise returns would push earnings for the quarter down to between 9 and 12 cents per share. Analysts had predicted about 29 cents a share.
Wall Street's response was swift: Merisel shares lost $6.75 in Nasdaq trading, closing at $10. About 8.8 million shares changed hands--many times the norm for Merisel.
Chief Financial Officer James Brill said the company intentionally trimmed its margins by cutting prices to stimulate its wholesale business. He said Merisel wanted to assure investors that the company was not changing focus from wholesaling with its recent acquisition of 160 Computerland retail outlets.