STOCK OF THE WEEK: ZONES INC

Stock of the Week: Zones, Inc.

Zones Inc and its subsidiaries principal activity is to resell name-brand information technology products to the small to medium sized business and the public sector. The products are offered through catalogs, trade publications and a telemarketing sales team. They are also sold through outbound and inbound account executives, specialty print and e-catalogs and the Internet. They market more than 150,000 products, which include printers, monitors, keyboards, modems, scanners and desktop. These products are supplied by more than 2,000 manufactures such as Apple, Compaq, Hewlett-Packard, IBM, Microsoft and Toshiba. The Group conducts its business in the United States under the service marks The PC Zones (R) and The Mac Zone (R) registered with the United States.

Incorporated in 1988, Zones, Inc., (ZONS) is headquartered in Auburn, Washington. Traded on NASDAQ since July 1996, they closed July 18th @ $3.72. Their 52 week high $7.40 came on 11/19/04 and their 52 week low $2.45 came on 9/12/04.

Their business model relies on building and maintaining relationships with their customers by anticipating their needs and providing the customer with service they have come to expect from Zones. They strive to deliver the best-in-class service by offering the most competitive value based on:

Price. Competitive pricing.

Availability. With more than 150,000 products available, Zones delivers.

Information. Because the technology industry is constantly changing with new and upgraded products and services, Zones Account Executives receive continuous training.

Fulfillment. Zones goal is to deliver every order complete- and on time.

Service. Zones offer a breadth of services that support the customer IT relationship. For example, their free customized online order management system called ZonesConnectTM helps their customers reduce administrative costs and streamline their purchasing process. With additional services such as asset tagging, imaging and product upgrades, Zones is a proactive business partner throughout the sales cycle, from presale to after the sale.

Zones Announced its Financial Results for the Year and Quarter Ended December 31, 2004. Highlights-

Sixth consecutive profitable quarter
2004 earnings per share increases to $0.32 compared to earnings per share $0.11 in 2003
2004 net sales increased 8% year over year

Net income for the year ending December 31, 2004 improved to $4.7 million, or $0.32 per diluted share, compared to $1.6 million, or $0.11 per diluted share, for the corresponding period a year ago. For the year ended December 31, 2004, net sales increased 7.6% to $495.6 million from $460.8 million for the corresponding period of the prior year.

Firoz Lalji, President and CEO, remarked, "We just completed our 6th consecutive quarter of profitability and by any measure our financial performance in 2004 was outstanding. Looking ahead to 2005, we remain committed to the initiatives that were the impetus behind our 2004 success. We intend to add to the number of account executives, which we increased 20.1% during 2004, diversify our customer mix and accelerate our programs to raise our presence in the public sector market while maintaining a sharp focus on reducing our operating expenses."

Operating highlights included Fourth quarter 2004 direct online sales increased 109.3% over the prior year, representing 20.6% of total sales. While consolidated outbound sales to the small to medium sized business, large customer account and public sector markets were $115.8 million in the fourth quarter of 2004 compared to $115.2 million in the same period of 2003.

Gross profit margins were 11.6% in the fourth quarter of 2004, representing an increase from 10.7% in the fourth quarter of 2003, as well as a sequential increase from 10.9% in the third quarter of 2004. The sequential and year over year increase in gross profit percentage is due to product mix and an improvement in related vendor programs.

The Company's balance sheet remained strong and ended the year with a cash balance of $6.5 million. Consolidated working capital was $27.0 million at December 31, 2004 compared to $20.9 million at December 31, 2003.

Zones has 3 main competitors (CDWC) @$56.96; (NSIT) @$20.07 and (PCCC) @ $6.23. Notably, on June 3rd Microsoft announced that Zones was the recipient of the Microsoft's Operational Excellence Award for fiscal year 2005. This prestigious award was presented at Microsoft's annual Channel Partner Summit and recognizes that Zones has exceeded rigorous standards for operational excellence.

With a vision to be a learning community, empowered to serve their customers with integrity, commitment and passion they must be doing something right. Check out their web site and see for yourself.

Are you ready for the Zones?

STOCK OF THE WEEK: ZONES INC

Stock of the Week: Zones, Inc.

Zones Inc and its subsidiaries principal activity is to resell name-brand information technology products to the small to medium sized business and the public sector. The products are offered through catalogs, trade publications and a telemarketing sales team. They are also sold through outbound and inbound account executives, specialty print and e-catalogs and the Internet. They market more than 150,000 products, which include printers, monitors, keyboards, modems, scanners and desktop. These products are supplied by more than 2,000 manufactures such as Apple, Compaq, Hewlett-Packard, IBM, Microsoft and Toshiba. The Group conducts its business in the United States under the service marks The PC Zones (R) and The Mac Zone (R) registered with the United States.

Incorporated in 1988, Zones, Inc., (ZONS) is headquartered in Auburn, Washington. Traded on NASDAQ since July 1996, they closed July 18th @ $3.72. Their 52 week high $7.40 came on 11/19/04 and their 52 week low $2.45 came on 9/12/04.

Their business model relies on building and maintaining relationships with their customers by anticipating their needs and providing the customer with service they have come to expect from Zones. They strive to deliver the best-in-class service by offering the most competitive value based on:

Price. Competitive pricing.

Availability. With more than 150,000 products available, Zones delivers.

Information. Because the technology industry is constantly changing with new and upgraded products and services, Zones Account Executives receive continuous training.

Fulfillment. Zones goal is to deliver every order complete- and on time.

Service. Zones offer a breadth of services that support the customer IT relationship. For example, their free customized online order management system called ZonesConnectTM helps their customers reduce administrative costs and streamline their purchasing process. With additional services such as asset tagging, imaging and product upgrades, Zones is a proactive business partner throughout the sales cycle, from presale to after the sale.

Zones Announced its Financial Results for the Year and Quarter Ended December 31, 2004. Highlights-

Sixth consecutive profitable quarter
2004 earnings per share increases to $0.32 compared to earnings per share $0.11 in 2003
2004 net sales increased 8% year over year

Net income for the year ending December 31, 2004 improved to $4.7 million, or $0.32 per diluted share, compared to $1.6 million, or $0.11 per diluted share, for the corresponding period a year ago. For the year ended December 31, 2004, net sales increased 7.6% to $495.6 million from $460.8 million for the corresponding period of the prior year.

Firoz Lalji, President and CEO, remarked, "We just completed our 6th consecutive quarter of profitability and by any measure our financial performance in 2004 was outstanding. Looking ahead to 2005, we remain committed to the initiatives that were the impetus behind our 2004 success. We intend to add to the number of account executives, which we increased 20.1% during 2004, diversify our customer mix and accelerate our programs to raise our presence in the public sector market while maintaining a sharp focus on reducing our operating expenses."

Operating highlights included Fourth quarter 2004 direct online sales increased 109.3% over the prior year, representing 20.6% of total sales. While consolidated outbound sales to the small to medium sized business, large customer account and public sector markets were $115.8 million in the fourth quarter of 2004 compared to $115.2 million in the same period of 2003.

Gross profit margins were 11.6% in the fourth quarter of 2004, representing an increase from 10.7% in the fourth quarter of 2003, as well as a sequential increase from 10.9% in the third quarter of 2004. The sequential and year over year increase in gross profit percentage is due to product mix and an improvement in related vendor programs.

The Company's balance sheet remained strong and ended the year with a cash balance of $6.5 million. Consolidated working capital was $27.0 million at December 31, 2004 compared to $20.9 million at December 31, 2003.

Zones has 3 main competitors (CDWC) @$56.96; (NSIT) @$20.07 and (PCCC) @ $6.23. Notably, on June 3rd Microsoft announced that Zones was the recipient of the Microsoft's Operational Excellence Award for fiscal year 2005. This prestigious award was presented at Microsoft's annual Channel Partner Summit and recognizes that Zones has exceeded rigorous standards for operational excellence.

With a vision to be a learning community, empowered to serve their customers with integrity, commitment and passion they must be doing something right. Check out their web site and see for yourself.

Are you ready for the Zones?

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