Insight Enterprises Inc (NSIT) 2003 Q2 法說會逐字稿

Good afternoon.

My name is Dorothy and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the Q2 2003 earnings release conference call.

Thank you.

Mr. Laybourne, you may begin your conference.

Welcome, everyone, and thank you for joining the Insight Enterprises conference call.

Today, we will be discussing the Company's earnings results for the quarter ended June 30, 2003.

Joining me, Stan Laybourne, Chief Financial Officer, is Timothy Crown, CEO of Insight Enterprises Inc.

If you do not have a copy of the earnings release that was posted this afternoon and filed with the SEC on Form 8-K, you will find it on our website at insight.com under our investor relations section.

Since detailed financial and operating data are contained in the earnings release, we will only be concentrating on highlights of the quarter during the scripted portion of the conference call.

As usual, at the conclusion of the scripted portion, we will answer questions our conference call participants may have.

Today's call, including all questions and answers, is being webcast live and can be accessed via the investor relations section of our website.

An archived indexed copy of the conference call will be available approximately two hours after the call, and will remain on our website for a limited time.

This conference call and the associated webcast contain time sensitive information that is accurate only as of today, July 24, 2003.

This call is the property of Insight Enterprises Inc.

Any redistribution, retransmission or rebroadcast of this call in any form without the written consent of Insight Enterprises Inc. is strictly prohibited.

Finally, let me remind you about forward-looking statements that will be made on today's call.

All forward-looking statements that are made in this conference call are subject to the risks and uncertainties that could cause the actual results to differ materially.

These risks are discussed in today's earnings release and also in greater detail on our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.

I will now turn the call over to Timothy Crown for opening remarks.

Thank you, Stan.

Hello, everyone, and thank you for joining us.

Today my comments on the quarter will be brief, focusing mainly on providing a status update for the IT systems conversion in progress across Insight North America's US operations.

Stan will then provide an overview of results from Q2 '03.

Overall, we are pleased with the slightly better net sales and net earnings this quarter over Q1 '03.

As expected, we have yet to see any dramatic increase in IT spending, although we remain encouraged by a continuing gradual increase in customer activity for Insight North America.

Last quarter, we mentioned that Q1 is typically strongly in the UK because several of our UK public sector and larger corporate customers operate on a March fiscal year-end rather than a calendar year-end and purchases are made to utilize year-end budget surpluses.

Therefore, as anticipated, net sales in the UK this quarter are down slightly sequentially, offset by a slight increase in the exchange rates.

But we are pleased report that in line with previously stated expectations Insight UK continues to operate profitably.

Additionally, Direct Alliance and PlusNet also posted sequential increases in earnings from operations.

I will now turn my discussion towards the status of our US systems integration.

In June, we issued a press release stating that we had successfully upgraded our public sector and large corporate groups to SAP-R3 Version 4.6.

I'm pleased to report that operations continue to run smoothly, while our integration plan remains on track for deployment of our Maximus system by the end of the year for Insight North America's United States operations.

At this time I would like to provide some further details of the deployment process.

Prior to initiating the systems conversion, our large corporate and public sector sales groups functioned using an older version of SAP-R3 and our SMB sales group used our proprietary Maximus system.

Support departments such as accounting, IS and HR were operating duplicate departments on separate IT systems -- half on Maximus, half on SAP.

As we have stated before, Maximus will be a hybrid system running SAP-R3 Version 4.6 for all the back end support functions that are common to any organization.

The customized front-end portion of Maximus consists of a set of enhanced capabilities developed from both historical systems.

These unique and customized front-end abilities are manifested in four key areas.

Number one, an enhanced graphical user interface designed initially for historically Max based sales executives that has integrated with SAP, yet consistent with the efficiencies to which they are accustomed to with Max.

Number two, a highly proficient product master designed to significantly enhance product data and search capability, allowing both customers and account executives to search and see the same product information.

Number three, a virtual sourcing engine that will be used by SAP for our drop ship sourcing model; and, number four, an enhanced Web environment that will support our e-commerce initiatives by supplying customers with more efficient product searching and enhanced customized landing pages.

I will now outline the criteria we are using to measure our success in completing the systems integration.

To achieve a successful integration by December 31, 2003, as previously stated, we will have completed the following four objectives.

Number one, we will take core system hardware from Illinois to Arizona.

Number two, upgrade our large corporate and public sector groups to SAP-R3 Version 4.6 to establish the baseline for Maximus.

Number three, merge all sales and back end support functions onto Maximus with the functionality described earlier; and, number four, eliminate support department redundancies in order to have more efficient operations and begin realizing synergies and cost savings in Q1 2004.

We have accomplished the first two objectives of relocating core system hardware and operating our large corporate and public sector groups onto SAP-R3 Version 4.6.

The remaining integration process should not disrupt these sales groups going forward as our daily workflow will not change substantially and they would only continue to see enhancements.

We've also completed the initial development of the customized modules to be integrated with SAP for the key technical areas we discussed previously for rep use interface, product master, virtual sourcing, and the Web.

Functional testing on these modules has already started, and quality assurance and sales training on the rep user interface will begin this quarter.

Additionally, SAP training for support departments such as accounting and human resources also has begun, with full conversion scheduled for Q4.

As planned, by the end of Q4 all of Insight North America's US-based employees will be utilizing Maximus and we will have completed the IT and accounting department consolidations so cost savings can begin to be realized in Q1 2004.

As previously stated, once our US integration is complete, we will continue to maintain and enhance the system as needed, benefited by experienced gain from daily usage.

This includes enhancements to the rep use interface for our large corporate group which will likely be introduced next year.

We also will examine plans for introducing the Maximus system into our Canadian and UK operations.

There is no current intention to convert Direct Alliance or PlusNet to Maximus, given their unique system requirements and completely separate operations from Insight North America and Insight UK.

In summary, we are extremely pleased with our progress thus far in the integration process and we continue to feel that the remaining objectives for the year, as outlined above, will be met on schedule.

The main hurdle for the majority of our corporate large sales group has been successfully cleared.

We expect our focus to remain on the customer and remaining integration activities should not reduce the momentum they have begun to experience this quarter.

Our SMB and public sector sales groups, as well as our support departments, are going through training designed to help ensure a smooth transition to Maximus.

As we previously discussed, the systems integration was purposely performed over an extended period to give appropriate time and resources to the process surrounding planning, requirements gathering, development, quality assurance, testing and trading.

Again, I'm very pleased with all aspect of the systems integration to date, and feel confident that we will complete the integration by December 31, 2003, with minimal interruption to our business.

I will, however, remind listeners that there are inherent risks that could alter the timing or successful completion of our migration to Maximus.

These risks are discussed in the earnings release and in greater detail in our Quarterly Report on form 10-Q for the quarter ended March 31, 2003.

Now, I will turn the call back to Stan.

Thanks, Tim.

Since substantial detail and year-over-year comparisons are included in the earnings release, I will focus my discussion on fluctuations from last quarter.

Let's begin with Insight North America.

Net sales increased 3% sequentially, primarily due to a slight increase in large corporate sales.

Sales to small to medium-size and public sector customers remained generally flat, and we saw a slight increase in our services due to our ongoing efforts to increase penetration into existing accounts with aspects of our advanced service capabilities.

We recently reevaluated how we classify account executives for reporting purposes, and have now excluded noncommissioned positions that used to be included in the account executive numbers, such as sales management, product specialists and service engineers.

However, we will continue to include account executives in training in our total account executive number.

This revised classification provides more useful management reporting for evaluating productivity, resources, etc.

Based on the revised classifications, Insight North America had 1,309 account executive at June 30, 2003.

To provide an accurate comparison to the past five quarters, the following are the revised account executive numbers for the end of each quarter using the current classification criteria.

Q1 2002 had 1,165 account executives;

Q2 2002 had 1,613 account executives;

Q3 2002 had 1,481 account executives;

Q4 2002 had 1,268 account executives; and Q1 2003 had 1,315 account executives.

Average tenure of our North American account executives is 3.0 years with 24%% of the account executives having less than 1 year experience, 15 with 1 to 2 years, 18 with 2 to 3 and 43% with more than 3 years experience.

Gross margin increased sequentially this quarter to 11.3% from 11.0%, due primarily to an increase in product margin, decreases in reserves for vendor receivables and an increase in service sales.

These increases were offset partially by decreases in supply reimbursements and cash discounts.

Selling and administrative expenses as a percentage of net sales decreased substantially to 9.8% from 9.9% -- they decreased sequentially from 9.8% to 9.9% due to the increase in net sales and cost-cutting initiatives, including some headcount reductions, offset by an additional training and non-capitalizable IT expenses associated with the IT system integration.

We're continuing to look at ways to lower selling and administrative costs without jeopardizing the success of the system integration or the service levels our customers have come to expect.

At Insight North America, it recorded $639,000 in restructuring costs related to severance costs associated with the elimination of certain support and management positions.

As we had previously stated, the majority of our cost savings will not be recognized until Q1 2004 when the system integration has been completed and support departments are consolidated using the Maximus system.

After December 31, 2003, we expect to discontinue the following current quarterly expenses -- $1.7m of accelerated depreciation; $892,000 of stay bonuses for certain employees; and at least $1m in salaries related to position that will be eliminated after the integration.

Of course, we expect eventually to realize additional efficiencies from the Maximus system, and long-term it is still our goal to reduce our consolidated selling and administrative expenses to between 7.5% and 8.5%.

This now brings me to Insight UK.

As expected, net sales this quarter are down sequentially from $94m in Q1 2003 to $91m in Q2, due to Q1 being seasonally strong.

Based on the revised classification discussed earlier, Insight UK had 272 account executives at June 30, 2003.

The following are the revised account executive numbers for each of the last five quarters using the current classification criteria.

Q1 2002, they had 316 account executives;

Q2 2002, 302 account executives;

Q3 2002, 295 account executive;

Q4 2002, 262 account executive; and Q1 2003, 270 account executives.

Average tenure of our UK account executives is 2.4 years, with 37% of the account executives having less than 1 year experience, 16 with 1 to 2 years, 21% with 2 to 3 years and 26% with more than 3 years experience.

We remain confident that Insight UK has established a solid business strategy, focused primarily on small to medium-size businesses and public sector customers and we're properly positioned to successfully grow the business in United Kingdom.

Gross margins decreased sequentially this quarter to 13.2% from 13.8%, due primarily to a decrease in product margin, due to aggressive pricing to attract new customers, offset partially by decreases in inventory provisions.

Selling and administrative expenses as a percentage of net sales decreased sequentially to 12.4% from 12.7%, due to cost-cutting initiatives, including some headcount reductions, offset partially by declines in net sales.

Regarding Direct Alliance, as we stated last quarter, one client program ended, as scheduled, in May of 2003.

This client represented approximately 3% of Direct Alliance's net sales for the second quarter and 8% for the first quarter of 2003.

Additionally, net sales declined sequentially, due to a decrease in pasture (ph) product sales.

Despite this one client program ending during the quarter, Direct Alliance increased earnings from operations 8% sequentially from $3.5m in Q1 2003 to $3.8m in Q2.

PlusNet continues to experience a shift in the primary source of its net sales from dial-up to broadband Internet access customers, which is providing a steady increase in net sales.

Active broadband Internet customers have increased from approximately 4,400 at June 30, 2002 to approximately 27,100 at June 30, 2003.

PlusNet also continues to contribute growing earnings from operations.

I will now turn the call back to Tim for final comments.

There have been numerous comments supported in the media from various companies and industry analysts saying that we have not yet begun to see any significant rebound in IT spending.

This is true for Insight as well, as indicated by our relatively flat second quarter.

However, the quarter had a slight uptick, making us cautiously optimistic about the future.

In the absence of any specific future guidance, I can tell you we remain conservative in our expectations and will continue to focus on completing the objectives of our IT systems integration, keeping our sales organization focused on the customer and maximizing both product and service sales opportunities.

We're confident that our single source business model is the right solution at the right time and as IT spending increases Insight is well positioned to capture market share and increase our penetration into existing accounts by leveraging our outstanding product and service capabilities.

That concludes my comments.

Stan and I are now available to answer any questions that you might have.

Brian Alexander, Raymond James.

You just mentioned some cost savings objectives heading into next year.

If I add up those amounts I think it's about $3.5m, or 50 basis points of expenses savings.

You're currently at about 10.2% expense ratio, which would get you down to about 9.7%, which is pretty far from your goal of 7.5% to 8.5%.

So can you help us understand the timing of your goal on getting expenses down to the 7.5% to 8.5% level?

What kind of sales would you need to get there?

First of all, the 7.5% to 8.5%, as indicated in the earlier conference call, was really a longer-term type of goal, not by Q1 of 2004.

In order to get there I think there's several things that will contribute to get to it.

First of all, there is continued cost-cutting and savings that we can incur besides those outlined previously.

Second of all, there is certainly, from a topline point of view, probably from a GP point of view, more than down below some synergies that we can gather from being one larger company that would additionally help to bring things into line a little bit better.

Finally, there is certainly expectation of a need to increase sales to a certain extent to get down to those numbers.

I'm sure you can figure out exactly the sales increase that's needed in order to get there.

And if we don't see those things happening, then consistent with our model I think we would take out more costs in order to get down to the numbers that were stated earlier between 7.5% and 8.5%.

Again, when we give you those numbers historically, although our model has changed to become a single source provider, it is certainly something that is realistic we've achieved in the past, and believe that on a longer-term basis we can do in the future.

The cost actions that you took during the second quarter have really nothing to do with the systems conversions?

That is just ongoing management of expenses?

Yes.

By management of expenses -- just to clarify that -- it's really bringing the two companies together.

Okay.

Can you talk about the upside to your sales in North America?

It sounds like most of that occurred in the large corporate segment.

How much of that was seasonality, versus maybe a pick up in spending, versus recognition of some of that previously deferred revenue that you had exiting last quarter?

Let me talk about the general demand in the marketplace.

Q2 to historically has been a tough quarter coming off Q1, from a seasonality perspective.

We're doing a little bit that (ph) -- again, we have a very slight uptick again from Q1.

But I need to caution everybody that although we're seeing increased activity at the quoting level at customers, everybody is talking a lot more about doing more projects and more things towards second half of this year and first part of next year, but it hasn't translated into a tremendous number of orders yet.

So although we're seeing an increase in activity, we have not actually seen a huge increase in orders yet.

Hence, the very slight increase from Q1.

To answer your other questions, first of all, on the deferred sales, if you would, or the inventory that was waiting further their work to be completed, it was about $12m within the quarter, which you can calculate off of the balance sheet because we separated that amount out.

We did complete additional services and performed them during the quarter, which allowed us to recognize the revenue during this quarter.

Your other comment about how much of this increase is due to certain factors, I guess I would go that the encouraging part, when I look at it, is that corporate sales were up.

I mentioned earlier that also service was up.

I think those two are tied closely together, which ties back to our single source model, that hopefully we're starting to make some inroads from this approach of getting additional product sales, getting additional service sales by being that single source provider to our customers.

I think at least from our point of view, we see some encouraging aspects in that area, despite the fact that the overall economy is relatively so-so.

The $6.5m on the balance sheet right now for inventory not available for sale, when should we expect to see that recorded in the income statement?

The public sector, how much of a percentage of your North American sales is that today?

First of all, on the inventory, in accordance with Generally Accepted Accounting Principles, when the additional services are performed we will be able to recognize that revenue, and that will be over a certain period of time.

Those are rollouts that occur, and, quite frankly, constantly rotate in and out.

So some of that will come out this quarter and additional will go in.

So that's just something that by its nature will happen.

In terms of the government sector, we really never have broken that out.

As you recall, a year ago I think we gave some numbers of about $250m, I believe it was, annually.

And we've said the economy is pretty flat, and we really haven't said much more than that.

So hopefully, that gives you some idea of the magnitude within that area, but we have not gone any deeper than that.

Maybe it is a little than $250m?

I'd don't think that's fair assessment.

Matt Sheerin, Thomas Weisel.

Regarding the expense savings that should kick in in the first quarter of next year related to the IT integration, could you give us an idea, Stan, of ballpark what to look for in terms of expenses coming down?

A couple of things.

First of all, in the press release, and as I mentioned earlier, first of all, there is accelerated depreciation that we are incurring the cost per quarter of about $1.7m.

We are incurring right now, in this most recent quarter, $92,000 of stay bonuses in order to get people to stay through the integration, which will go away.

The salary costs related to those stay bonuses will total about $1m.

Additionally, as I mentioned earlier, in this quarter, in North America, they took about 639,000 in restructuring costs related to severance costs.

Again, those are the ones we have identified and as I said earlier there are other things that we intend to do.

But at this point at least that gives you some idea of the magnitude that we expect to accomplish by Q1 of 2004.

That's helpful.

Regarding the gross margin, which improved a little bit, a little bit surprising, given that generally I think you said in the past, with the large corporate customer businesses generally lower margin.

Is it a factor of the extra services that you talked about?

Can you give us and idea of how services impact your gross margin?

Services positively impact it, there's no doubt about it, because they are basically on a net basis that add to it and we did see an increase this quarter.

There are still services.

Pure services are still a small percentage of our total sales, but we do see them growing healthily as we continue to go on.

I think, though, one thing that may not be clear is, as I said earlier, is we have really made a concerted effort to spotlight, if you would, the GP area and put more focus to try to increase gross profit percentage through various actions that we're taking within the Company.

I think that's starting to pay off.

I don't think it is at its end yet, but I think it's starting to pay off.

As you're pointing out, I think we're really happy in this environment, and given the corporate growth and everything else, that in fact it sequentially increased.

I want to add a little bit on that.

If you look at last quarter, we were able to consolidate distribution centers.

We are starting to get a little bit more synergies of being one company with our suppliers also.

The efficiencies are everywhere else (ph), but specifically in the gross margin line.

As Stan said, we're very focused on this as a combined entity.

So I think that it's an area we're going to spend a lot of energy on in the next couple of quarters.

Could you give us an example of some of the services that you're doing there?

Is a lot of that from the former Comark?

Absolutely.

Still doing a tremendous amount within the integration center by adding value, whether it's integrated products, product images, turning on PalmPilots.

We've also done a lot in the field by specifically selling other peoples' services.

It could be anything from cabling to wiring to going out there and having somebody physical go on-site to consult.

A lot of the time on that we don't actually do it ourselves; we just in essence act as a sales and marketing agent for someone else.

The key focus there, as Stan said, is we're try to be a single source provider, a one-stop location where people can come in and solve their product and service problems with one common solution.

So that's why I think we've seen a little bit of a bright spot on both, obviously the gross margin and a little bit on the sales side.

Thanks very much.

David Manthey, Robert W. Baird.

Wondering if you could comment on share repurchase at this point.

I know in the past you've indicated you wanted to pay down debt.

I think you're getting close to a net zero debt position.

Any thoughts near-term?

You're absolutely right.

Our philosophy has always been that we don't want to pay it down with borrowed money.

We still have debt on the financial statements; therefore, there's no change in that philosophy internally.

I might also add, David, you've seen receivables come down -- really two things.

One is certainly be environment we're in -- receivables come down.

One is the environment we're in.

The second is I think we are doing a very good job of the collection process.

But knock on wood, at some point, hopefully, we will see an increase in the sales activity that then things and slip around the other way and you need to funds that, so receivables are going to increase, and consequently working capital goes down and debt may come up.

We're trying to take that into account.

I guess what's clear, hopefully, from this message is at this point we don't intend to do anything because we still have that debt on the financial statement and we feel strongly that you shouldn't borrow to buy back.

Tim, maybe you could give us and idea of what the data point we should expect on the IT integration.

Are we going to have to wait until next quarter?

Or are you going to do like you did this quarter and have something sort of in the middle of the quarter, an update on a certain data point?

I think what's going to happen is -- this is obviously an important quarter for us, but really it's really it is early next quarter when we actually start putting the sales reps physically on the new interface with the SMB group.

So it may be one of those things where we give an update next quarter, but it may be towards the end of the year.

Part of it is no news is good news on some of this stuff.

Stan, when you were talking about the accelerated depreciation, stay bonuses, duplicate salaries, all of these things and you referred to some of the synergies from being one company and purchasing and distribution things, are those the things that you were referring to back when you said you thought you could get 25m in the synergies from the Comark acquisition?

First of all, the stay bonuses, I don't think, necessarily qualify because that's something in order to entice the people to stay, but the rest of those certainly is salary reductions, etc., that lets combined company to be able to buy better, etc.

Those are exactly the type of things that we were talking about at that point.

Last quarter you said that you saw no irrational pricing, despite weaker sales industry-wide.

I'm wondering what you thought about the second quarter.

One of your competitors was fairly aggressive and I'm wondering if you saw them in the market, if that impacted your pricing or no?

Not really.

If you are referring to PCCC, I think those guys were down over 100 basis points sequentially in gross margin.

We really didn't see those guys out there that much.

Our number one competitor on pricing continues to be Dell.

If you want to call it our group or reseller community, it's really our friends at Dell, when they choose to go in on desktop and notebook servers and really focus on the pricing model.

But overall, we continue to see very rational pricing out there.

That said, it's always been aggressive.

That is no change.

But we're not seeing unnatural acts by our competitors.

Final question -- when you refer to a slight uptick in the large corporate accounts, when I'm running my numbers here, are you talking about something in sort of the low single digits, like 5%, or are you talking about something smaller than that?

It seems like the sequential increase is too large, given the SMB being flat, to not see a fair nice increase in the large corporate space.

I think you're characterizing it right at less than 5%.

Thanks a lot.

Bruce Simpson, William Blair.

Good afternoon.

Can you give us some sense of pricing or perhaps some index category or maybe the largest categories, like CPUs, year-over-year and how that's impacting total revenue growth and GP?

I need to come back to you specifically on that number.

I do not know the number off the top of my head on just notebooks year-over-year.

We have seen, just generally, decreases in average sale prices.

There's no doubt that on a unit basis we're up year-over-year in units, in desktops specifically.

But our average sale price is down on the desktop.

Over the last six months or so, we've kind of seen that flatten out.

We're not seeing the same kind of average sale price drops specifically in the desktop category than we have seen from a year, year and a half ago.

I would add one other thing.

The average sales price, that's pretty much across the board.

But that's common in this industry.

So it's not just desktops, it's right down the line.

Where people have to sell more in order just to stay even.

And so on a year-over-year basis, maybe certain categories are down 5% to 10%, do you think that's accurate?

As a generality, that's probably right.

But they really do fluctuate from group to group.

But I don't think -- to give you a sense of things --

My follow-up question has to do with your strategy on the sales force.

It seems like we've had a couple of ups and downs in terms of your outlook about whether the right thing to do was generally trim down the number of salespeople and try to focus on their productivity and weeding out the least productive folks, versus really ramping up and adding new people.

I thought a couple quarters ago, Tim, you had indicated that you were going to pretty aggressively add people.

I haven't heard anything about it in a quarter, so I would just like some color as to what your thoughts are about the right number of salespeople across your organization now, and in a year.

We have added new salespeople.

I think we've been more aggressive in weeding out the lowest performers. (indiscernible) the biggest teams in our business over the last three or four quarters is that we've been very aggressive at innovations that we didn't think were a good fit to the organization.

So we have been aggressively managing that, and continue to do that.

That said, we continue to hire also.

We plan on net adding account executives on the go forward basis.

The exact number is a little bit depending also on the marketplace, is that going to be net ten people a quarter or net 100 people a quarter, is really going to be based on the market.

Right now, we're not being super aggressive in terms of net adds, but we would like to be up sequentially for the next couple of quarters.

Although a fairly small amount.

If we see an uptick come either second half of this year or next year that's material, we might increase that number in terms of a net add basis.

The last piece is, while we're talking about -- you mentioned on public sector, and we sort of got a general sense of how big that is.

Certainly CDW had a nice seasonal bonus in their public sector segment.

Did you see that, is that baked into the numbers that you also had a second quarter ramp up, or is it the fact that your public sector business is more tilted toward the federal market, so seasonality really wasn't an impact in the quarter.

We did not see a big uptick in that.

Part of the thing I should also point out is, we're grouping middle integration, and we've got lots of internal things going on.

So that could be a little bit of part of it.

But we did not see a big sequential increase from Q1 to Q2.

Thanks.

Chris Hussey, Goldman Sachs.

Good afternoon.

I guess the question I would have for you guys is on the trends over the course of the months.

I know you have decided not to yet report monthly sales; some of your competitors have.

Maybe you could give us a little bit of color, at least postmortem.

Did things improve as the quarter went on?

You had a better run rate at the end of June than the were at the beginning of April?

Really when you look back on it month-to-month, it's really a pretty flat type of environment month-to-month that we saw, which is pretty consistent if you go back with what we saw in Q1 also.

So I don't think we can characterize it as a pickup in that last month.

What's different, I think, is that let's say four quarters ago we used to get a slight uptick in the third month -- a more material uptick.

We've not been seeing that.

It's really been pretty flat overall.

Our reluctance on that sales number is that some of the large corporate accounts, when you get a couple of POs here or there it could dramatically impact a single month sales number.

That's probably one of our big reasons for hesitantly to focus on monthly sales numbers.

It could mislead the investors from the point of view of up or down based on a couple of orders really affecting those numbers.

It certainly worked out for the stock price so far too.

But what you're seeing is even in the month of June, where we were sort of getting a flavor from several people that the month of June was pretty strong, you guys didn't necessarily see a strong June.

Slight uptick -- I guess I'm looking for something over 5% -- something where you go, "wow" and I saw a hockey stick.

Yes.

No hockey in Tempe.

It's 110.

As it should be.

Thanks.

John Lawrence, Morgan Keegan.

Tim, would you comment a little bit, you went through in the beginning a lot of the details on what you're doing with the system.

Not to belabor the point, but would you just walk through when it's all converted and everything -- you have the hybrid system together, what does your salesmen have at his fingertips now that's much better than he had either at Insight or Comark before?

And what's the competitive advantage for the new system?

That's a great question.

A couple items there and I will try to be brief on this because anybody that knows me from history, I am a computer science, computer engineer guy, so I love this stuff.

First of all, the back end is going to be the best back end in the industry to really go out and do service integrations and just the whole solutions sell better than anybody else can do on a back end side.

Just as importantly, the front end is going to be a GUI graphical based interface, also the ability to go out and at fingertips of the sales reps do anything from deliver a single product to wrap a solution to wrap a service around it, all with very easy order entry with a fully scalable back end.

If you look at everybody in this industry, everybody started out with home-grown systems, usually proprietary.

We will be really the first guys to do end-to-end solutions that are, if you want to call it enterprise strength, enterprise level, multilingual, multi-currency and have the ability to have the broadest product offering and the broadest service capability of anybody in our space.

So when it's all done we're very excited about, as an example, a couple of years from now beginning able to go out there and have, let's say a deployment from a major corporate customer, whether it is within Europe, or within the US, all from a single point of order entry.

So we look at that as a huge competitive advantage on the long run.

But from an efficiency perspective, we're going to make it dramatically more efficient for sales reps to enter orders, for customers to enter orders, track quarters and the power to out there and in essence to anything that anyone can do at fingertips.

This won't be a bunch of systems cobbled together -- it is one seamless system end-to-end.

We're very excited about this over the long haul.

Thanks.

At this time, there are no further questions.

Mr. Laybourne, are there any closing remarks?

Thank you on behalf of Insight Enterprises.

Thanks for all your hard work and dedication, Insight employees throughout the world.

Keep your eyes focused on the future.

Thank you.

This concludes today's Insight Enterprises quarter two 2003 earnings release conference call.

You may now disconnect.