The Best (And Worst) Channel Stocks Of 2008

It was a tough year on Wall Street, but an even more difficult one for the stocks of publicly-traded channel companies. The 10 companies featured here saw their shares plummet by an average of 54 percent last year. By comparison, Nasdaq fell 33.8 percent and Dow Jones declined 40.5 percent over the past 12 months. For better or worse, here are the year's 10 best (and worst) stocks for eight distributors, plus two direct marketers which often serve as product suppliers for VARs. We begin with the toughest cases.

10. Bell Microproducts (BELM.PK) Dec. 31, 2007 Closing Price: $6.01 Dec. 31, 2008 Closing Price: $0.60 1-Year Change: -90% Bell Microproducts was delisted by Nasdaq in March after failing to finish its investigation into its 2006 financials. While the San Jose, Calif.-based distributor expected auditors to wrap up by the end of 2008, it was a dismal year for the company's investors. Bell Micro's stock fell to 60 cents per share from $6.01 per share on Dec. 31, 2007 for the same date in 2008. Chairman and CEO Don Bell even called the company's stock performance "embarrassing" at a November meeting with analysts and investors. "We believe there's a significant amount of baggage hanging over [Wall Street] because of the delisting," Bell said in November. "Completing the audit will get a major chunk of that out of the way. In the meantime, we continue to run the business, with our core strength of storage and focusing on selling solutions capabilities in high growth areas like security, the surveillance market, the medical market." In its third fiscal quarter, Bell Micro's sales fell 10 percent to $903 million. North America sales fell 14 percent to $382 million.

9. Brightpoint (CELL) Dec. 31, 2007 Closing Price: $15.36 Dec. 31, 2008 Closing Price: $4.35 1-Year Change: -71.7% The Plainfield, Ind.-based distributor of cellular, mobile and wireless products saw its net income for the nine-month period ended Sept. 30, 2008, fall to $3.9 million, from $32.5 million in the year-ago period. Revenue increased to $3.29 billion from $2.38 billion for the same periods, respectively. Last month, the stock fell almost 10 percent alone after a Jefferies & Co. analyst lowered his outlook for the company due to slower-than-expected handset sales. "Despite the challenging macro economic factors affecting all industries, our industry-leading low cost business model, global market position and strong balance sheet are resulting in many new opportunities with the leading companies in the wireless space," said Robert Laikin, chairman and CEO, in a statement last October.

8. Insight Enterprises (NSIT) Dec. 31, 2007 Closing Price: $18.24 Dec. 31, 2008 Closing Price: $6.90 1-Year Change: -62.2% The Phoenix-based direct marketer was helped by its acquisition of networking VAR Calence, which helped offset a high-single digit decline in legacy hardware sales. But it still wasn't enough to keep the company from laying off 8 percent of its work force last November to due weakening demand. Overall, Insight's sales through the first nine months of 2008 increased 4 percent to $3.67 billion. "Given the continuing challenges of the technology sector, we feel these actions are necessary to reduce our cost structure and improve the affordability of our business model," CEO Rich Fennessy said in a statement at that time.

7. PC Connection (PCCC) Dec. 31, 2007 Closing Price: $11.35 Dec. 31, 2008 Closing Price: $5.12 1-Year Change: -54.9% The Merrimack, N.H.-based direct marketer's sales fell 3 percent to $441 million in the third quarter and also went through a workforce reduction and management restructuring. Through the first three quarters of 2008, PC Connection's sales increased 1.4 percent to $1.31 billion, compared to the year-ago period. Net income fell 22 percent to $13.1 million, or 49 cents per share, for the same periods. "Customers are pushing out and delaying purchases and when purchases are deemed to be mission critical and we are going forward, we are seeing more bidders and we are seeing a lot more competition. I think that's fairly common in a down market, so that has put a little margin pressure on the business," said Timothy McGrath, executive vice president of the enterprise group at PC Connection last November.