===============================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
(Mark One)
   [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 1999

   [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
 For  the  transition  period  from   _______________  to _______________.

                        Commission File Number 000-11560

                          SAVOIR TECHNOLOGY GROUP, INC.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                  94-2414428
(State or other jurisdiction               (I.R.S. Employer Identification No.)
of incorporation or organization)

 254 E. HACIENDA AVENUE, CAMPBELL, CA                      95008
(Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (408) 379-0177

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:


                                                          NAME OF EACH EXCHANGE
               TITLE OF EACH CLASS                          ON WHICH REGISTERED
               -------------------                        ---------------------
          Common Stock, par value $0.01 per share        Nasdaq National Market

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

     The aggregate market value of the registrant's voting stock held by
non-affiliates on February 24, 2000, based on the last reported sales price for
the registrant's Common Stock on the Nasdaq National Market on such date, was
approximately $34,265,881. For purposes of the foregoing calculation only, the
registrant has included in the shares owned by affiliates the beneficial
ownership of Common Stock of officers and directors of the registrant and
members of their families. Such inclusion shall not be construed as an admission
that any such person is an affiliate for any other purpose.


     As of February 24, 2000, there were 13,489,569 outstanding shares of Common
Stock, $0.01 par value.

===============================================================================

<PAGE>


                          SAVOIR TECHNOLOGY GROUP, INC.

                                TABLE OF CONTENTS

                                 1999 FORM 10-K

Item No.                                                                   Page
--------                                                                   ----
                                     PART I

1.  Business...............................................................   1
2.  Properties.............................................................  14
3.  Legal Proceedings......................................................  15
4.  Submission of Matters to a Vote of Security
      Holders..............................................................  15

                                     PART II

5.  Market for the Registrant's Common Stock
      and Related Stockholder Matters......................................  15
6.  Selected Consolidated Financial Data...................................  17
7.  Management's Discussion and Analysis of
      Financial Condition and Results of Operations........................  18
7A. Quantitative and Qualitative Disclosures About Market Risk.............  24
8.  Financial Statements and Supplementary Data............................  25
9.  Changes In and Disagreements With Accountants
      on Accounting and Financial Disclosure...............................  46

                                    PART III

10. Directors and Executive Officers of the
      Registrant...........................................................  46
11. Executive Compensation.................................................  48
12. Security Ownership of Certain Beneficial
      Owners and Management................................................  52
13. Certain Relationships and Related
      Transactions.........................................................  54

                                     PART IV

14. Exhibits, Financial Statement Schedules
      and Reports on Form 8-K..............................................  56

                              --------------------

     This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), regarding future events and the Company's plans and
expectations that involve risks and uncertainties. When used in this Report, the
words "estimate," "project," "intend," "expect" and "anticipate" and similar
expressions are intended to identify such forward-looking statements. Such
statements are subject to certain risks and uncertainties, including those
discussed below, that could cause actual results to differ materially from those
projected. Factors that may cause or contribute to such differences include, but
are not limited to, those discussed below under "Risk Factors," as well as those
discussed elsewhere in this Report and in the documents incorporated herein by
reference. In light of the important factors that can materially affect results,
including those set forth in this paragraph and below, the inclusion of
forward-looking information herein should not be regarded as a representation by
the Company or any other person that the objectives or plans for the Company
will be achieved. The reader is therefore cautioned not to place undue reliance
on the forward-looking statements contained herein, which speak only as of the
date hereof. Savoir Technology Group, Inc. (the "Company" or "Savoir")
undertakes no obligation to publicly release updates or revisions to these
statements.

<PAGE>


                                     PART I


ITEM 1.  BUSINESS
         --------

     Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and our plans and expectations. Our actual
results could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed below in "RISK FACTORS" as well as those discussed elsewhere in this
Report.

COMPANY OVERVIEW

     We were incorporated in California in 1975 as Silicon Valley Services, Inc.
and were renamed Western Micro Technology, Inc. in April 1977. In August 1997,
we reincorporated in Delaware. We changed our name to Savoir Technology Group,
Inc. in November 1997.

     We are a value-added wholesale distributor of commercial mid-range servers,
peripheral equipment (including wireless networking equipment, storage products,
printers and terminals) and software. We believe that we are one of the leading
distributors of IBM's commercial mid-range servers product lines (AS/400 and
RS/6000). We also distribute commercial mid-range servers, peripheral equipment
and software manufactured by NCR, Telxon, Aironet and the Santa Cruz Operation
("SCO"). We primarily distribute commercial mid-range servers and related
products to value-added resellers ("VARs") who generally combine our products
with commercial applications software and sell integrated computer systems to
end user customers. We also integrate and configure personal computers,
workstations and departmental servers for original equipment manufacturers
("OEMs") and VARs and provide and remarket installation and technical support
services. Through twelve acquisitions since December 1994 and internal growth,
we have expanded our products and services, increased our geographic market
coverage, strengthened our management and technical personnel and increased our
operating leverage. As a result, our net sales increased from $131.7 million in
1996 to $767.2 million in 1999.

     On March 2, 2000 we agreed to merge with a subsidiary of Avnet, Inc., so
that we would become a wholly owned subsidiary of Avnet. The acquisition has
been approved by the boards of directors of both entities and is subject to
approval by the stockholders of Savoir and regulatory review. If the merger is
completed, depending upon the average of the closing trading price of Avnet's
common stock during the 15 days ending on the fifth day prior to the vote of our
stockholders, our common stockholders will receive between 0.15494 and 0.11452
of a share of Avnet common stock for each share of Savoir stock they own. The
transaction is expected to close in June. If the merger is not completed, we may
be required to pay Avnet a termination fee of $750,000, and we may be required
to pay Avnet an additional fee of $3.75 million if we enter into an acquisition
agreement with another company within a year of termination of the Avnet merger
agreement. Avnet, Inc. is a Phoenix, Arizona based distributor of
semiconductors, interconnect, passive and electromechanical components and
computer products. At its last fiscal year end, Avnet reported sales of
approximately $6.35 billion.

PRODUCTS AND VENDORS

     Two of our business divisions, the Mid-Range Systems Division and the
Computer and Peripherals Group, generate most of our net sales.

     Mid-Range Systems Division. The distribution of commercial mid-range
servers in 1999 accounted for approximately 86% of our total net sales. The
principal goal of our commercial mid-range systems distribution business is to
provide customers with both rapid, accurate delivery of products and quality
configuration and technical support. Products distributed by this Division
include mid-range servers which run on Unix, OS/400 and NT operating systems,
peripheral equipment (including wireless networking equipment, storage products,
printers and terminals) and software. In addition to selling new equipment, we
also distribute refurbished IBM AS/400 and RS/6000 equipment. Our Mid-Range
Systems Division represents four major manufacturers: IBM, NCR, Aironet and
Telxon. During the years ended December 31, 1997, 1998, and 1999, approximately
65%, 80% and 82%, respectively, of our net sales was generated from the sale of
IBM products (including mid-range and peripheral equipment). Our mid-range IBM
product line includes the AS/400 and RS/6000 families of mid-range servers. We

                                      -1-

<PAGE>


have received the IBM business partner leadership award for the past five
six-month periods. This award is given by IBM to its top distributor in North
America once every six months. Additionally, IBM has named Savoir as one of only
five certified e-business partners (and the only distributor) in North America.
We are also one of several distributors to qualify for IBM's Authorized Assembly
Program ("AAP"). The AAP certification allows us to utilize our integration
facilities to assemble custom RS/6000 configurations, allowing for shorter
delivery times to customers and a reduction in required inventory levels of
pre-configured systems.

     Computer and Peripherals Group. We offer OEMs and departmental server
customers a single source for their hardware, software and service needs through
our Computer and Peripherals Group ("CPG"). CPG accounted for approximately 14%
of our total net sales in 1999. Through CPG, we offer our customers a wide
variety of value-added systems integration services up to, and including, the
actual installation at the end user site (e.g., "turnkey" systems assembly of
departmental servers, workstations, hardware and software "bundling" and light
manufacturing). CPG's more advanced products include fault tolerant software,
serial port expansion devices and disk striping and mirroring solutions for the
SCO/UNIX operating environments. Products assembled and manufactured by CPG
include special purpose PC-based subcomponents of larger systems, private-label
departmental and small enterprise servers and related peripherals. CPG purchases
components manufactured by Intel Corporation, IBM System Storage Division, Sony
Electronics, Inc., SCO, Hitachi America, Ltd. and Microsoft Corporation, among
others. Through CPG, we also specialize in building systems under long-term
contracts for customers seeking fully compatible configurations that remain
consistent over time.

VALUE-ADDED SERVICES

     In addition to the products we offer, we also provide a variety of
value-added services, including the following:

     Integration Services. We perform light manufacturing or technical
integration services, ranging from simple hardware and software integration,
burn-in and testing to building customized systems to our customer's
specifications.

     Technical Support Services. We currently offer our customers pre-sale
technical assistance, configuration review and verification, consulting
services, network design, implementation and installation services and site
planning, telephone support and help desk, patch/bug isolation and
identification, certification requirements and preparation and system
administration assistance. We also remarket certain vendor maintenance and
consulting services and reseller training programs.

     Logistical and Inventory Management Services. We offer ordering and
purchasing services, including order acknowledgment, order management, contract
purchasing and end-of-life buy programs. We also offer inventory services such
as expedited delivery, kitting and bill-of-material services, warehousing and
storage services, bonded inventory programs, consignment programs and customer
on-site operations. In addition, we offer various delivery options and services,
including drop shipments, blind shipments, custom packaging, consolidated
shipping services, special handling services, personnel services and exporting
assistance.

     Marketing Services. We make current and updated information on our products
and services available to our customers through fax broadcast services and our
web site. We also customize and provide Internet web sites for certain of our
customers. In addition, we offer ready to execute demand generation campaigns,
assistance with such campaigns, assistance with organizing advertising campaigns
and joint marketing funds.

     Financing, Credit and Leasing Services. We offer our customers various
financing and credit options, including open account terms, electronic funds
transfer, standby letters of credit, security interest/UCC filings, personal
guarantees and end user lock box services. We also offer end user financing
programs through third parties, including leasing programs, joint purchase
orders, payment agreements and inventory financing programs.

CUSTOMERS

     We currently have approximately 2,600 active customer accounts. One of our
customers, Sirius Computer Solutions, Ltd. ("Sirius"), accounted for
approximately 11%, 18% and 16% of our net sales in 1997, 1998 and 1999,
respectively. No other single customer accounted for more than 10% of our net
sales. Our sales to Sirius are made

                                      -2-

<PAGE>


under the Industry Remarketer Affiliate Agreement between the Company and
Sirius dated as of September 30, 1997, as amended by Amendments Nos. 1 and 2
thereto, dated December 31, 1998 and November 30, 1999, respectively (the
"Sirius Agreement"), pursuant to which we appointed Sirius as one of our
industry remarketer affiliates of IBM products. The Sirius Agreement provides
that Sirius may not enter into any similar arrangement with any third party for
the purpose of selling IBM products to its end user customers and also provides
a favorable pricing structure to Sirius. As a result, Sirius is expected to
remain our largest customer for the duration of the Sirius Agreement and to
account for approximately the same percentage of our net sales in 2000 as it
represented in 1999. The Sirius Agreement expires on December 31, 2000, but may
be terminated earlier under certain conditions, not including termination at
will.

     We divide our significant customers into the following three broad
categories:

     Value-Added Resellers. VARs typically install their own or other vendors'
software, configure completed systems and integrate their service offerings with
hardware. For example, Sirius purchases IBM mid-range servers from us and
typically bundles these servers with software provided by J.D. Edwards. As a
result, Sirius is usually able to provide its end user customers with a complete
turnkey computer systems package. Similarly, NxTrend, Inc. purchases IBM
mid-range servers from us and sells the servers to its end user customers
combined with its own proprietary distribution applications software.

     OEMs. These manufacturers similarly integrate or have us integrate our
products with their own products prior to distribution to their end user
customers. One example of our OEM customers is eShare Technologies ("eShare"), a
provider of customer contact and telephone call management systems. eShare uses
our capabilities to configure its proprietary software on a preconfigured system
which can be shipped directly to eShare's customer. In addition, customers such
as Divicom, Inc. and Wang Laboratories, Inc. have found it more efficient to
outsource certain specialized products to us as opposed to creating their own
internal infrastructure.

     Systems Integrators. Systems integrators focus on delivering non-industry
specific solutions to the end user customer. The solutions may include
electronic commerce, networking, Intranet/Internet configurations and
application-specific solutions. For example, Innovative Business Systems, Inc.
designs and installs network systems solutions in a variety of application
environments that incorporate commercial mid-range servers purchased from
Savoir.

SALES AND MARKETING

     We focus on selling and marketing high-quality commercial mid-range servers
and integrated computer system products from a relatively small number of
vendors. In general, sales, sales support and product management organizations
are organized by vendor into business units that sell and support only products
offered by that particular vendor. We believe that our customers require ongoing
support from technically trained sales professionals who (1) are dedicated to
certain vendors, and, in certain instances, to a particular product line, and
(2) can provide technical support on the increasingly complex mid-range servers
and systems we offer our customers.

     Our sales professionals require the technical expertise to work with
customers and our mid-range product purchasing specialists to provide the
computer system solutions required by our customers and, ultimately the end
user. Our sales professionals regularly participate in vendor-sponsored training
and certification programs. Within the mid-range distribution business units, we
maintain a salesperson to technical support person ratio of approximately 4 to
1. We utilize directed telemarketing programs, maintain a database of current
and potential customers, participate in cooperative advertising with vendors,
participate in trade shows and advisory councils and utilize print media as part
of our sales and marketing efforts.

     Our CPG sells primarily to OEMs. Technical expertise within CPG's sales
force is critical during the relatively long sales cycles required to develop
new commercial products. Once the products are developed, the sales force and
technical support personnel must carefully manage and review the ongoing
forecasting, manufacture, delivery and installation of these systems. Within
CPG, we maintain a salesperson to technical support person ratio of
approximately 2 to 1. Due to the complex nature of the products offered by CPG,
new customers are primarily solicited using targeted print advertising and
customer referrals.

                                      -3-

<PAGE>


     As of December 31, 1999, we had approximately 140 direct sales personnel.
We have a North American presence served by sales offices in Campbell and Lake
Forest, California, Chicago, Illinois, Boston, Massachusetts, Huntsville,
Alabama, Atlanta, Georgia, Monterrey and Mexico City, Mexico, San Antonio, Texas
and Ontario, Canada. Centralized marketing departments located in Campbell and
San Antonio support our sales offices. We generally compensate our sales and
marketing personnel based on attainment of specified gross profit targets.

OPERATIONS AND INFRASTRUCTURE

     Information Systems

     Our corporate information system is a scalable, centralized processing
system capable of supporting numerous operational functions, including
purchasing, receiving, order processing, shipping, inventory management, sales
analysis and accounting. Our customers and sales representatives rely on the
information system for on-line, real-time information on product pricing,
inventory availability and order status. The fully integrated modular system
provides customers and sales representatives on-line access to the status of the
backlog of shipments we expect to receive, thereby significantly reducing back
office telephone investigation time. After product pricing and availability have
been determined, the integrated order entry system automatically places an order
for shipment or, if necessary, allocates the inventory to the assembly
operations. The system then instructs warehouse personnel to pull products for
shipment and directs them to the location of the inventory. In order to optimize
the use of warehouse space, we use a random access system whereby inventory is
stored in the first available location within the warehouse.

     Inventory Control

     For both the Mid-Range Systems Division and CPG, our computer system
automatically determines price and availability of inventory and can allocate
inventory to bills of material. This computer system manages all of our
inventories at all of our locations throughout the United States. Inventories
are overseen by a dedicated group of product specialists, assigned by product
line, whose responsibility it is to appropriately manage inventory levels and
turnover.

     Warehouse and Integration Facilities; Shipping

     We maintain inventory stocking locations in Lake Forest and Fremont,
California, Atlanta, Georgia, Chicago, Illinois, Boston, Massachusetts, and San
Antonio, Texas. In addition, we have a major integration facility in Fremont,
California, adjacent to our warehouse, with other integration facilities in
Atlanta, Lake Forest, Chicago and San Antonio. Our Fremont integration facility
is ISO 9002 certified. We currently ship products from our warehouses via FedEx,
UPS and other common carriers. In addition, we distribute a significant portion
of our products by having our vendors drop-ship the products to our customers.

     Financial Services

     We offer a number of flexible leasing and financing alternatives to our
customers, including a variety of leasing options, inventory flooring options
and end user lock-box arrangements. We also maintain credit insurance in order
to more effectively manage the risk of extending credit to our customers.

COMPETITION

     The markets in which we operate are highly competitive. Competition is
based primarily on product availability, price, credit availability, speed of
delivery, ability to tailor specific solutions to customer needs, breadth and
depth of product lines and services, technical expertise and pre- and post-sale
service and support. Increased competition may result in further price
reductions, reduced gross profit margins and loss of market share, any of which
could materially and adversely affect our business, financial condition and
results of operations.

     Through the Mid-Range Systems Division, we compete with national, regional
and local distributors, including, but not limited to, Gates/Arrow Commercial
Systems, a division of Arrow Electronics, Inc., Hall-Mark Global Solutions, a
subsidiary of Avnet, Inc., and Pioneer Standard Electronics, Inc. In some
limited circumstances,

                                      -4-

<PAGE>


we compete with our own vendors. In the distribution of storage products,
we compete with national, regional and local distributors. Through CPG, we
compete with contract manufacturers, systems integrators and certain assemblers
of computer products. We have experienced, and expect to continue to experience,
increased competition from current and potential competitors, many of which have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base than
we do. Accordingly, such competitors or future competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their products than we can. Competitors which are larger than us may be
able to obtain more favorable pricing and terms from vendors than we can. As a
result, we may be at a disadvantage when competing with these larger companies.
If we fail to compete effectively, our business, financial condition and results
of operations would be materially and adversely affected.

     EMPLOYEES

     As of February 24, 2000, we had approximately 585 full-time employees. We
are not a party to any collective bargaining agreement and consider our employee
relations to be good.

Risk Factors

     RISKS RELATED TO THE PROPOSED ACQUISITION OF US BY AVNET

     The expected benefits of combining Avnet and Savoir may not be realized

     We entered into the merger agreement with Avnet with the expectation that
the merger will result in benefits to the combined companies, including reduced
costs as a percentage of sales due to increased economies of scale, greater
access to capital, stronger buying power with our vendors and broader offerings
of products to our customers. If we are not able to integrate effectively our
technology, operations and personnel in a timely and efficient manner, then the
benefits of the merger will not be realized, and, as a result, the combined
companies' operating results and the market price of Avnet's common stock may be
adversely affected. In particular, if the integration is not successful:

     o    we may lose key personnel; and

     o    we may not be able to retain our customers.

     In addition, the attention and effort devoted to the integration of the two
companies will significantly divert management's attention from other important
issues, and could significantly harm the combined companies' business and
operating results.

     Failure to complete the proposed merger could harm our stock price and
future business and operations

     If the merger is not completed for any reason, we may be subject to a
number of material risks, including the following:

     o    we may be required to pay Avnet a termination fee of $750,000, and we
          may be required to pay Avnet an additional fee of $3.75 million if we
          enter into an acquisition agreement with another company within a
          year of termination of the Avnet merger agreement;

     o    the price of our common stock may decline to the extent that the
          current market price of our common stock reflects a market assumption
          that the merger will be completed; and

     o    costs related to the merger, such as legal, accounting and financial
          advisor fees, must be paid even if the merger is not completed.

     In addition, our customers may, in response to the announcement of the
merger, delay or defer purchasing decisions. Any delay or deferral in purchasing
decisions by our customers could materially and adversely affect our

                                      -5-

<PAGE>


business, regardless of whether the merger is ultimately completed. Similarly,
our current and prospective employees may experience uncertainty about their
future role with Avnet until Avnet's strategies with regard to Savoir are
announced or executed. This may adversely affect our ability to attract and
retain key management, marketing and technical personnel.

     Further, if the merger is terminated and our board of directors determines
to seek another merger or business combination, we may be unable to find a
partner willing to pay an equivalent or more attractive price than the price
proposed to be paid in the merger. In addition, while the merger agreement is in
effect and subject to limited exceptions, we are prohibited from soliciting,
initiating or inducing or entering into certain extraordinary transactions, such
as a merger, sale of assets or other business combination, with any party other
than Avnet. We granted Avnet an option to purchase shares of our common stock,
and if the merger agreement is terminated, because of that option, we may not be
able to account for future transactions as a "pooling of interests."

     RISKS RELATED TO OUR BUSINESS

     The following risk factors include risks related to our business without
taking into account the proposed merger. Risks such as those relating to
strategic acquisitions may not apply if the proposed merger is completed.

     We are dependent upon IBM as our principal vendor

     Our business, financial condition and results of operations are highly
dependent upon our relationship with International Business Machines Corporation
("IBM") and upon the continued market acceptance of IBM commercial mid-range
servers, storage products and other peripheral equipment. During the years ended
December 31, 1997, 1998 and 1999, approximately 65%, 80% and 82%, respectively,
of our net sales were generated from the sale of IBM products and we expect this
percentage to remain constant in 2000. Our agreement with IBM is non-exclusive
and may be unilaterally modified by IBM upon 30 days' written notice, renews
automatically but may be terminated by IBM upon written notice given not less
than 90 days prior to the renewal date (January 1, 2001), provides no franchise
rights and may not be assigned by us. The continued consolidation of wholesale
distributors of commercial mid-range servers may also result in IBM raising the
sales volume threshold required to maintain most favorable volume discount
status. As part of our business strategy, and in order to maintain most
favorable volume discount status with IBM, we have completed several
acquisitions and we are actively engaged in an ongoing search for additional
acquisitions. We are also seeking to make minority equity investments in
potential large customers for similar purposes. However, we cannot assure you
that we will be successful in completing any future acquisitions or in making
any equity investments. If we are unable to complete other acquisitions or make
equity investments, or are otherwise unable to increase our sales volume through
internal growth, we could lose our most favorable volume discount status with
IBM, which would, in turn, have a material adverse effect on our relationship
with IBM and on our business, financial condition and results of operations. The
occurrence of any of the following events could have a material adverse effect
upon our business, financial condition and results of operations:

     o    any disruption, change or termination in our relationship with IBM or
          in the manner in which IBM distributes its products;

     o    the failure of IBM to develop new products which are accepted by our
          customers;

     o    our failure to continue to achieve sufficient sales volumes of certain
          IBM products or to maintain the required infrastructure, in each case
          as required to maintain most favorable volume discount status; and

     o    the addition of other wholesale distributors by IBM.

     We receive market development funds and other incentives from IBM. These
market development and incentive funds directly affect our gross profit and our
sales and marketing expenses. Any change in the availability of these market
development and incentive funds would have a material adverse effect on our
business, financial condition and results of operations.

                                      -6-

<PAGE>


     Our operating results may fluctuate from quarter to quarter

     Our quarterly net sales and operating results may vary significantly as a
result of a variety of factors, including, but not limited to:

     o    changes in the supply and demand for commercial mid-range servers,
          peripheral equipment, software and related services;

     o    the cost, timing and integration of acquisitions;

     o    the addition or loss of a key vendor or customer;

     o    the introduction of new technologies;

     o    changes in manufacturers' prices, price protection policies or stock
          rotation (return) privileges;

     o    changes in market development or other promotional funds;

     o    product supply shortages;

     o    disruption of warehousing or shipping channels;

     o    inventory adjustments;

     o    increases in the amount of accounts receivable written off;

     o    price competition; and

     o    changes in the mix of products sold through distribution channels and
          in the mix of products purchased by OEMs.

Our operating results could also be adversely affected by:

     o    general economic and other conditions affecting the timing of customer
          orders and capital spending;

     o    a downturn in the market for commercial mid-range servers; and

     o    order cancellations or rescheduling.

In addition, historically a substantial portion of our net sales has been
made in the last few days of a quarter. Our quarterly operating results are
therefore difficult to predict and delays in the closing of sales near the end
of a quarter could cause quarterly net sales to fall substantially short of
anticipated levels and, to a greater degree, adversely affect profitability.
Thus, we believe that period-to-period comparisons of our operating results are
not necessarily meaningful and should not be relied upon as an indication of our
future performance. Our future operating results are expected to fluctuate as a
result of these and other factors, which could have a material adverse effect on
our business, financial condition and results of operations and on the price of
our common stock. It is possible that in future periods our operating results
may be below the expectations of securities analysts and investors. If this
happens, it is likely that the market price of our common stock would be
materially and adversely affected.

     We face substantial competition

     The markets in which we operate are highly competitive. Competition is
based primarily on:

     o    product availability;

     o    price;

                                      -7-

<PAGE>


     o    credit availability;

     o    speed of delivery;

     o    ability to tailor specific solutions to customer needs; and

     o    breadth and depth of product lines and services, technical expertise
          and pre-sale and post-sale service and support.

Increased competition may result in further price reductions, reduced gross
profit margins and loss of market share, any of which could materially and
adversely affect our business, financial condition and results of operations.

     Through our Mid-Range Systems Division, we compete with national, regional
and local distributors, including Gates/Arrow Commercial Systems, a division of
Arrow Electronics, Inc., Hall-Mark Global Solutions, a subsidiary of Avnet,
Inc., and Pioneer Standard Electronics, Inc. In some limited circumstances, we
also compete with our own vendors. In the distribution of storage products, we
compete with national, regional and local distributors. Through our Computers
and Peripherals Group, we compete with contract manufacturers, systems
integrators and assemblers of computer products.

     We have experienced, and expect to continue to experience, increased
competition from current and potential competitors, many of which have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base than
we do. Accordingly, present or future competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements or
to devote greater resources to the development, promotion and sale of their
products than we can. Competitors that are larger than Savoir may be able to
obtain more favorable pricing and terms from vendors than we can. As a result,
we may be at a disadvantage when competing with these larger companies. If we
fail to compete effectively, our business, financial condition and results of
operations would be materially and adversely affected.

     Sirius Computer Solutions, Ltd. accounts for 16% of our net sales

     During the years ended December 31, 1997, 1998 and 1999, sales to Sirius
Computer Solutions, Ltd. accounted for approximately 11%, 18% and 16%,
respectively, of our net sales. Our sales to Sirius are made under the Industry
Remarketer Affiliate Agreement between Savoir and Sirius dated as of
September 30, 1997, under which we appointed Sirius as one of our industry
remarketer affiliates for IBM products. This agreement provides that Sirius may
not enter into any similar arrangement with any third party for the purpose of
selling IBM products to its end user customers and also provides a favorable
pricing structure to Sirius. As a result, Sirius is expected to remain our
largest customer for the duration of this agreement and to account for
approximately the same percentage of our net sales in 2000 as it represented in
1999. The agreement with Sirius expires on December 31, 2000, but may be
terminated earlier upon the happening of specified events. This agreement may
not be unilaterally terminated by either Savoir or Sirius. Any disruption,
change or termination of our relationship with Sirius or a reduction in
Sirius's purchases from us could have a material adverse effect upon our
business, financial condition and results of operations.

     Integration of acquired companies and our business may not be successful

     Since December 1994, we have completed twelve acquisitions. The combination
of our business and acquired businesses requires, among other things:

     o    integration of the respective management teams and sales and other
          personnel;

     o    coordination of sales and marketing efforts;

     o    conversion of computer systems (including inventory control, order
          entry and financial reporting); and

     o    integration of the businesses' products and physical facilities.

                                      -8-

<PAGE>


The difficulties of such integration may be increased by the necessity of
coordinating geographically separate organizations. The integration of
operations will require the dedication of management resources which may
temporarily divert attention away from the day-to-day business of the combined
company. We cannot assure you that the required coordination and integration
will be accomplished smoothly or successfully. Our inability to integrate
successfully the operations of acquired businesses could have a material adverse
effect on our business, financial condition and results of operations. In
addition, during the integration phase, aggressive competitors may attempt to
attract our customers and recruit our key employees. We cannot assure you that
acquisitions will not materially and adversely affect the selling patterns of
vendors and the buying patterns of our present and potential customers, and that
any change in these patterns will not materially and adversely affect our
business, financial condition and results of operations.

     Our ability to achieve the anticipated benefits of our acquisitions depends
in part upon whether the integration of our business and any acquired business
is accomplished in an efficient and effective manner, and we cannot assure you
that this will occur. Our previous acquisitions and investments have placed and
will, together with future acquisitions, continue to place, substantial demands
on our management team and financial resources. The integration of the
operations of acquired companies has on occasion been slower, more complex and
more costly than we originally anticipated. We will encounter similar
uncertainties and risks in any future acquisitions and investments. Although we
expect to realize cost savings and sales enhancements as a result of the recent
and proposed acquisitions, we cannot assure you that these savings or
enhancements will be realized in full or when anticipated, or that any cost
savings will not be offset by increases in other expenses.

     We may not be able to complete the future acquisitions and expansion that
we believe are important to the growth of our business

     Acquisitions have played an important role in the implementation of our
business strategy, and we believe that additional acquisitions are important to
our growth, development and continued ability to compete effectively in the
marketplace. We evaluate potential acquisitions and strategic investments on an
ongoing basis. We cannot assure you as to our ability to compete successfully
for available acquisition or investment candidates or to complete future
acquisitions and investments or as to the financial effect on us of any acquired
businesses or equity investments. Any future acquisitions and investments we
might make may involve significant cash expenditures and may result in increased
indebtedness, interest and amortization expense or decreased operating income,
any of which could have a material adverse effect on our business, financial
condition and results of operations. In addition, future growth will require
additional financing to fund the working capital requirements of our business
and to finance future acquisitions and strategic equity investments, if any. We
cannot assure you that we will be able to raise financing on satisfactory terms
and conditions, if at all. Should we be unable to implement successfully our
acquisition and investment strategy, our business, financial condition and
results of operations could be materially and adversely affected.

     We may have difficulty in managing our growth

     Since 1997, we have experienced significant growth in the number of our
employees and in the scope of our operating and financial systems, resulting in
increased responsibilities for our management. To manage future growth
effectively, we will need to continue to improve our operational, financial and
management information systems, procedures and controls and expand, train,
motivate, retain and manage our employee base. We cannot assure you that we will
be successful in managing any future expansion or identifying, attracting and
retaining key personnel, and failure to do so could have a material adverse
effect on our business, financial condition and results of operations.

     We are dependent on key personnel

     Our future success depends in part on the continued service of our key
management, technical, sales and marketing personnel and our ability to identify
and hire additional personnel. Competition for qualified management, technical,
sales and marketing personnel is intense and we cannot assure you that we can
retain and recruit adequate personnel to operate our business. Our success is
largely dependent on the skills, experience and efforts of our key personnel,
particularly P. Scott Munro, Chairman of the Board, Chief Executive Officer and
Secretary, and Carlton Joseph Mertens, II, President and Chief Operating
Officer, each of whom has entered into an employment agreement with us. The loss
of either of these individuals or other key personnel could have a material

                                      -9-

<PAGE>


adverse effect on our business, financial condition and results of
operations. We maintain life insurance on Mr. Munro and Mr. Mertens in the
amounts of $7.9 million and $10.0 million, respectively.

     We have significant future capital needs, and the availability of
additional financing is uncertain

     Our operations to date have required substantial amounts of working capital
to finance accounts receivable and product inventories. Although we believe that
we have sufficient funds, or alternate sources of funds, to carry on our
business as presently conducted through 2000, we will need to raise additional
amounts through public or private debt or equity financings in order to achieve
the growth contemplated by our business plan. We cannot assure you that
additional financing of any type will be available on acceptable terms, or at
all, and failure to obtain such financing could have a material adverse effect
upon our business, financial condition and results of operations.

     We are dependent upon the availability of credit and our present credit
facility

     In order to obtain necessary working capital, we rely primarily on a line
of credit that is collateralized by substantially all of our assets. The amount
of credit available to us may be adversely affected by numerous factors beyond
our control, such as:

     o    delays in collection or deterioration in the quality of our accounts
          receivable;

     o    economic trends in the technology industry;

     o    the obsolescence of our inventory;

     o    interest rate fluctuations; and

     o    the lending policies of our creditors.

Any decrease or material limitation on the amount of capital available to
us under our line of credit or other financing arrangements will limit our
ability to fill existing sales orders or expand our sales levels and, therefore,
would have a material adverse effect on our business, financial condition and
results of operations. In addition, any significant increase in interest rates
will increase our cost of financing and could have a material adverse effect on
our business, financial condition and results of operations. We are dependent on
the availability of accounts receivable financing on reasonable terms and at
levels that are high relative to our equity base in order to maintain and
increase our sales. We cannot assure you that such financing will continue to be
available to us or available under terms acceptable to us. Our inability to have
continuous access to such financing at reasonable costs would materially and
adversely impact our business, financial condition, results of operations and
cash flows.

     We have primarily funded our working capital requirements through a $125.0
million Inventory and Working Capital Agreement with IBM Credit Corporation.
Borrowings under this credit facility are collateralized by substantially all of
our assets, including accounts receivable, inventories and equipment. This
credit facility provides that the outstanding interest-bearing cash advance
balance is subject to interest at the annual rate of prime plus 1.875% (10.375%
at December 31, 1999) and expires on August 31, 2000. IBM Credit Corporation may
terminate this credit facility at any time upon the occurrence of, and
subsequent failure to cure, an "Event of Default" (as that term is defined in
the documentation for the credit facility). In the event of termination, the
outstanding borrowings under the credit facility become immediately due and
payable. The termination of this credit facility and our subsequent inability to
secure a replacement credit facility on terms and conditions no less favorable
than those contained in our present credit facility would have a material
adverse effect on our business, financial condition and results of operations.

     Our present credit facility limits our ability to incur additional
indebtedness

     The terms of our credit facility with IBM Credit Corporation require that
we obtain the consent of IBM Credit Corporation prior to incurring some types of
additional indebtedness, including any additional senior or subordinated debt.
We may incur additional indebtedness without IBM's consent through capital
leases and general business commitments if the terms are commercially reasonable
and consistent with our prior business practices.

                                      -10-

<PAGE>


Our present credit facility and our anticipated cash flows may not provide
funding sufficient to achieve the growth contemplated by our business plan. We
may therefore need to obtain the consent of IBM Credit Corporation to incur
additional indebtedness. While we have no reason to believe that IBM will not so
consent, we cannot assure you that IBM Credit Corporation will give its consent.
Failure to obtain IBM's consent or to obtain an alternate credit facility could
have a material adverse effect on our business, financial condition and results
of operations.

     Our business is subject to rapid technological change, price reductions and
inventory risk

     Since we acquire inventory in advance of product orders and shipments,
there is a risk that we will forecast incorrectly and stock excessive or
insufficient inventory of particular products. The markets for products that we
sell are extremely competitive and are characterized by declining selling prices
over the life of a particular product and rapid technological change. Therefore,
our business, like that of other wholesale distributors, is subject to the risk
that the value of our inventory will decline as a result of price reductions by
manufacturers or due to technological changes affecting the usefulness or
desirability of our product inventory. It is the policy of many manufacturers of
technology products to protect wholesale distributors such as Savoir from the
loss in value of inventory due to technological change or reductions in the
manufacturers' prices. Under the terms of most of our distribution agreements,
vendors will generally credit us for inventory losses resulting from the
vendor's price reductions if we comply with the conditions set forth in those
agreements. In addition, generally under such agreements, we have the right to
return for credit or exchange for other products a portion of our slow moving or
obsolete inventory items within designated periods of time. We cannot assure you
that, in every instance, we will be able to comply with all necessary conditions
or manage successfully our price protection or stock rotation opportunities, if
available. Also, a manufacturer that elects to terminate a distribution
agreement generally will repurchase its products carried in a wholesale
distributor's inventory. These industry practices are sometimes not included in
written agreements and do not protect us in all cases from declines in inventory
value, excess inventory or product obsolescence. We cannot assure you that
manufacturers will continue these protective practices or that we will be able
to manage successfully our existing and future inventories. Historically, we
have not experienced losses due to obsolete inventory in excess of established
inventory reserves. Significant declines in inventory value in excess of
established inventory reserves or dramatic changes in prevailing technology
could have a material adverse effect on our business, financial condition and
results of operations.

     Our business has low profit margins

     As a result of price competition, we have low gross profit and operating
income margins. These low margins magnify the impact on operating results of
variations in net sales and operating costs. We have partially offset the
effects of our low gross profit margins by increasing net sales, availing
ourselves of large volume purchase discount opportunities and reducing selling,
general and administrative expenses as a percentage of net sales. However, we
cannot assure you that we will maintain or increase net sales, continue to avail
ourselves of large volume purchase discount opportunities or further reduce
selling, general and administrative expenses as a percentage of net sales.
Future gross profit margins may be materially and adversely affected by changes
in product mix, vendor pricing actions and competitive and economic pressures.

     We may experience product supply shortages

     We are dependent upon the supply of products available from our vendors.
From time to time, the industry has experienced shortages of some of the
products that we distribute due to vendors' difficulty in projecting demand.
When product shortages occur, we typically receive an allocation of product from
the vendor. We cannot assure you that our vendors will be able to maintain an
adequate supply of products to fulfill all of our orders on a timely basis. If
we fail to obtain adequate product supplies, or if product supplies are
available to competitors but not to us, it would have a material adverse effect
on our business, financial condition and results of operations.

     We extend credit to customers without requiring collateral

     We sell products to a broad geographic and demographic base of customers
and offer unsecured credit terms to our customers. Sirius accounted for
approximately 16% of our outstanding accounts receivable at December 31, 1999.
No other single customer accounted for more than 10% of our outstanding accounts
receivable at December 31, 1999. To reduce our credit risk, we perform ongoing
credit evaluations of our customers, maintain an allowance for doubtful accounts
and have credit insurance. Historically, we have not experienced losses from

                                      -11-

<PAGE>


write offs in excess of established reserves. Should our customers increase the
rate at which they default on payments due to us, and should we be unable to
collect our accounts receivable at a rate consistent with our present
experience, it could have a material adverse effect on our business, financial
condition and results of operations.

     Our business is seasonal

     The computer distribution industry experiences seasonal trends and, within
each quarter, a substantial amount of product is generally sold in the last few
days of the quarter. Our largest vendor, IBM, historically has sold up to 35% of
its products in the last calendar quarter, and the continuation of this pattern
could have an effect on our quarterly net sales. Historically, a substantial
portion of our net sales has been made in the last few days of a quarter. Due to
our recent significant growth through acquisitions and our increased dependence
on the sale of IBM products, sales variations may be magnified in the future and
could have a material adverse effect on our business, financial condition and
results of operations.

     Our ability to expand our service capabilities is uncertain

     We are expanding the nature and scope of our value-added services. We
cannot assure you that new value-added services will be integrated successfully
with our commercial mid-range server and related products distribution business.
If we are unable to provide value-added services effectively, we may be unable
to compete for the business of customers that demand services as a condition to
purchasing products from us. In addition, we will be subject to risks commonly
associated with a value-added services business, including dependence on
reputation, fluctuations in workload and dependence on the ability to identify,
recruit and retain qualified technical personnel. The expansion of our
value-added services is expected to require a significant capital investment,
including an increase in the number of technical employees. We cannot assure you
that difficulties encountered in connection with the expansion of our
value-added services will not have a material adverse effect on our business,
financial condition and results of operations.

     We are dependent on third-party shippers

     We presently ship a majority of our products from our warehouses via
Federal Express Corporation, but we also ship via United Parcel Service of
America, Inc. and other common carriers. In addition, we drop-ship products from
our vendors directly to our customers via these carriers. Changes in shipping
terms or the inability of Federal Express, United Parcel Service or any other
third-party shipper to perform effectively (whether as a result of mechanical
failure, casualty loss, labor stoppage, other disruption or any other reason)
could have a material adverse effect on our business, financial condition and
results of operations. We cannot assure you that we can maintain favorable
shipping terms or replace our present shipping services on a timely or
cost-effective basis.

     Our planned international expansion may not be successful

     One of the elements of our business strategy is to expand internationally.
We are currently distributing IBM products in Canada and Mexico. We cannot
assure you that we will be able to continue to expand our international business
successfully. Risks inherent in doing business on an international level
include:

     o    management of remote operations;

     o    unexpected changes in regulatory requirements;

     o    export restrictions;

     o    tariffs and other trade barriers;

     o    difficulties in staffing and managing foreign operations;

     o    longer payment cycles;

     o    problems in collecting accounts receivable;

                                      -12-

<PAGE>


     o    political instability;

     o    fluctuations in currency exchange rates; and

     o    potentially adverse tax consequences.

Any of these risks could adversely impact the success of our international
operations. We cannot assure you that difficulties encountered with one or more
of these factors will not have a material adverse effect on our future
international operations and, consequently, on our business, financial condition
and results of operations.

     We have not paid and do not presently intend to pay cash dividends on
Savoir common stock

     We have never declared or paid a cash dividend on our common stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business, including possible acquisitions, and we do not intend
to pay any cash dividends in the foreseeable future. The payment of any future
dividends will be at the discretion of our Board of Directors and will depend
upon, among other factors:

     o    future earnings and cash flow;

     o    operations;

     o    capital requirements;

     o    acquisitions and strategic investment opportunities;

     o    our general financial condition; and

     o    general business conditions.

Further, our ability to pay cash dividends is currently restricted by the
terms of our credit facility with IBM Credit Corporation. The terms of future
credit facilities or other agreements may also contain similar restrictions. In
addition, our Certificate of Designation with respect to the Series A Preferred
Stock prohibits the payment of dividends on our common stock unless and until
dividends are paid on the Series A Preferred Stock in accordance with its terms.

     If we issue stock in connection with future acquisitions, it may result in
dilution to existing stockholders

     We may issue additional shares of our common stock or other equity or
convertible debt securities to effect future acquisitions or for other corporate
purposes. Upon the issuance of additional capital stock, the percentage
ownership of our stockholders will be reduced and stockholders may experience
additional dilution.

     Our stock price has been volatile historically

     The market price of our common stock has been and is likely to continue to
be highly volatile and may be significantly affected by factors such as:

     o    actual or anticipated fluctuations in our quarterly operating results;

     o    announcements of technological innovations;

     o    industry conditions and trends;

     o    changes in or our failure to meet the expectations of securities
          analysts and investors; and

     o    general market conditions and other factors.

                                      -13-

<PAGE>


     It is possible that in some future quarter, our operating results may be
below the expectations of securities analysts and investors. If this occurs, the
price of our common stock would likely decline, perhaps substantially. In
addition, the stock market has from time to time experienced significant price
and volume fluctuations that have particularly affected the market prices of the
stocks of technology companies. These broad market fluctuations may adversely
affect the market price of our common stock. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought. We cannot assure you that
similar litigation will not occur in the future with respect to us and our
securities. Any litigation relating to our securities could result in
substantial costs and a diversion of management's attention and resources, which
could have a material adverse effect upon our business, financial condition and
results of operations.

     Provisions of our charter and bylaws and Delaware law may make Savoir a
less attractive acquisition candidate

     Provisions of our Certificate of Incorporation and of our Bylaws may make
it more difficult for a third party to acquire, or may discourage a third party
from attempting to acquire, control of Savoir. These provisions could limit the
price that investors may be willing to pay for shares of our common stock. We
presently have 1,850,012 shares of Series A Preferred Stock outstanding and 10
shares of Series B Preferred Stock outstanding and, without any further vote or
action by the stockholders, have the authority to issue up to an additional
8,149,978 shares of preferred stock and to determine the price, rights,
preferences, qualifications, limitations and restrictions, including voting
rights, of this additional preferred stock. The issuance of additional preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could delay or prevent a third party
from acquiring a majority of our outstanding voting stock. Further, Section 203
of the General Corporation Law of Delaware prohibits us from engaging in various
types of business combinations with interested stockholders. These provisions
may delay or prevent a change in control of Savoir without action by the
stockholders, and therefore could adversely affect the market price of our
common stock.

ITEM 2.  PROPERTIES
         ----------

     We lease all facilities used in our business. The following table
summarizes the principal properties occupied by us.
<TABLE>
<CAPTION>

                                                                                                         Lease
                                                                                      Approximate     Expiration
                    Location                                Principal Use            Square Footage      Date
                    --------                                -------------            --------------   -----------
<S>                                                <C>                                    <C>            <C>

Campbell, California...........................    Corporate Headquarters and             24,000         2000
                                                   Sales Office

San Antonio, Texas.............................    Savoir Operational Headquarters       120,000         2003
                                                   and Sales, Warehouse,
                                                   Distribution, Integration
                                                   Center, Marketing and Technical
                                                   Support Office

Fremont, California............................    Warehouse, Distribution and            66,500         2003
                                                   Integration Center

Atlanta, Georgia...............................    Warehouse, Distribution,               16,500         2002
                                                   Integration Center and Sales
                                                   Office

Lake Forest, California (a suburb of Los Angeles)  Warehouse, Distribution,               13,300         2004
                                                   Integration Center, Sales
                                                   Office and Technical Support
                                                   Office

Burr Ridge, Illinois (a suburb of Chicago).....    Warehouse, Distribution,               16,900         2003
                                                   Integration Center and
                                                   Technical Support and Sales
                                                   Office

Framingham, Massachusetts (a suburb of Boston).    Sales Office                           11,200         2000

                                      -14-

<PAGE>

                                                                                                         Lease
                                                                                      Approximate     Expiration
                    Location                                Principal Use            Square Footage      Date
                    --------                                -------------            --------------   -----------




Huntsville, Alabama............................    Sales Office                            6,000         2002

Monterrey, Mexico..............................    Sales Office                            2,700         2000

Mississauga, Ontario, Canada...................    Sales Office                            3,300         2001

</TABLE>

     We believe our facilities are suitable for our uses and are generally
adequate to support our current level of operations. We believe that lease
extensions or replacement space may be obtained for all of our leased facilities
upon the expiration of the current lease terms, in most cases at rates not
materially higher than those currently in effect.

ITEM 3.   LEGAL PROCEEDINGS
          -----------------

     Other than as set forth below, we are not a party to any material pending
legal proceeding, nor is our property the subject of any material pending legal
proceeding, except ordinary routine legal proceedings arising in the ordinary
course of our business and incidental to our business, none of which are
expected to have a material adverse impact upon our business, financial position
or results of operations.

     On June 18, 1999 a complaint was filed in the Superior Court of Orange
County, California by Lee Adams against Western Micro Technology, Inc., WMT
Acquisition Corp. and us. Mr. Adams' complaint purports to allege causes of
action for breach of contract, specific performance, accounting, common count
and false promise, arising out of an Agreement and Plan of Reorganization, dated
March 17, 1997, by and among Western Micro Technology, Inc., WMT Acquisition
Corp., Target Solutions, Inc. and Lee Adams. In addition to equitable relief,
Mr. Adams' complaint seeks to recover compensatory damages in the amount of
$10.0 million and punitive damages according to proof. Mr. Adams has
subsequently dismissed without prejudice his cause of action for accounting. We
believe the complaint is without merit and intend to defend ourselves vigorously
against this complaint. In addition, we have filed a cross-complaint for breach
of contract in which we are seeking compensatory damages in the amount of $1.5
million. The case has been set for trial on July 17, 2000.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

     Not applicable.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
         --------------------------------------------------------------------

     (a) Common Stock Price Range
         ------------------------

     Our Common Stock is quoted on The Nasdaq National Market under the symbol
"SVTG." Prior to November 24, 1997, our Common Stock was quoted on The Nasdaq
National Market under the symbol "WSTM." The following table sets forth, for the
periods indicated, high and low sales prices for our Common Stock as reported by
The Nasdaq National Market.

                                      -15-

<PAGE>


                                                       High           Low
                                                       ----           ---
YEAR ENDED DECEMBER 31, 1998
     First Quarter..............................    $    12.75    $     9.63
     Second Quarter.............................         13.44          9.13
     Third Quarter..............................         12.75          4.31
     Fourth Quarter.............................          9.50          5.31
YEAR ENDED DECEMBER 31, 1999
     First Quarter..............................    $    12.50    $     8.63
     Second Quarter.............................         10.75          7.50
     Third Quarter..............................          9.75          7.75
     Fourth Quarter.............................          8.38          4.31

     (b) Holders

     As of February 24, 2000, there were approximately 260 stockholders of
record and approximately 1,900 beneficial stockholders of our Common Stock.

     (c) Dividends

     We have never declared or paid any cash dividends on our Common Stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business, including possible acquisitions, and do not intend to
pay any cash dividends in the foreseeable future.

     (d) Recent Sales of Unregistered Securities, Use of Proceeds from
Registered Securities

     Not applicable.

                                      -16-

<PAGE>


ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA
          ------------------------------------
<TABLE>
<CAPTION>


                                                                         YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------------------
                                                        1995        1996         1997        1998        1999
                                                        ----        ----         ----        ----        ----
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>         <C>          <C>         <C>         <C>


Statements of Operations Data:
     Net sales.................................      $ 106,462   $131,697     $237,884    $ 593,341   $ 767,243
     Cost of goods sold........................         93,416    114,389      205,089      526,113     683,292
                                                     ---------   --------     --------    ---------   ---------

     Gross profit..............................         13,046     17,308       32,795       67,228      83,951

     Selling, general and administrative expenses..     13,694     13,716       25,969       46,002      61,083
     Restructuring charges.....................          3,600         --           --           --      11,287
                                                     ---------   --------     --------    ---------   ---------

     Operating income (loss)...................         (4,248)     3,592        6,826       21,226      11,581
     Interest expense..........................            850        978        3,181        4,318       2,842
                                                     ---------   --------     --------    ---------   ---------

     Income (loss) before income taxes.........         (5,098)     2,614        3,645       16,908       8,739
     Income tax expense........................             --        276          335        8,268       6,948
                                                     ---------   --------     --------    ---------   ---------

     Income (loss) before extraordinary item...         (5,098)     2,338        3,310        8,640       1,791
     Extraordinary item, net of tax............             --         --           --       (2,338)         --
                                                     ---------   --------     --------    ---------   ---------

     Net income (loss).........................      $  (5,098)  $  2,338     $  3,310    $   6,302   $   1,791
                                                     ==========  ========     ========    =========   =========

     Net income (loss) per share: (1)
        -Basic.................................      $    (1.36) $   0.55     $   0.57    $    0.10   $    0.03
        -Diluted...............................      $    (1.36) $   0.52     $   0.55    $    0.09   $    0.03
     Number of shares used in per share
calculations:(1)
        -Basic.................................           3,756     4,255        4,902        8,714      12,387
        -Diluted...............................           3,756     4,513        5,976        9,343      12,951
</TABLE>

<TABLE>
<CAPTION>



                                                                           AS OF DECEMBER 31,
                                                     --------------------------------------------------------
                                                        1995        1996         1997        1998        1999
                                                        ----        ----         ----        ----        ----
                                                                            (IN THOUSANDS)
<S>                                                  <C>         <C>          <C>         <C>         <C>

BALANCE SHEET DATA:
     Working capital...........................      $   7,312   $  7,448     $  6,454    $   3,455   $   5,569
     Total assets..............................         35,899     63,276      186,888      308,902     324,693
     Short-term debt...........................          7,126     11,335       15,579       22,260      23,987
     Long-term debt, less current portion......            117         53       22,330        1,087       4,376
     Stockholders' equity......................         11,004     15,714       47,080       93,567     112,790
<FN>

----------
(1)      See Note 7 of Notes to Consolidated Financial Statements for
         information concerning the computation of net income (loss) per share.
</FN>
</TABLE>

                                      -17-

<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          ---------------------------------------------------------------
          RESULTS OF OPERATIONS
          ---------------------

     The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Report.

     Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and our plans and expectations. Our actual
results could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed previously in "Risk Factors," as well as those discussed elsewhere in
this Report or incorporated herein by reference.

OVERVIEW

     Recognizing the consolidation trend in the commercial mid-range systems
distribution industry, we commenced our acquisition strategy in December 1994
with the acquisition of First Computer Corporation. Since then, we have focused
upon expanding our commercial mid-range server distribution business through
internal growth and strategic acquisitions. Since December 1994, we have
completed twelve acquisitions, which have expanded our products and services,
increased our geographic market coverage, strengthened our management and
technical personnel and increased our operating leverage. The following table
summarizes our acquisition history:

<TABLE>
<CAPTION>
                                                                                                    Estimated Earnout
                                                                                                        Potential
                                                Initial Consideration   Actual Earnout Paid(1)       Consideration(1)
                                              ------------------------  ----------------------  ----------------------
                                                            Shares of                Shares of                Shares of
                                 Transaction                  Common                  Common                   Common
      Acquisition Target              Date        Cash       Stock        Cash        Stock       Cash         Stock
      ------------------         -----------  -----------   ----------   --------   -----------  --------   ------------
<S>                                <C>        <C>            <C>        <C>         <C>         <C>               <C>

Enlaces ("Enlaces")(2).........    4/27/99    $ 5,200,000    235,638          --           --   $5,000,000        --

Infinite Solutions, Inc.
("Infinite")(3)................    1/4/99       2,750,000     88,560          --           --           --        --

REAL Applications, Ltd.
("REAL")(4)....................    9/8/98      12,875,000         --          --           --           --        --

MCBA Systems, Inc. ("MCBA")(5).    6/5/98                    852,854          --    1,500,000           --        --

UniDirect Corporation
("UDC")(6).....................    5/15/98      2,900,000         --          --           --           --        --

Star Management Services, Inc.
     ("SMS")(7)................    9/30/97     42,150,000    460,000    $5,000,000         --           --        --

Target Solutions, Inc.
("TSI")(8).....................    3/17/97             --    220,273          --           --           --        --

International Data Products,
LLC  ("IDP")(9)................   11/29/96        265,000         --          --      140,000           --        --

Star Technologies, Inc.
("STI")(10)....................    11/7/96             --    113,263          --      166,800           --        --

R&D Hardware Systems Company
     of Colorado ("R&D")(11)...    1/2/96       1,000,000    125,000          --       78,587           --        --

International Parts, Inc.
("IPI")(12)....................   11/18/95             --    300,000          --       42,516           --        --

First Computer Corporation
     ("FCC")(13)...............    12/1/94             --    328,943          --           --           --        --
<FN>
----------

(1)  As of February 24, 2000.
(2)  For the year ended December 31, 1998, Enlaces had unaudited revenues of
     approximately $17 million.
(3)  For the year ended December 31, 1998, Infinite had unaudited revenues of
     approximately $19 million.
(4)  For the year ended April 30, 1998, REAL had audited revenues of
     approximately $80 million.

                                      -18-

<PAGE>

(5)  We also canceled indebtedness of $487,000 owed to the Company by MCBA at
     the time of acquisition. For the year ended December 31, 1997, MCBA had
     audited revenues of approximately $27 million.

(6)  For the year ended December 31, 1997, UDC had unaudited revenues of
     approximately $18 million. We also issued a $1.7 million promissory note to
     the former parent company of UDC. At December 31, 1999, the balance on the
     note was $800,000.

(7)  For the eleven months ended September 30, 1997, SMS had audited revenues of
     approximately $87 million.

(8)  For the year ended December 31, 1996, TSI had unaudited revenues of
     approximately $15 million. The TSI agreement provides for a total earnout
     potential consideration of $10,000,000 in cash and stock.

(9)  Excludes assumed liabilities of $424,000. For the year ended December 31,
     1995, IDP had unaudited revenues of $5 million.

(10) For the year ended June 30, 1996, STI had unaudited revenues of
     approximately $8 million.

(11) For the year  ended  December  31,  1995,  R&D had  unaudited  revenues  of
     approximately $10 million.

(12) For the year ended December 31, 1994, IPI had unaudited revenues of
     approximately $15 million.

(13) For the year ended December 31, 1993, FCC had unaudited revenues of
     approximately $6 million.
</FN>
</TABLE>


INCOME TAXES

     Due to the use of net operating loss carryforwards generated in 1995 and
years prior, our effective tax rate was 9.2% in 1997, as compared to a normal
combined effective tax rate of approximately 40% for federal and state income
taxes. As of December 31, 1997, we had used substantially all of our available
federal net operating loss carryforward amounts. Due to the significant amount
of non-tax deductible amortization expense related to goodwill incurred in
certain acquisitions, our effective tax rates were 48.9% in 1998 and 79.5% in
1999. The 1999 tax rate was also affected by the write off of nondeductible
intangible assets as part of the restructuring charge.

RESULTS OF OPERATIONS

     The following table sets forth for the periods indicated certain income and
expense items as a percentage of net sales:

<TABLE>
<CAPTION>

                                                                              Fiscal Year Ended December 31,
                                                                             --------------------------------
                                                                             1997          1998          1999
                                                                             -----        ------        -----
<S>                                                                           <C>          <C>           <C>


Net sales..........................................................           100.0%       100.0%        100.0%
Cost of goods sold.................................................            86.2         88.7          89.1
                                                                              -----         -----         -----
     Gross profit..................................................            13.8         11.3          10.9
Selling, general and administrative expenses.......................             9.8          6.7           6.7
Restructuring charge...............................................            --           --             1.5
Depreciation and amortization expense..............................             1.1          1.1           1.2
                                                                              -----         -----         -----
     Total operating expenses......................................            10.9          7.8           9.4
                                                                              -----         -----         -----
     Operating income..............................................             2.9          3.5           1.5
Interest expense...................................................             1.4          0.6           0.4
                                                                              -----         -----         -----
Income before income taxes and extraordinary item..................             1.5          2.9           1.1
Income tax expense.................................................             0.1          1.4           0.9
                                                                              -----         -----         -----
Income before extraordinary item...................................             1.4          1.5           0.2
Extraordinary item, net of tax effect..............................            --           (0.4)         --
                                                                              -----         -----         -----
Net income.........................................................             1.4%         1.1%          0.2%
                                                                              ======        ======        =====
</TABLE>


COMPARISONS OF YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

     Net Sales. Net sales consists of sales of commercial mid-range servers,
integrated personal computers, workstations, peripheral equipment, storage
products, software and remarketed installation and technical support services,
net of sales discounts and returns. Net sales increased by 29.3% to $767.2
million in 1999 from

                                      -19-

<PAGE>


$593.3 million in 1998, and 149.4% in 1998 from $237.9 million in 1997.
Sales increased due to the continued expansion of our computer systems
distribution business. The acquisitions of Infinite and Enlaces also contributed
to the rise in our revenue. Infinite and Enlaces accounted for approximately
$37.4 million of net sales in 1999. Sales also increased due to the recruitment
of new customers, hiring of additional sales representatives and higher storage
product sales. Despite the increase in revenue during the third and fourth
quarters of 1999 compared to the third and fourth quarters of 1998, we did incur
a slowdown in sales in the third and fourth quarters of 1999 in our largest
product line, the IBM AS/400(TM). We attribute the slowdown to the Year 2000
issue and its effect on purchasing patterns in end user accounts. We have
determined that larger end user accounts reduced their purchases from our
value-added reseller customers as they focused on ensuring that their systems
are Year 2000 compliant. We expect historical buying patterns to return after
the first quarter of 2000. The acquisitions of MCBA and REAL, the opening of a
sales office in Canada and increased software sales, primarily as a result of
the acquisition of UDC, contributed to the rise in revenue in 1998. MCBA, REAL
and UDC accounted for approximately $64.2 million of net sales in 1998.

     For the years ended December 31, 1997, 1998 and 1999, sales to Sirius
accounted for approximately 11%, 18% and 16%, respectively, of our net sales.
Our sales to Sirius are made under the Sirius Agreement, pursuant to which we
appointed Sirius as one of our industry remarketer affiliates of IBM products.
The Sirius Agreement provides that Sirius may not enter into any similar
arrangement with any third party for the purpose of selling IBM products to its
end user customers and also provides a favorable pricing structure to Sirius. As
a result, Sirius is expected to remain our largest customer for the duration of
the Sirius Agreement and to account for approximately the same percentage of our
net sales in 2000 as it represented in 1999. The Sirius Agreement expires on
December 31, 2000, but may be terminated earlier under certain conditions, not
including termination at will.

     Gross Profit. Cost of sales is comprised of purchase costs, net of early
payment and volume discounts and product freight and does not include any
depreciation or amortization expense. Gross profit as a percentage of net sales
is affected by several factors including the mix of high margin and low margin
products and services and the proportion of large orders on which we extend
volume discounts to our customers. Gross profit increased by 24.9% to $84.0
million in 1999 from $67.2 million in 1998, and by 105.0% in 1998 from $32.8
million in 1997. Gross profit as a percentage of net sales was 10.9% in 1999,
11.3% in 1998 and 13.8% in 1997. The decreases are a result of a higher
proportion of large orders on which we extended volume discounts to our
customers.

     Operating Expenses. Operating expenses include: salaries and commissions
paid to sales representatives; compensation paid to marketing, product
management, technical and administrative personnel; depreciation of
infrastructure costs, including our information system and leasehold
improvements; amortization of intangibles resulting from goodwill recorded from
acquisitions; facility lease expenses; telephone and data line expenses and
provision for bad debt losses. Fluctuations in operating expenses as a
percentage of net sales can result from planned expenditures by us for
additional sales, marketing, technical support and administrative personnel,
efficiencies gained through higher sales volumes and resulting economies of
scale and the timing of acquisitions.

     Selling, general and administrative expenses (excluding depreciation and
amortization expense and restructuring charge) increased by 31.5% to $52.2
million in 1999 from $39.7 million in 1998, and by 70.3% in 1998 from $23.3
million in 1997. Selling, general and administrative expenses as a percentage of
net sales were 6.7% in 1999, 6.7% in 1998 and 9.8% in 1997. In 1999, selling,
general and administrative expenses increased due to the acquisitions of
Infinite and Enlaces, a full year of expenses related to the 1998 acquisitions
of MCBA, REAL and UDC, necessary personnel increases as a result of higher
systems sales and the costs associated with reviewing potential international
acquisitions that were not completed. As a percentage of net sales, selling,
general and administrative expenses were essentially the same in 1999 as in 1998
as a result of the revenue shortfall experienced in the third and fourth quarter
of 1999. In 1998, selling, general and administrative expenses as a percentage
of net sales decreased due to the economies of scale generated from acquisitions
and rapid net sales growth.

     Depreciation and amortization expense increased by 41.3% to $8.9 million in
1999 from $6.3 million in 1998, and by 137.1% in 1998 from $2.7 million in 1997.
Depreciation and amortization expense as a percentage of net sales was 1.2% for
1999 and 1.1% for 1998 and 1997. Depreciation and amortization increased during
1999 and 1998 as a result of higher amortization expense from increased goodwill
related to larger acquisitions and increased depreciation costs due to leasehold
improvements and computer equipment additions.

                                      -20-

<PAGE>


     The consolidated statements of operations for 1999 include pre-tax charges
totaling $11.3 million related to the restructuring of corporate functions and
the recognition of impaired assets. Of this amount, $2.8 million represents
costs associated with the consolidation of facilities and elimination of
redundant back-office functions. The costs associated with the restructuring
principally include lease termination costs ($500,000), leasehold and other
asset disposals ($1.4 million) and personnel (a total of 38 employees, primarily
in administration, finance and information technology) severance costs
($900,000). The remaining $8.5 million represents asset impairment charges
related to recorded goodwill and fixed assets. These impairment costs
principally include the write off of goodwill ($7.0 million) related to
unprofitable business activities acquired in previous purchases (Target
Solutions, Inc., International Data Products, LLC and UniDirect, Inc.), the
operations of which we have terminated as part of our restructuring. The balance
of the impairment charge relates to the write off of unproductive electronic
commerce assets ($1.5 million).

     We decided to restructure our operations as a result of internal reviews of
all significant corporate functions. Upon completion of the review, we
determined, as a result of multiple acquisitions over the past three years, that
there were functions, facilities and personnel that were duplicative and
unnecessary if properly consolidated.

     The impairment charges were a result of our ongoing evaluation of our
assets and the related  useful lives and  contributions  to our company of these
assets. The goodwill portion of the charge relates to the acquisitions of Target
Solutions,  Inc.,  International Data Products,  L.L.C. and UniDirect,  Inc. The
business lines associated with each of these acquisitions have had deteriorating
results over the past year, with a significant  drop off in the second and third
quarters of 1999.  The decline is  attributable  to the fact that these business
lines were not within the core  distribution  competency  of our  company.  As a
result, we terminated these operations as part of our  restructuring.  The fixed
asset portion of the impairment charge relates to unsuccessful  investments made
by our company in an  electronic  commerce  attachment  to our business  process
system.

     Operating Income. Operating income decreased by 45.3% to $11.6 million in
1999 from $21.2 million in 1998, and increased in 1998 by 211.0% from $6.8
million in 1997. Operating income as a percentage of net sales was 1.5% in 1999,
3.5% in 1998 and 2.9% in 1997. The decrease in operating income in 1999 was
primarily due to the restructuring charge in the third quarter of 1999 and
revenue shortfall experienced in the third and fourth quarters of 1999.
Operating income increased in 1998 due to higher net sales and economies of
scale.

     Interest Expense. Interest expense decreased by 34.9.% to $2.8 million in
1999 from $4.3 million in 1998 and increased by 35.7% from $3.2 million in 1997.
Interest expense as a percentage of net sales was 0.4% in 1999, 0.6% in 1998 and
1.4% in 1997. Interest expense decreased in 1999 due to a more effective use of
working capital to fund operations and limiting the use of our line-of-credit.
In 1998 interest expense increased due to additional borrowings necessary to
fund acquisitions, infrastructure additions and overall growth. In addition,
interest expense in 1998 also increased due to the amortization of a discount on
warrants issued in September 1997. The warrants were originally determined to
have a fair market value of $1,330,000, which was recorded as discount on notes
payable. During the first quarter of 1998, the warrants were revalued at
$2,721,000. We recorded approximately $330,000 in interest expense for the
discount on the warrants in 1998. We will not incur an additional expense
resulting from the warrants as the unamortized value was expensed as a result of
our public offering and subsequent payoff of the debt underlying the warrants.

     Income Taxes. Income tax expense was $6.9 million, $8.3 million and
$335,000 in 1999, 1998 and 1997, respectively, reflecting effective tax rates of
79.5%, 48.9% and 9.2%, respectively. In 1999 and 1998, our effective tax rates
were higher than the federal statutory rate (35.0%) due to non-deductible
goodwill and other expenses, state income taxes and foreign taxes in excess of
the federal statutory rate. Our effective tax rates were lower than the
statutory rates in 1997 due to the utilization of net operating loss
carryforwards from losses generated in 1995 and prior and the release of the
valuation allowance against the deferred tax assets. These net operating loss
carryforwards were fully applied in 1997.

     In connection with the repayment of our outstanding debt obligations, we
recorded an extraordinary charge in 1998 of $2,338,000, net of tax, resulting
from a prepayment penalty, the write off of unamortized discounts relating to
certain warrants issued to debt holders and other related expenses.

                                      -21-

<PAGE>


QUARTERLY RESULTS OF OPERATIONS

     The following tables set forth certain unaudited quarterly financial data
and such data expressed as a percentage of net sales for the quarters of 1998
and 1999. In our opinion, this information has been presented on the same basis
as the audited consolidated financial statements appearing elsewhere in this
Report, and all necessary adjustments (consisting only of normal recurring
adjustments) have been included in the amounts stated below to present fairly
the unaudited quarterly results when read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Report. The
operating results for any quarter are not necessarily indicative of the results
to be expected for any future period.

<TABLE>
<CAPTION>

                                                            1998                                          1999
                                    --------------------------------------------- -------------------------------------------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                      FIRST       SECOND      THIRD     FOURTH      FIRST      SECOND      THIRD      FOURTH
                                     QUARTER     QUARTER     QUARTER    QUARTER    QUARTER     QUARTER    QUARTER    QUARTER
                                    ---------- ----------   ---------  ---------- ---------- ----------  ---------- ----------
<S>                                 <C>        <C>          <C>        <C>        <C>        <C>         <C>        <C>

Net sales.......................... $  100,504 $  122,920   $  149,809 $  220,108 $  168,569 $  201,687  $  181,577 $  215,410
Cost of goods sold.................     87,443    108,031      132,561    198,078    149,476    179,282     162,026    192,508
                                    ---------- ----------   ---------- ---------- ---------- ----------  ---------- ----------
     Gross profit..................     13,061     14,889       17,248     22,030     19,093     22,405      19,551     22,902
                                    ---------- ----------   ---------- ---------- ---------- ----------  ---------- ----------

Selling, general and administrative
     expenses......................      8,025      9,067       10,551     12,028     11,606     12,988      13,330     14,273
Depreciation and amortization......      1,201      1,560        1,626      1,944      2,021      2,458       2,296      2,111
Restructuring charge...............         --         --           --         --         --         --      12,800     (1,513)
                                    ---------- ----------   ---------- ---------- ---------- ----------  ---------- -----------
     Total operating expenses......      9,226     10,627       12,177     13,972     13,627     15,446      28,426     14,871
                                    ---------- ----------   ---------- ---------- ---------- ----------  ---------- ----------

     Operating income (loss).......      3,835      4,262        5,071      8,058      5,466      6,959      (8,875)     8,031
Interest expense...................      1,709        963          605      1,041        738        774         586        744
                                    ---------- ----------   ---------- ---------- ---------- ----------  ---------- ----------
Income (loss) before income taxes
     and extraordinary item........      2,126      3,299        4,466      7,017      4,728      6,185      (9,461)     7,287
Income tax expense (benefit).......      1,033      1,618        2,179      3,438      2,317      3,013      (4,063)     5,681
                                    ---------- ----------   ---------- ---------- ---------- ----------  ---------------------
Income (loss) before extraordinary
item                                     1,093      1,681        2,287      3,579      2,411      3,172      (5,398)     1,606
Extraordinary item, net of tax
effect.............................         --     (2,338)          --         --         --         --          --         --
                                    ---------- -----------  ---------- ---------- ---------- ----------  -------------- ------
     Net income (loss)............. $    1,093 $     (657)  $    2,287 $    3,579 $    2,411 $    3,172  $   (5,398)   $ 1,606
                                    ========== ===========  ========== ========== ========== ==========  ============== ======
Income before extraordinary item -
Basic.............................. $     0.12 $      0.16  $    (0.20)$     0.30 $     0.18 $      0.23 $     (0.44)  $  0.10
Extraordinary item, Net of tax
effect............................. $      --  $     (0.30) $      --  $       -- $      --  $       --  $       --    $    --
Net income (loss) - Basic.......... $     0.12 $     (0.14) $    (0.20)$     0.30 $     0.18 $      0.23 $     (0.44)  $  0.10
                                    ========== ===========  ========== ========== ========== =========== ============== =======
Income before extraordinary
   item - diluted.................. $     0.11 $      0.08  $    (0.20)$     0.27 $      0.17$      0.21 $     (0.44)  $  0.10
Extraordinary item, net of tax
effect............................. $      --  $     (0.22) $      --  $      --  $       --
Net income (loss) - Diluted........ $     0.11 $      0.30  $    (0.20)$     0.27 $      0.17$      0.21 $     (0.44)  $  0.10
                                    ========== ===========  ========== ========== ============== ======= ============== =======
</TABLE>
<TABLE>
<CAPTION>

                                                                       AS A PERCENTAGE OF NET SALES
                                     -------------------------------------------------------------------------------------------
<S>                                  <C>           <C>         <C>          <C>         <C>        <C>         <C>        <C>

Net sales..........................       100.0%     100.0%      100.0%      100.0%     100.0%     100.0%      100.0%     100.0%
Cost of goods sold.................        87.0       87.9        88.5        90.0       88.7       88.9        89.2       89.4
                                    ------------   ----------  ----------   ----------  ---------  --------   ---------   ---------
     Gross profit..................        13.0       12.1        11.5        10.0       11.3       11.1        10.8       10.6
                                    ------------   ----------  ----------   ----------  ---------  --------   ---------   ---------
Selling, general and administrative
     expenses......................         8.0        7.4         7.0         5.5        6.9        6.4         7.3        6.6
Depreciation and amortization......         1.2        1.2         1.1         0.8        1.2        1.3         1.4        1.0
Restructuring charge...............         --         --          --          --         --         --          7.0       (0.7)
                                    ------------   ----------  ----------   ----------  ---------  --------   ---------   ---------
     Total operating expenses......         9.2        8.6         8.1         6.3        8.1        7.7        15.7        6.9
                                    ------------   ----------  ----------   ----------  ---------  --------   ---------   ---------
     Operating income (loss).......         3.8        3.5         3.4         3.7        3.2        3.4        (4.9)       3.7
Interest expense...................         1.7        0.8         0.5         0.5        0.4        0.3         0.3        0.4
                                    ------------   ----------  ----------   ----------  ---------  --------   ---------   ---------
     Income (loss) before income
        taxes and extraordinary item        2.1        2.7         2.9         3.2        2.8        3.1        (5.2)       3.3
Income tax expense (benefit).......         1.0        1.3         1.4         1.6        1.4        1.5        (2.2)       2.6
                                    ------------   ----------  ----------   ----------  ---------  --------   ---------   ---------
Income (loss) before extraordinary
item ..............................         1.1        1.4         1.5         1.6        1.4        1.6        (3.0)       0.7
Extraordinary item, net of  tax
effect.............................         --        (1.9)        --          --         --         --          --         --
                                    ------------   ----------  ----------   ----------  ---------  --------   ---------   ---------
     Net income (loss).............         1.1%      (0.5)%       1.5%        1.6%       1.4%       1.6%       (3.0)%      0.7%
                                    ============   ==========  ==========   ==========  =========  ========   =========   =========
</TABLE>

                                      -22-

<PAGE>


     Our quarterly net sales and operating results may vary significantly as a
result of a variety of factors, including, but not limited to, changes in the
supply and demand for commercial mid-range servers, peripheral equipment,
software and related services, the cost, timing and integration of acquisitions,
the addition or loss of a key vendor or customer, the introduction of new
technologies, changes in manufacturers' prices, price protection policies or
stock rotation privileges, changes in market development funds, changes in the
level of operating expenses, product supply shortages, disruption of warehousing
or shipping channels, inventory adjustments, increases in the amount of accounts
receivable written off, price competition, changes in the mix of products sold
through distribution channels and in the mix of products purchased by OEMs.
Operating results could also be adversely affected by general economic and other
conditions affecting the timing of customer orders and capital spending, a
downturn in the market for commercial mid-range servers, and order cancellations
or rescheduling. In addition, the computer distribution industry experiences
both seasonal trends and, within each quarter, tends to sell a substantial
amount of its products at the end of the quarter. For example, our largest
vendor, IBM, sells up to 35% of its products in the last calendar quarter.
Historically, a substantial portion of our net sales has been made in the last
few days of a quarter. Accordingly, our quarterly results of operations are
difficult to predict and delays in the completion of sales near the end of a
quarter could cause quarterly net sales to fall substantially short of
anticipated levels and, to a greater degree, adversely affect profitability.
Because of the many factors that can affect our operating results, we believe
that period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
Our future operating results are expected to continue to fluctuate as a result
of these and other factors, which could have a material adverse effect on our
business, financial condition and results of operations.

LIQUIDITY AND CAPITAL RESOURCES

     We have required substantial capital to finance accounts receivable,
inventories, capital expenditures and acquisitions. In the past, we have
financed these requirements primarily through borrowings under credit
facilities, cash generated from operations, the issuance and sale of Common and
Series A Preferred Stock and Subordinated Notes.

     In September 1998, we agreed with IBMCC to increase the IBMCC Credit
Facility line from $75.0 million to $125.0 million. For the period December 27,
1999 through March 31, 2000 the line was temporarily increased to $145 million.
Product purchases from IBM and cash advances from IBMCC are directly charged to
the credit line and are paid by us based on payment terms outlined in the IBMCC
Credit Facility. Borrowings under the IBMCC Credit Facility are based on
eligible accounts receivable and inventory, as defined. The IBMCC Credit
Facility expires on August 31, 2000 and contains restrictive covenants which
include the maintenance of minimum current, tangible net worth and net profit
after tax to revenue ratios, as defined. As of December 31, 1998 and 1999, we
had outstanding obligations under the IBMCC Credit Facility of $113.7 million
and $117.7 million, respectively. Of the total outstanding borrowings, $6.2
million and $6.0 million represented cash advances at December 31, 1998 and
1999, respectively. Cash advances bear interest at the prime rate plus 1.875%
(10.375% at December 31, 1999). Based on eligible assets, as of December 31,
1999, we had additional borrowings available under the IBMCC Credit Facility of
approximately $24.4 million.

     On April 23, 1999, we executed an amendment to the IBMCC Credit Facility,
pursuant to which we obtained a loan of $5,000,000 to consummate the Enlaces
transaction. On September 8, 1998, we executed another amendment to the IBMCC
Credit Facility, under which we obtained an additional loan of $15,000,000 to
consummate the REAL transaction. These loans bear interest at prime plus 2.0%
(10.5% at December 31, 1999) and are due in monthly installments through
September 2000.

     Operating activities for 1999 provided cash in the amount of $21.3
million.  For this period, cash was provided primarily as a result of a decrease
in accounts  receivable of $12.3 million.  Favorable accounts payable terms with
IBMCC and increased  leasing of product purchases by customers through IBMCC and
third party leasing  vendors  resulted in the  generation  of cash in 1999.  For
1998, net cash of $15.6 million was provided. This was primarily attributable to
growth in sales and the  resulting  increases  in  accounts  payable and accrued
expenses, offset by an increase in accounts receivable.

     Investing activities for 1999 used cash in the amount of $16.8 million. For
this period, cash was used for the purchase of Enlaces and Infinite and
continuing leasehold and computer hardware and software investments made at the
headquarters, sales office and warehouse and integration center sites. For 1998,
$23.7 million was used in investing activities, principally for the acquisitions
of REAL and UDC as well as infrastructure additions.

                                      -23-

<PAGE>


     In 1999, cash used by financing activities was $510,000, which resulted
primarily from borrowings and payments under the IBMCC Credit Facility. Cash
provided by financing activities for 1998 was $11.0 million, consisting of a
$15.0 million loan from IBMCC and proceeds from a secondary offering of our
common stock of $28.6 million offset by payments on the Subordinated Notes, SMS
Seller Notes and the IBMCC Credit Advance totaling $32.6 million.

     We believe we have sufficient funds, or alternate sources of funds, to
carry on our business as presently conducted through 2000.

BACKLOG

     Although we receive purchase orders for products to be delivered to
customers over a specified time period, there can be no assurance that such
orders will result in sales, as most orders are subject to revision or
cancellation without penalty. Consequently, we do not believe that backlog is a
meaningful indicator of sales for future periods.

INFLATION

     We do not believe that inflation in the United States, Canada or Mexico in
recent years has had a significant effect on our results of operations.

RECENT PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS
No. 137, is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives which meet the definition of a hedge transaction are recorded each
period in either earnings or other comprehensive income. We believe that the
impact of the pronouncement will be minimal, as historically, we have not
entered into any derivative or hedging transactions.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
           ----------------------------------------------------------

MARKET RISKS

     Certain of the Company's operations, primarily its international
subsidiaries, occasionally purchase and sell products in currencies other than
their functional currencies. This subjects the Company to the risks associated
with fluctuations of foreign currency exchange rates. The Company reduces this
risk by utilizing natural hedging (offsetting receivables and payables). The
Company does not hedge either its investments in its foreign operations or its
floating interest rate exposures.

     The Company's primary interest rate exposure results from the revolving
credit facility's floating rate pricing mechanism. If interest rates were to
increase 100 basis points from March 20, 2000 levels, the additional annual
expense would be approximately $200,000 on a pre-tax basis.

                                      -24-

<PAGE>


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
          -------------------------------------------



                        REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and Stockholders
Savoir Technology Group, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 56 present fairly, in all material
respects, the consolidated financial position of Savoir Technology Group, Inc.
and its subsidiaries at December 31, 1999 and 1998, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 14(a)(2)
on page 56 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Austin, Texas
January 27, 2000,
except for Note 16, as to
which the date is March 2, 2000


                                      -25-

<PAGE>


                 SAVOIR TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)



<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                     ---------------------------------------
                                                                              1998                1999
                                                                      ------------------   -----------------
<S>                                                                   <C>                  <C>
                               ASSETS
Current assets:
     Cash........................................................     $           5,820    $           9,863
     Trade accounts receivable, net of allowance for doubtful
       accounts of $2,036 in 1999 and $1,100 in 1998.............               156,953              145,328
     Other receivables...........................................                11,443               14,331
     Inventories.................................................                38,913               36,986
     Other current assets........................................                 4,574                6,588
                                                                      -----------------    -----------------
         Total current assets....................................               217,703              213,096
Property and equipment, net......................................                 5,526                5,998
Excess of cost over acquired net assets and other intangibles, net               83,810              100,969
Other assets.....................................................                 1,863                4,630
                                                                      -----------------    -----------------
             Total assets........................................     $         308,902    $         324,693
                                                                      =================    =================

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Notes payable...............................................     $          21,240    $          21,018
     Current portion of long-term debt...........................                 1,020                2,969
     Accounts payable............................................               184,915              177,161
     Accrued expenses and other current liabilities..............                 7,073                6,379
                                                                      -----------------    -----------------
         Total current liabilities...............................               214,248              207,527
Long-term debt, less current portion.............................                 1,087                4,376
                                                                      -----------------    -----------------
             Total liabilities...................................               215,335              211,903
                                                                      -----------------    -----------------

Commitments and contingencies (Notes 4, 9 and 11)................

Stockholders' equity
     Preferred stock, $0.01 par value; 10,000,000 shares
         authorized; issued and outstanding: Series A:  1,850,012
         shares in 1999 and 1,986,500 shares in 1998; Series B:  10
         shares in 1999 and 1998; liquidation preference: $17,691
         in 1999 and $18,996 in 1998.............................                    20                   19
     Common stock, $0.01 par value; 25,000,000 shares authorized;
         issued and outstanding; 13,165,311 shares in 1999 and
         10,698,010 shares in 1998...............................                   107                  132
     Shareholder note receivable.................................                    --               (2,513)
     Additional paid-in capital..................................                91,810              113,434
     Retained earnings...........................................                 1,630                1,718
                                                                      -----------------    -----------------
         Total stockholders' equity..............................                93,567              112,790
                                                                      -----------------    -----------------
              Total liabilities and stockholders' equity.........     $         308,902    $         324,693
                                                                      =================    =================

</TABLE>




          THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
          FINANCIAL STATEMENTS.

                                      -26-

<PAGE>


                 SAVOIR TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                     ------------------------------------------------------
                                                            1997               1998               1999
                                                     --------------     ---------------    ---------------
<S>                                                  <C>                 <C>                <C>

Net sales.......................................     $      237,884      $      593,341     $      767,243
Cost of goods sold..............................            205,089             526,113            683,292
                                                     --------------      --------------     --------------

     Gross profit...............................             32,795              67,228             83,951

Selling, general and administrative expenses....             25,969              46,002             61,083

Restructuring charge............................                 --                  --             11,287
                                                     --------------      --------------     --------------

     Operating income...........................              6,826              21,226             11,581

Interest expense................................              3,181               4,318              2,842
                                                     --------------      --------------     --------------

     Income before income taxes and
        extraordinary item......................              3,645              16,908              8,739

Income tax expense..............................                335               8,268              6,948
                                                     --------------      --------------     --------------

Income before extraordinary item................              3,310               8,640              1,791

     Extraordinary item, net of tax effect of
        $2,246..................................                 --              (2,338)                --
                                                     --------------      ---------------    --------------

        Net income..............................     $        3,310      $        6,302     $        1,791
                                                     ==============      ==============     ==============

Net income per share:
     Income before extraordinary item-basic.....     $         0.57      $         0.37     $         0.03

     Extraordinary item, net of tax effect......                 --               (0.27)                --
                                                     --------------      ---------------    --------------

     Net income per share-basic.................     $         0.57      $         0.10     $         0.03
                                                     ==============      ==============     ==============

     Income before extraordinary item-diluted...     $         0.55      $         0.34     $         0.03

     Extraordinary item, net of tax effect......                 --               (0.25)                --
                                                     --------------      ---------------    --------------

     Net income per share-diluted...............     $         0.55      $         0.09     $         0.03
                                                     ==============      ==============     ==============

Number of shares used in per share calculations:
     Basic......................................              4,902               8,714             12,387
                                                     ==============      ==============     ==============

     Diluted....................................              5,976               9,343             12,951
                                                     ==============      ==============     ==============

</TABLE>


          THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
          FINANCIAL STATEMENTS.

                                      -27-

<PAGE>


                 SAVOIR TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                          Preferred Stock         Common Stock       Additional   Retained  Shareholder
                                          ---------------         ------------        Paid-In     Earnings     Note
                                         Shares    Amount     Shares      Amount      Capital    (Deficit)   Receivable     Total
                                         ------    ------     ------      ------     ----------  ---------   ----------  -----------
<S>                                    <C>        <C>       <C>         <C>          <C>         <C>         <C>         <C>

Balances, January 1, 1997.............        --  $     --   4,488,131  $       45   $   17,914  $   (2,245) $       --  $   15,714
   Exercise of stock options..........        --        --      24,375          --           74          --          --          74
   Issuance of common stock in
     business combinations............        --        --     809,898           8        6,817          --          --       6,825
   Issuance of common stock under
     employee stock purchase plan.....        --        --      31,044           1          255          --          --         256
   Issuance of preferred stock and
     common stock warrants, net of
     offering .......................  2,242,500        22          --          --       19,110          --          --      19,132
   Dividend on preferred stock .......        --        --       4,230          --           50        (100)         --         (50)
   Common stock warrants issued in
     connection with debt offerings...        --        --          --          --        1,330          --          --       1,330
   Tax benefit from exercise of stock
     options..........................        --        --          --          --          489          --          --         489
   Net income.........................        --        --          --          --           --       3,310          --       3,310
                                        --------  --------   ---------  ----------   ----------  ----------  ----------  ----------

Balances, December 31, 1997........... 2,242,500        22   5,357,678          54       46,039         965          --      47,080
   Exercise of stock options..........        --        --      54,611           1          308          --          --         309
   Issuance of common stock in
     business combinations............        --        --   1,193,510          12        9,727          --          --       9,739
   Issuance of common stock under
     employee stock purchase plan.....        --        --      33,773          --          297          --          --         297
   Issuance of common stock under
     secondary offering...............        --        --   3,000,000          30       28,559          --          --      28,589
   Dividend on preferred stock........        --        --     171,252           2        1,801      (1,803)         --          --
   Additional costs related to
     issuance of preferred stock......        --        --          --          --         (219)         --          --        (219)
   Conversion of preferred stock to
     common stock.....................  (256,000)       (2)    262,853           2           --          --          --          --
   Dividend on preferred stock........        --        --     612,533           6        3,793      (3,799)         --          --
   Cash dividend on preferred stock ..        --        --          --          --           --         (35)         --         (35)
   Exercise of warrants...............        --        --      11,800          --          114          --          --         114
   Revalue of warrants in connection with
     debt offering....................        --        --          --          --        1,391          --          --       1,391
   Net income.........................        --        --          --          --           --       6,302          --       6,302
                                        --------  --------   ---------  ----------   ----------  ----------  ----------  ----------

Balances, December 31, 1998........... 1,986,500        20  10,698,010         107       91,810       1,630          --      93,567
   Exercise of stock options..........        --        --     583,614           6        2,927          --          --       2,933
   Issuance of common stock in
     business combinations............        --        --   1,479,322          15       15,941          --          --      15,956
   Issuance of common stock under
     employee stock purchase plan.....        --        --      84,428           1          622          --          --         623
   Dividend on preferred stock........        --        --     156,790           1        1,575      (1,576)         --          --
   Conversion of preferred stock to
     common stock.....................  (136,488)       (1)    163,147           2            6          (7)         --          --
   Cash dividend on preferred stock...        --        --          --          --           --        (120)         --        (120)
   Tax benefit from exercise of stock
     options..........................        --        --          --          --          553          --          --         553
   Shareholder note receivable........        --        --          --          --           --          --      (2,513)     (2,513)
   Net income.........................        --        --          --          --           --       1,791          --       1,791
                                        --------  ---------   ---------  ----------   ----------  ----------  ----------  ----------

Balances, December 31, 1999...........  1,850,012 $      19  13,165,311  $      132   $  113,434  $    1,718  $   (2,513) $  112,790
                                        ========= =========  ==========  ==========   ==========  ==========  =========== ==========
</TABLE>


          THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
          FINANCIAL STATEMENTS.

                                      -28-

<PAGE>


                 SAVOIR TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                             ---------------------------------------------------
                                                                    1997             1998             1999
                                                             ---------------    -------------   ---------------
<S>                                                          <C>               <C>              <C>

Cash flows from operating activities:
   Net income..........................................      $         3,310   $        6,302   $        1,791
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Write down of fixed assets and intangibles......                   --               --            7,492
       Depreciation and amortization...................                2,670            6,331            8,886
       Extraordinary loss on retirement of debt........                   --            2,773
       Loss on sale of equipment.......................                   --              117                1
       Provision for doubtful accounts receivable......                  472              842            1,702
       Deferred taxes..................................               (1,551)             (59)            (171)
       Accretion on long-term debt obligations.........                  344              732               --
       Change in assets and liabilities:
         Accounts receivable...........................              (23,282)         (77,229)          12,273
         Inventories...................................               (7,505)          (2,089)           1,848
         Other current assets..........................               (1,564)          (8,570)          (4,451)
         Accounts payable..............................               32,312           71,080           (9,318)
         Accrued expenses and other liabilities........                  655           15,331            1,271
                                                             ---------------   --------------   --------------

             Net cash provided by operating activities.                5,861           15,561           21,324
                                                             ---------------   --------------   --------------
Cash flows from investing activities:
   Acquisition of businesses, net of cash acquired.....              (35,166)         (18,573)          (9,977)
   Proceeds from sale of fixed assets..................                   --                6               11
   Acquisition of other assets.........................                 (988)          (2,665)          (2,660)
   Acquisition of property and equipment...............               (1,592)          (2,423)          (4,395)
   Proceeds from sale of investment....................                   --               --              250
                                                             ---------------   --------------   --------------

             Net cash used in investing activities.....              (37,746)         (23,655)         (16,771)
                                                             ----------------  ---------------  ---------------
Cash flows from financing activities:
   Proceeds from short-term borrowings.................               72,761          301,023          487,532
   Payments on short-term borrowings...................              (81,175)        (301,440)        (487,654)
   Payments on long-term debt obligations..............                 (236)         (32,643)          (1,311)
   Proceeds from issuance of common stock .............                   --           28,589               --
   Proceeds from exercise of stock options and warrants                   74              423              420
   Proceeds from short term loan.......................                   --           15,000            5,000
   Payments on short-term loan.........................                   --               --           (5,000)
   Proceeds from employee stock purchase plan..........                  256              297              623
   Proceeds from issuance of long-term debt net of
         issuance costs................................               23,099               --               --
   Proceeds from issuance of preferred stock and warrants,
         net...........................................               19,082             (219)              --
   Proceeds from equipment loans.......................                  559               --               --
   Payment of cash dividend on preferred stock ........                   --              (35)            (120)
                                                             ---------------   ---------------  ---------------

             Net cash provided by (used in) financing
             activities................................               34,420           10,995             (510)
                                                             ---------------   --------------   ---------------
Net increase in cash...................................                2,535            2,901            4,043
Cash--beginning of period...............................                 384            2,919            5,820
                                                             ---------------   --------------   --------------
Cash--end of period.....................................      $        2,919   $        5,820   $        9,863
                                                             ===============   ==============   ==============
</TABLE>


          THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
          FINANCIAL STATEMENTS.

                                      -29-

<PAGE>



                 SAVOIR TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Nature of Operations:

     Savoir Technology Group, Inc. (the "Company"), formerly Western Micro
Technology, Inc., is a value-added distributor of commercial mid-range servers,
peripheral equipment (including wireless networking equipment, storage products,
printers and terminals) and software. The Company believes that it is one of the
leading distributors of IBM's AS/400 and RS/6000 commercial mid-range servers.
The Company also distributes commercial mid-range servers, peripheral equipment
and software manufactured by NCR, Aironet and Telxon. The Company primarily
distributes commercial mid-range servers and related products to VARs who
generally incorporate commercial applications software and sell integrated
computer systems to end user customers. The Company also integrates and
configures personal computers, workstations and departmental servers for OEMs
and VARs, and provides and remarkets installation and technical support
services. The Company's primary sales offices and distribution centers, from
which it ships products to customers throughout the United States, are located
in Northern California and San Antonio, Texas. In addition to these locations,
the Company has distribution centers in Massachusetts, Southern California,
Georgia and Illinois, sales offices throughout the United States, Mexico and
Canada.

     Consolidated Financial Statement Presentation:

     The  consolidated  financial  statements  include  the  accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.

     Estimates:

     In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

     Certain Risks and Concentrations:

     The Company maintains cash balances with four major financial institutions.
The Company sells its products to a broad geographic and demographic base of
customers, extends trade credit, and generally does not require supporting
collateral. To reduce credit risk, the Company performs ongoing credit
evaluations of its customers, maintains an allowance for doubtful accounts and
has credit insurance. One customer accounted for 16% and 22% of the outstanding
accounts receivable balance at December 31, 1999 and 1998, respectively. No
other customer accounted for more than 10% of the outstanding accounts
receivable balance at December 31, 1999 and 1998.

     Revenues are concentrated with a relatively limited number of customers
and the providers of certain systems are concentrated among a few manufacturers.
The  loss  of  a  major  customer  or  the   interruption  of  certain  supplier
relationships  could adversely affect operating results.  During the years ended
December 31, 1997, 1998 and 1999,  approximately 65%, 80% and 82%, respectively,
of the Company's revenue was generated from the sale of products  purchased from
one  of the  Company's  vendors,  International  Business  Machines  Corporation
("IBM").

     Fair Value of Financial Instruments:

     The carrying amounts of the Company's financial instruments including cash,
accounts receivable, notes payable and accounts payable approximate fair value
due to their short maturity. Based on borrowing rates currently available to the
Company for similar debt, the carrying value of long-term debt approximates fair
value.

                                      -30-

<PAGE>

     Revenue Recognition:

     The Company records revenue, net of allowance for estimated returns, at the
time of product shipment.

     Inventories:

     Inventories, consisting primarily of purchased product held for resale, are
stated at the lower of cost or net realizable value. Cost is determined using
average and specific cost methods. The Company's inventories include high
technology computer systems that may be specialized in nature and subject to
rapid technological obsolescence. The Company does, however, have certain return
privileges with many of its vendors. While the Company attempts to minimize the
required inventories on hand and considers technological obsolescence when
estimating required reserves to reduce recorded amounts to market values, it is
reasonably possible that such estimates could change in the near term.

     Property and Equipment:

     Property and equipment are recorded at cost. Depreciation is recorded on a
straight-line basis over the estimated useful lives, typically two to ten years.
Leasehold improvements are amortized over the useful lives of the improvements
or lease term, whichever is shorter.

     When assets are sold or retired, the cost and related accumulated
depreciation are removed from the accounts and the resulting gains or losses are
included in income.

     Excess of Cost over Acquired Net Assets and Other Intangibles:

     The excess of cost over acquired net assets is being amortized on a
straight-line basis over 15 and 20 year periods. Other intangibles are being
amortized on a straight-line basis over their estimated useful lives which is
typically 3 to 5 years. Amortization expense was $1,400,000, $4,636,000 and
$6,296,000 in 1997, 1998 and 1999, respectively. The Company reviews the
carrying value of excess costs over acquired net assets and other intangibles
for impairment whenever events or changes in circumstances indicate the carrying
amount may not be recoverable. At December 31, 1999, the net unamortized balance
of goodwill is not considered to be impaired.

     Income Taxes:

     The Company accounts for its income taxes using the liability method under
which deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts expected to be realized.

     Market Development Funds:

     Primary vendors provide the Company with market development funds in an
amount that is generally based on purchases of the vendors' products and
services. These funds typically range from 1% to 3% of such purchases and are
required to be used to market and promote the vendors' products and services.
The Company records these funds when earned as a reduction to offset direct
costs of marketing, selling, general, and administrative expenses.

     Stock-Based Compensation:

     The Company accounts for stock-based compensation using the intrinsic value
method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock. The Company
has adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation."

                                      -31-

<PAGE>


     Net Income (Loss) Per Share:

     Basic earnings per share ("EPS") is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed giving effect to all
dilutive potential common shares that were outstanding during the period.
Dilutive potential common shares consist of incremental shares issuable upon
exercise of stock options and warrants and conversion of preferred stock
outstanding.

     Recent Pronouncements:

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS
No. 137, is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives which meet the definition of a hedge transaction are recorded each
period in either earnings or other comprehensive income. The Company believes
that the impact of the pronouncement will be minimal, as historically, the
Company has not entered into any derivative or hedging transactions.

     Reclassifications:

     Certain amounts in the financial statements have been reclassified to
conform with the current year's presentation. These classifications did not
change previously reported total assets, liabilities, stockholders' equity or
net income.

2.   LONG LIVED ASSETS:

     Property and equipment consist of the following (In thousands):

<TABLE>

<CAPTION>
                                                                             December 31,
                                                                       ------------------------
                                                                          1998           1999
                                                                       ---------       --------
<S>                                                                    <C>             <C>
     Computer and office equipment...............................      $  10,119       $ 10,995
     Leasehold improvements......................................          1,482          1,937
                                                                       ---------       --------
                                                                          11,601         12,932
     Accumulated depreciation and amortization...................         (6,075)        (6,934)
                                                                       ---------       --------
                                                                       $   5,526       $  5,998
                                                                       =========       ========
     Excess of cost overacquired net assets and other intangibles
     (In thousands):

                                                                                December 31,
                                                                       -------------------------
                                                                           1998          1999
                                                                       ----------      ----------
     Excess of cost over net assets acquired.....................      $  85,544      $  108,291
     Other intangibles...........................................          4,633           3,636
                                                                       ----------      ----------
                                                                          90,177         111,927
     Accumulated amortization....................................         (6,367)        (10,958)
                                                                       ----------      ----------
                                                                       $  83,810      $  100,969
                                                                       ==========      ==========
</TABLE>

                                      -32-

<PAGE>

3.   BORROWING ARRANGEMENTS:

     Notes Payable (In thousands):

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                       -------------------------
                                                                            1998            1999
                                                                       ---------       ---------
<S>                                                                    <C>             <C>
     Working capital line........................................      $   6,228       $   6,018
     Other.......................................................         15,012          15,000
                                                                       ---------       ---------
                                                                       $  21,240       $  21,018
                                                                       =========       =========
</TABLE>

     The Company has an inventory and working capital financing agreement (the
"IBMCC Credit Facility") with IBM Credit Corporation ("IBMCC"), an affiliate of
IBM, whereby purchases from IBM and cash advances from IBMCC are directly
charged to the IBMCC Credit Facility and are paid by the Company based on
payment terms outlined in the agreement. Total borrowings under the IBMCC Credit
Facility are based on eligible accounts receivable and inventory, as defined,
and are limited to $125,000,000. For the period December 27, 1999 through
March 31, 2000 the line was temporarily increased to $145,000,000. The IBMCC
Credit Facility expires on August 31, 2000 and contains restrictive covenants
which include the maintenance of minimum current ratio, tangible net worth and
net profit after tax to revenue ratios, as defined, and is collateralized by
substantially all assets of the Company. As of December 31, 1998 and 1999, the
Company had outstanding borrowings under this agreement of $113,697,000 and
$117,671,000, respectively. Of the total outstanding borrowings, $6,228,000 and
$6,018,000 represented cash advances at December 31, 1998 and 1999,
respectively, with the remainder included in accounts payable which amounted to
$107,469,000 and $111,652,000, respectively. Cash advances bear interest at
prime (8.5% and 7.75% as of December 31, 1999 and 1998, respectively) plus
1.875%. Based on eligible assets, as of December 31, 1999, the Company had
borrowings available of approximately $24,356,000. The weighted average interest
rates for the Company's cash advances during 1998 and 1999 were 10.3% and 9.8%,
respectively.

     On September 8, 1998, the Company executed an amendment to its credit
facility with IBMCC, pursuant to which the Company obtained a loan of
$15,000,000 to consummate the REAL transaction (See Note 11). On April 23, 1999,
the Company executed an additional amendment to the IBMCC Credit Facility,
pursuant to which the Company obtained an additional loan of $5,000,000 to
consummate the Enlaces transaction (See Note 11). These loans, included in other
notes payable, bear interest at prime (8.5% and 7.75% at December 31, 1999 and
1998, respectively) plus 2.0% and are due in monthly installments through
September 2000. The balance remaining at December 31, 1999 was $15,000,200. In
January 2000, the maturity date of each of the $15,000,000 and $5,000,000 loans
was amended and extended through June 2001.

     Long-Term Debt (In thousands):

<TABLE>

<CAPTION>
                                                                              December 31,
                                                                       ------------------------
                                                                          1998           1999
                                                                       ---------      ---------
<S>                                                                    <C>            <C>
     Enlaces note payable........................................      $      --      $   5,000
     Various notes payable.......................................          2,107          2,345
                                                                       ---------      ---------
                                                                           2,107          7,345
     Less amounts due within one year............................         (1,020)        (2,969)
                                                                       ---------      ---------
     Long-term debt due after one year...........................      $   1,087      $   4,376
                                                                       =========      =========
</TABLE>

     Principal payments for long-term debt at December 31, 1999 are as follows:

<TABLE>
        <S>                                                                         <C>

        2000                                                                        $     2,969
        2001....................................................................          3,692
        2002....................................................................            174
        2003....................................................................            127
        2004....................................................................            383
                                                                                    -----------
                                                                                    $     7,345
                                                                                    ===========
</TABLE>

                                      -33-

<PAGE>

     On April 23, 1999, in connection with the purchase of Enlaces (see Note
11), the Company recorded $5,000,000 in long-term debt due in annual payments
through April 2001.

     On May 15, 1998, in connection with the acquisition of assets from
UniDirect Corporation (see Note 11) the Company issued a $1,700,000 promissory
note to UniDirect. The promissory note bears interest at 8.25% and is payable
over a two-year period.

4.  OPERATING LEASE COMMITMENTS:

     The Company leases its warehouse and office space under operating leases.
These leases expire on various dates from 2000 through 2004 and provide for
payment of insurance, maintenance and property taxes. In addition, the Company
leases certain equipment under operating leases and rental arrangements
extending for periods of up to seven years.

     The total rent expense, net of sublease income, was $1,600,000, $2,169,000
and $2,275,000 for 1997, 1998 and 1999, respectively.

     Future minimum rental commitments for all noncancelable operating leases
are as follows (In thousands):

     Years Ending December 31,
     -------------------------
     2000                                                             $    3,116
     2001.........................................................         2,659
     2002.........................................................         2,515
     2003.........................................................         1,745
     2004.........................................................           678
     Thereafter...................................................           423
                                                                      ----------
                                                                      $   11,136
                                                                      ==========

5.   INCOME TAXES:

     The provision for (benefit from) income taxes consist of the following (In
thousands):

<TABLE>

<CAPTION>
                                                     Federal       State        Foreign       Total
                                                     -------       -----        -------       -----

       <S>                                         <C>          <C>           <C>          <C>
       1999:
              Current........................      $   5,013    $     882     $   1,224    $   7,119
              Deferred.......................           (171)           0             0         (171)
                                                   ---------    ---------     ---------    ---------
                                                   $   4,842    $     882     $   1,224    $   6,948
                                                   =========    =========     =========    =========

       1998:
              Current........................      $   6,055    $   1,585     $     687    $   8,327
              Deferred.......................            (44)         (15)           --          (59)
                                                   ---------     --------      --------     --------
                                                   $   6,011    $   1,570     $     687    $   8,268
                                                   ========      ========      =======         =====
       1997:
              Current........................      $   1,578    $     308     $      --    $   1,886
              Deferred.......................         (1,301)        (250)           --       (1,551)
                                                   ---------     --------      --------      --------
                                                   $     277    $      58     $      --    $     335
                                                   =========     ========      ========     ========
</TABLE>


                                      -34-

<PAGE>

     The Company's effective tax rate differs from the U.S. federal statutory
tax rate as follows:

<TABLE>
<CAPTION>
                                                                1997       1998       1999
                                                                ----       ----       ----
<S>                                                             <C>        <C>        <C>
       Statutory tax (benefit) rate.......................        34%        35%        34%
       Goodwill and other nondeductible expenses..........        15         10         28
       Benefit resulting from utilization of federal NOL..       (17)        --         --
       State taxes, net of federal benefit................         8          6         10
       Change in valuation reserve........................       (35)        --         --
       Foreign rates in excess of federal statutory rate..        --         --          6
       Other..............................................         4         (2)         1
                                                                -----      -----       ----
                                                                   9%        49%        79%
                                                                =====      =====       ====

</TABLE>

     The components of the net deferred tax asset (included in other current
assets) are as follows (In thousands):

<TABLE>
<CAPTION>

                                                                                 December 31,
                                                                        ---------------------------
                                                                             1998           1999
                                                                        -----------       ---------
<S>                                                                       <C>            <C>
        Deferred tax assets:
        Accounts receivable reserve.................................      $     443      $     469
        Accumulated depreciation and amortization...................            (13)           407
        Uniform inventory capitalization............................            216            113
        Inventory reserve...........................................            399            432
        Other nondeductible reserves................................            319            162
        Other.......................................................            246            197
                                                                        -----------    -----------
                                                                          $   1,610      $   1,780
                                                                        ===========    ===========
</TABLE>

6.   STOCKHOLDERS' EQUITY:

     Stockholders' Equity:

     On April 29, 1998, the Company completed the public offering of 3,000,000
shares of its Common Stock at a price of $10.50 per share. After deducting the
underwriting discount and offering expenses, the net proceeds to the Company
were $28,589,000. The Company used the proceeds of the offering to reduce its
outstanding debt obligations, exclusive of the outstanding cash advances on the
IBMCC Credit Facility.

     Preferred Stock Private Placement:

     On September 19, 1997, the Company completed the private placement of
1,121,250 units (the "Units"). Each Unit consists of two shares of the Company's
Series A Preferred Stock, par value $0.01 per share, for an aggregate of
2,242,500 shares, at a purchase price of $9.5625 per share, and one Common Stock
purchase warrant (which expires in five years), par value $0.01 per share, for
an aggregate of 1,121,250 shares, at a purchase price of $.125 per warrant and
exercisable at a price of $9.6875 per share for a total purchase price of $19.25
per Unit. The Series A Preferred Stock has an eight percent (8%) cumulative
dividend, payable in cash or Company Common Stock at the election of the Company
and a potential special dividend should the price of the Company's Common Stock
fall below $9.5625 on each anniversary of the private placement. The special
dividend may not exceed $1.9125 per share each year. The Series A Preferred
Stock is convertible at the option of the Holders, at any time, into Common
Stock of the Company. The conversion price is $9.3125 and is subject to
adjustment if the Company issues any stock or securities at less than the
conversion price. During the year ended December 31, 1998 and 1999, 256,000 and
136,488, respectively, of these shares were converted into 262,853 and 163,147,
respectively, shares of the Company's common stock. Subsequent to September 19,
1998, the Company may redeem the Preferred Stock provided that the Company's
Common Stock is trading at one hundred fifty percent (150%) of the conversion
price (as adjusted) and the daily trading volume of the Company's stock is in
excess of 125,000 shares, as defined. Subsequent to September 19, 2001, the
Company may redeem the Preferred Stock at the conversion price (as adjusted). In
connection with the transaction, the Company issued warrants for the purchase of
112,125 shares of Common Stock to placement agents. The warrants are exercisable
at $9.6875 per share and expire in five years.

                                      -35-

<PAGE>

Net proceeds totaled approximately $18,900,000. The Company used the proceeds to
pay down its line of credit and for general working capital purposes.

     On September 19, 1998, the Company declared a special dividend, payable in
common stock, due to the holders of the Company's Series A Preferred Stock. The
Company issued 612,533 shares of its common stock with a fair market value of
approximately $3,800,000. The dividend was paid as a result of the average
common stock price falling below $9.5625 in the five trading days prior to
September 19, 1998, as stipulated in the Series A Preferred Stock Agreement. At
a special shareholders' meeting held on April 6, 1999, the Company's
stockholders approved the amendment of certain provisions of its Series A
Preferred Stock. Included in the adopted changes was the elimination of the
special dividend provision, which potentially occurred on an annual basis
dependent on the average stock price of the Company's Common Stock falling below
a predetermined amount. Also included in the adopted changes was the lowering of
the conversion price of the Preferred Stock from $9.31 to $8.00 per share.

     Warrants:

     At December 31, 1998 and 1999, warrants were outstanding to purchase a
total of 1,721,575 shares of Common Stock at exercise prices ranging from $4.77
to $9.69 per share. The warrants, which were issued in connection with various
debt and equity financings, expire from 2002 to 2004. At December 31, 1998 and
1999, the Company had reserved 1,721,575 shares of Common Stock for issuance
upon exercise of these warrants. During the year ended December 31, 1998, 11,800
warrants were exercised. No warrants were exercised in 1999.

     Stock Option Plan:

     Under the terms of the 1987 and 1994 Stock Option Plans, the Company may
grant nonqualified or incentive stock options at prices not less than 85% and
100% of the market value at the grant date, respectively. To date, most options
have been granted at 100% of the market value as of the date of grant.
Generally, options vest and become exercisable in equal annual increments over
four years beginning one year after the date of grant and expire five years
after they become exercisable.

<TABLE>
<CAPTION>
                                                                                    Options Outstanding
                                                                          --------------------------------------
                                                              Shares                                     Total
                                                            Available     Number of     Price per         (in
                                                            for Grant       Shares        Share       thousands)
                                                            ---------     ---------     ---------     ----------
<S>                                                        <C>            <C>          <C>               <C>
Balances, January 1, 1997...........................               64       929,581    $2.00-$10.34    $  5,430
     Additional shares reserved.....................          700,000
     Options granted................................         (610,679)      610,679    $8.00-$12.75       6,506
     Options exercised..............................               --       (24,375)   $2.25-$7.00          (74)
     Options terminated.............................           79,875       (79,875)   $2.13-$12.25        (629)
                                                           ----------     ---------    ------------      -------
Balances, December 31, 1997.........................          169,260     1,436,010    $2.00-$12.75    $ 11,233
     Additional shares reserved.....................          925,000
     Options granted................................       (1,178,500)    1,178,500    $5.63-$13.00       9,846
     Options exercised..............................               --       (54,611)   $2.00-$9.00         (309)
     Options terminated.............................          123,500      (123,500)   $2.25-$13.00      (1,047)
                                                           ----------     ---------    ------------     --------
Balances, December 31, 1998.........................           39,260     2,436,399    $2.00-$13.00    $ 19,723
     Additional shares reserved.....................          700,000
     Options granted................................         (738,500)      738,500    $4.50-$11.44       4,866
     Options exercised..............................               --      (583,614)   $2.13-$10.25      (2,933)
     Options terminated.............................          332,250      (332,250)   $2.00-$13.00      (3,118)
     Plan shares expired............................           (6,875)       (5,125)        N/A             (57)
                                                           ----------     ---------    ------------      -------
Balances, December 31, 1999.........................          326,135     2,253,910    $2.00-$13.00    $ 18,481
                                                           ----------     ---------    ------------      -------
</TABLE>

     At December 31, 1999, there were 2,580,045 shares of Common Stock reserved
for issuance under the Company's stock option plans. Outstanding options for
991,507, 598,330 and 360,581 shares of Common Stock were exercisable, at
December 31, 1999, 1998 and 1997, respectively, at weighted average exercise
prices per share of $9.02, $6.43 and $5.44.

                                      -36-

<PAGE>

     Employee Stock Purchase Plan:

     The Company implemented an Employee Stock Purchase Plan (the "Plan") in
November 1995, under which 675,000 shares of common stock have been reserved for
issuance. The Plan is qualified under Section 423 of the Internal Revenue Code.
The Plan allows for the purchase of stock at 85% of the lower of the closing
stock price at the beginning or the end of each six-month purchase period. As of
December 31, 1999, 191,080 shares have been issued under this Plan.

     The following information concerning the Company's stock option and
employee stock purchase plans is provided in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company accounts for such plans
in accordance with APB No. 25 and related interpretations.

     The following table summarizes information with respect to stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                                          OUTSTANDING AND EXERCISABLE BY
                                            PRICE RANGE AS OF 12/31/99

------------------------------------------------------------------------------------------------------------------
                                      OPTIONS OUTSTANDING                            OPTIONS EXERCISABLE
------------------------------------------------------------------------------------------------------------------
                          NUMBER        WEIGHTED AVERAGE       WEIGHTED           NUMBER
 RANGE OF EXERCISE    OUTSTANDING AS        REMAINING          AVERAGE        EXERCISABLE AS    WEIGHTED AVERAGE
      PRICES            OF 12/31/99     CONTRACTUAL LIFE    EXERCISE PRICE      OF 12/31/99      EXERCISE PRICE
------------------------------------------------------------------------------------------------------------------

<S>                  <C>                <C>                <C>               <C>                <C>
$3.38-$4.625               81,221             7.34             $   3.89            46,221           $   3.38
$4.63-$4.63               375,000             9.80                 4.63                 0               0.00
$5.00-$5.44                56,250             6.00                 5.08            56,250               5.08
$5.63-$5.63               227,375             8.26                 5.63            73,314               5.63
$5.88-$8.50               233,875             7.31                 6.51           118,875               6.50
$8.53-$8.88                41,000             8.69                 8.66             9,250               8.74
$9.00-$9.00               333,000             7.81                 9.00           159,000               9.00
$9.06-$10.00              110,500             8.08                 9.61            42,750               9.65
$10.25-$10.25             237,250             8.09                10.25           179,000              10.25
$10.34-$13.00             558,439             7.72                11.71           306,847              11.47
                     ---------------------------------------------------------------------------------------------

$3.38-$13.00            2,253,910             8.12             $   8.22           991,507           $   9.02
</TABLE>


     The fair value of each option grant has been estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1997, 1998 and 1999:

<TABLE>
<CAPTION>

                                                            Group A                         Group B
                                                 ------------------------------  ---------------------------
                                                  1997      1998       1999       1997       1998       1999
                                                 -------  --------   --------   --------   --------   ------

<S>                                              <C>       <C>        <C>        <C>        <C>        <C>
       Risk-free interest rates............       6.30      4.96       5.88       6.39       5.14       6.00
       Expected life.......................      5 years   5 years    5 years    4 years    4 years    4 years
       Volatility..........................      75.00%    56.00%     186.55%    75.00%     56.00%     186.55%

</TABLE>

     The weighted average expected life was calculated based on the exercise
behavior of each group. Group A represents officers and directors who are a
smaller group holding a greater average number of options than other option
holders and who tend to exercise later in the vesting period. Group B are all
other option holders, virtually all of whom are employees. This group tends to
exercise earlier in the vesting period.

     The weighted average fair value of those options granted in 1997, 1998 and
1999 was $6.90, $4.27 and $6.26, respectively.


                                      -37-

<PAGE>

     The Company has also estimated the fair value for the purchase rights
issued under the Company's Employee Stock Purchase Plan under the Black-Scholes
valuation model using the following assumptions:

<TABLE>
<CAPTION>
                                                                 1997          1998         1999
                                                                ------        ------       ------
<S>                                                           <C>         <C>            <C>
      Risk-free interest rate..............................     5.46          5.41         6.00
      Expected life........................................   0.5 years    0.5 years     0.5 years
      Volatility...........................................    75.00%        56.00%       186.55%
</TABLE>

     The weighted average fair value of those purchase rights granted in 1997,
1998 and 1999 was $5.10, $3.56 and $5.80, respectively.

     The following pro forma net income information has been prepared following
the provisions of SFAS No. 123 (In thousands except per share data):

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                              ---------------------------------------
                                                                 1997          1998         1999
                                                                 ----          ----         ----
       <S>                                                    <C>          <C>           <C>

       Net income (loss)--pro forma........................     $ 1,624      $ (252)     $  1,227
                                                              ===========  ===========   ===========

       Basic net income (loss) per share--pro forma........      $ 0.23     $ (0.03)      $  0.10
                                                              ============ ============  ============

       Diluted net income (loss) per share--pro forma......      $ 0.21     $ (0.03)      $  0.09
                                                              ============ ============  ============
</TABLE>

     The above pro forma effects on net income may not be representative of the
effects on net income for future years as option grants typically vest over
several years and additional options are generally granted each year.

                                      -38-

<PAGE>

7.   EARNINGS PER SHARE:

     In accordance with the disclosure requirements of SFAS 128, a
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (In thousands, except per share amounts):

<TABLE>

<CAPTION>
                                                                                Year Ended December 31,
                                                                 -----------------------------------------------
                                                                      1997              1998            1999
                                                                 ------------      ------------     ------------

<S>                                                              <C>               <C>              <C>
Numerator-basic and diluted EPS
     Income before extraordinary item.......................     $      3,310      $      8,640     $      1,791
     Less:  preferred stock dividends.......................             (484)           (5,439)          (1,432)
                                                                 -------------     -------------    -------------

     Income available to common stockholders, before
        extraordinary item..................................            2,826             3,201              359
     Extraordinary item, net of tax effect..................               --            (2,338)              --
                                                                 ------------      -------------    ------------

     Net income-basic.......................................            2,826               863              359
     Plus: impact of assumed preferred conversion...........              484                --               --
                                                                 ------------      ------------     ------------

     Net income-diluted.....................................     $      3,310      $        863     $        359
                                                                 ============      ============     ============

Denominator-basic EPS
     Weighted average shares outstanding....................            4,902             8,714           12,387
                                                                 ============      ============     ============

     Basic EPS
     Income before extraordinary item.......................     $       0.57      $       0.37     $       0.03
     Extraordinary item, net of tax effect..................               --             (0.27)              --
                                                                 ------------      ------------     ------------

     Basic earnings per share...............................     $       0.57      $       0.10     $       0.03
                                                                 ============      ============     ============

Denominator-diluted EPS
     Denominator-basic EPS..................................            4,902             8,714           12,387
     Effect of dilutive securities:
     Common stock options and warrants......................              453               629              564
     Preferred Stock........................................              621                --               --
                                                                 ------------      ------------     ------------
                                                                        5,976             9,343           12,951
                                                                 ============      ============     ============
     Diluted EPS
     Income before extraordinary item.......................     $       0.55      $       0.34     $       0.03
     Extraordinary item, net of tax effect..................               --             (0.25)              --
                                                                 ------------      -------------    ------------

     Diluted earnings per share.............................     $       0.55      $       0.09     $       0.03
                                                                 ============      ============     ============
</TABLE>


Options to purchase 1,419,144, 906,582 and 211,720 shares of Common Stock
were outstanding at December 31, 1999, 1998 and 1997, respectively, but were not
included in the calculation of net income per share because the options exercise
price was greater than the average market price of the Common Shares.

                                      -39-

<PAGE>


8.   SUPPLEMENTAL CASH FLOW INFORMATION:

     Supplemental Disclosures of Cash Flow Information:

     Cash paid for interest and income taxes was (In thousands):

<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                 -----------------------------------------------
                                                                      1997              1998            1999
                                                                 -------------     -------------    ------------
<S>                                                              <C>               <C>              <C>

Interest....................................................     $      2,700      $      3,495     $      2,769
Income taxes................................................     $        706      $      4,495     $     11,225


     Supplemental  Disclosures of Noncash Investing and Financing Activities (In thousands):
</TABLE>
<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                 -----------------------------------------------
                                                                      1997              1998            1999
                                                                 -------------     -------------    ------------
<S>                                                              <C>               <C>              <C>

Tax benefit from exercise of stock options..................     $        489      $         --     $        553
Common stock issued in connection with business combinations            6,825             9,739           15,956
Dividend on preferred stock.................................               50             1,803            1,576
Special dividend on preferred stock.........................               --             3,799               --
Common stock warrants issued in connection with
     notes payable issuance.................................            1,330                --               --
Common stock warrants issued in connection with
     preferred stock........................................            1,000                --               --
Common stock warrants revaluation...........................               --             1,391               --
Shareholder note receivable (see Note 15)...................               --                --            2,513
</TABLE>


9.   CONTINGENCIES:

     The Company is from time to time subject to routine legal proceedings
arising in the ordinary course of the Company's business and incidental to its
business, none of which the Company expects to have a material adverse impact
upon the Company's business, financial position or results of operations.

     On June 18, 1999 a complaint was filed in the Superior Court of Orange
County, California by Lee Adams against Western Micro Technology, Inc., WMT
Acquisition Corp. and the Company. Mr. Adams' complaint purports to allege
causes of action for breach of contract, specific performance, accounting,
common count and false promise, arising out of an Agreement and Plan of
Reorganization, dated March 17, 1997, by and among Western Micro Technology,
Inc., WMT Acquisition Corp., Target Solutions, Inc. and Lee Adams. In addition
to equitable relief, the complaint seeks to recover compensatory damages in the
amount of $10 million and punitive damages according to proof. Mr. Adams has
subsequently dismissed without prejudice his cause of action for accounting. The
Company believes the complaint is without merit and intends to defend itself
vigorously against this complaint. In addition, the Company has filed a
cross-complaint for breach of contract in which it is seeking compensatory
damages in the amount of $1.5 million. The case has been set for trial on
July 17, 2000.

     The Company has employment agreements with several of its officers. Under
the employment  agreements,  the officers are entitled to receive 6 to 24 months
of their  base  salary in the event  they are  terminated  without  cause or for
certain specified reasons.  During the year ended December 31, 1999, the Company
paid $138,019 in connection with terminations  under the employment  agreements.
The Company made no payments in 1997 and 1998.

                                      -40-

<PAGE>


10.  SAVINGS AND RETIREMENT PLAN:

     The Company maintains the "Western Micro Technology Savings and Retirement
Plan," qualified under section 401(a) of the Internal Revenue Code. The Plan
provides for tax deferred automatic salary deductions and alternative investment
options. Employees are eligible to participate after completion of six months of
employment. Participants may apply for loans from their accounts.

     The Plan permits Company contributions determined quarterly by the Board of
Directors. No contributions were made in the years ended December 31, 1997, 1998
or 1999.

11.  ACQUISITIONS AND INVESTMENTS:

     On April 27, 1999, the Company completed the acquisition of Enlaces, an
IBM distributor headquartered in Monterrey, Mexico, for approximately $5,200,000
in cash and 235,638  shares of the  Company's  Common Stock (valued at $8.49 per
share).  The  acquisition  has been  accounted for as a purchase with the result
that Enlaces' operations are included in the Company's financial statements from
the date of purchase.  The agreement between the Company and Enlaces contains an
earnout provision which allows the former  shareholders of Enlaces to earn up to
an additional  $8,000,000,  of which  $5,000,000 is  guaranteed.  The guaranteed
earnout has been recorded as a liability by the Company.  In connection with the
acquisition,  the Company  recorded  approximately  $11,600,000  of goodwill and
other intangible assets.

     Enlaces consists of a group of companies that sell IBM AS/400 and RS/6000
mid-range products and services, and includes Enlaces Computacionales and
Enlaces y Asociados. It also includes Instituto de Educacion Avanzada, which is
an IBM training center and provides sales, technical support and administrative
services. For the year ended December 31, 1998, Enlaces had unaudited revenues
of approximately $17,000,000.

     On January 4, 1999, the Company acquired certain assets of Infinite
Solutions, Inc. ("Infinite") for $2,750,000 in cash and 88,560 shares of the
Company's Common Stock (valued at $8.47 per share). The acquisition has been
accounted for as a purchase with the result that Infinite's operations are
included in the Company's financial statements from the date of purchase. In
connection with the acquisition, the Company recorded approximately $3,600,000
of goodwill and other intangible assets.

     Infinite is an Atlanta, Georgia based specialty distributor and integrator
of computer systems and software. For the year ended December 31, 1998, Infinite
had unaudited revenues of approximately $19,000,000.

     On September 8, 1998, the Company acquired the distribution segment of REAL
Applications, Ltd. ("REAL") from its parent company, El Camino Resources, Ltd.
("El Camino") for $12,875,000. In connection with the acquisition, the Company
recorded approximately $13,141,000 of goodwill and other intangible assets. The
acquisition has been accounted for as a purchase with the result that REAL
operations are included in the Company's financial statements from the date of
purchase.

     REAL is a reseller of IBM commercial mid-range servers, including the
AS/400 and RS/6000, as well as high end data storage and IBM Netfinity servers.
REAL had audited revenues of approximately $80,000,000 for the year ended
April 30, 1998.

     The following presents unaudited pro forma combined net sales, net income
and earnings per share of the Company and REAL as if the combination had
occurred at the beginning of the earliest period presented. The pro forma
information is presented for informational purposes only, and is not necessarily
indicative of the operating results that would have occurred if the REAL
acquisition had been consummated at the earliest period presented, nor is it
indicative of future operating results.

                                      -41-

<PAGE>

<TABLE>
<CAPTION>

                                         Year Ended                 Year Ended
                                      December 31, 1997          December 31, 1998
                                    ----------------------     ----------------------
<S>                                 <C>                        <C>

Net Sales.......................... $        299,927,000       $       646,575,000
Net Income......................... $          3,360,000       $         8,300,000
Net Income per share - basic....... $               0.58       $               0.33
Net Income per share - diluted..... $               0.56       $               0.31

</TABLE>

     On June 5, 1998, the Company acquired all of the outstanding shares of MCBA
Systems, Inc.'s ("MCBA") common stock for $487,000 of canceled indebtedness and
852,854 shares of the Company's common stock. The acquisition has been accounted
for as a purchase with the result that MCBA operations are included in the
Company's financial statements from the date of purchase. In connection with the
acquisition, the Company recorded approximately $9,800,000 of goodwill and other
intangible assets. The fair values of assets acquired from MCBA were
approximately $4,045,000 and liabilities assumed were approximately $3,945,000.
In addition, the selling stockholders of MCBA earned an additional 1,500,000
shares of the Company's common stock based upon attainment of certain
performance goals in calendar 1998 and 1999. These shares were accounted for as
an increase in the purchase price which resulted in the Company recording an
additional $11,000,000 of goodwill and other intangible assets.

     MCBA is a value-added wholesale distributor and reseller of IBM commercial
mid-range servers, including the AS/400 and RS/6000, and software. MCBA is also
one of four authorized distributors of IBM's S/390 mainframe systems. In
addition to the products it offers, MCBA provides network configuration and
technical support services to its customers. MCBA's audited revenues for the
year ended December 31, 1997 were approximately $26,900,000 with net income of
approximately $26,000.

     On May 15, 1998, the Company purchased substantially all of the UniDirect
catalog and VarCity distribution business and related electronic software
distribution organization of UniDirect Corporation ("UDC") for $4,600,000,
comprised of $2,900,000 in cash and a $1,700,000 promissory note. The promissory
note bears interest at 8.25% and is payable over a two-year period. This
transaction has been accounted for as a purchase with the result that UDC
operations are included in the Company's financial statements from the date of
purchase. In connection with the acquisition, the Company recorded approximately
$4,900,000 of goodwill and other intangible assets. During the year ended
December 31, 1997, the acquired businesses had unaudited revenues of
approximately $18,000,000. The Company has included the unamortized balance of
goodwill and other intangible assets of the VarCity distribution business in the
restructuring charge for the year ended December 31, 1999 (see Note 14).

     UDC specializes in the sales and support of technically advanced software
products. Software solutions include products for areas such as web and intranet
development and related management tools, UNIX and Windows NT applications and
utilities, client/server applications, advanced operating systems and databases,
and PC connectivity applications.

     On September 30, 1997, the Company acquired all of the capital stock of SMS
for an aggregate of $42,150,000 in cash at closing, 460,000 shares of the
Company's Common Stock, valued at $3,887,000, and additional cash payments of
approximately $6,870,000, made in May of 1998. In addition, the selling
stockholders have earned $5,000,000 in cash payments based upon attainment of
certain performance goals. The acquisition has been accounted for as a purchase
with the result that SMS operations are included in the Company's financial
statements from the date of purchase. In connection with the acquisition, the
Company recorded approximately $47,600,000 of goodwill and other intangible
assets. The fair value of assets acquired from SMS was approximately $41,400,000
and liabilities assumed were approximately $36,100,000. SMS was a holding
company for a family of companies including Star Data Systems, Inc., dba Sirius
Computer Solutions ("Sirius"), a value-added distributor for high technology
mid-range solutions in the IBM AS/400 and RS/6000 systems market. Sirius also
sells systems directly to end user customers as an industry remarketer. Prior to
the closing of the SMS acquisition, SMS completed a spin-off of the Sirius end
user business as a separate unaffiliated company. Upon acquiring SMS, the
distribution arm was renamed Business Partner Solutions, Inc. ("BPS"). Upon
completion of the SMS acquisition, BPS became a wholly owned subsidiary of the
Company. For the eleven months ended September 30, 1997, the distribution
business of Sirius had revenues of approximately $86,500,000 and income from
operations of approxi-

                                      -42-

<PAGE>


mately $1,100,000. The following presents unaudited pro forma combined net
sales, net income and earnings per share of the Company and SMS (excluding the
Sirius end user business) for the fiscal year ended December 31, 1997. The pro
forma information is presented for informational purposes only, and is not
necessarily indicative of the operating results that would have occurred if the
SMS acquisition had been consummated at the beginning of the earliest period
presented, nor is it indicative of future operating results.

                                                              Year Ended
                                                           December 31, 1997
                                                          ------------------
Net sales..........................................         $   306,000,000
Net income.........................................         $       899,000
Net income per share-basic.........................         $          0.17

Net income per share-diluted.......................         $          0.14

     The above amounts do not include pro forma adjustments for sales that would
have occurred between the distribution business of SMS and the end user business
if the spinoff of the end user business had occurred at the beginning of such
period presented. Including these sales amounts, pro forma combined net sales
would have been approximately $336,000,000 for the year ended December 31, 1997.

     On March 17, 1997, the Company acquired all of the common stock of Target
Solutions, Inc. ("TSI"), a privately held company, for approximately $2,200,000,
paid in common stock (220,273 shares) of the Company. Additional consideration,
up to $10,000,000 in cash and stock, can be earned by TSI by meeting certain
defined gross profit targets through fiscal year 1998. An additional 62,578
shares were issued by the Company on March 17, 1997, and placed in escrow for
the earn-out provision. No shares were earned in 1997 or 1998. The unearned
shares will be returned to the Company. The acquisition has been accounted for
as a purchase with the result that TSI operations are included in the Company's
financial statements from the date of purchase. Additional amounts payable under
contingent earn-out provisions will be accounted for as an increase in the
purchase price when such amounts become determinable. In connection with the
acquisition, the Company recorded approximately $2,600,000 of goodwill and other
intangible assets. The fair value of assets acquired from TSI was approximately
$1,141,000 and liabilities assumed were approximately $1,484,000. The Company
has included the unamortized balance of goodwill and other intangible assets of
the TSI operations in the restructuring charge for the year ended December 31,
1999 (See Note 14).

12.  SEGMENT REPORTING:

     The Company has adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131").

     The Company has two operating segments: the Mid-Range Systems Division
("MRS") and the Computer and Peripherals Group ("CPG"). Products distributed by
MRS include mid-range servers that run on UNIX, OS/400 and NT operating systems,
peripheral equipment (including wireless networking equipment, storage products,
printers and terminals) and software. Through CPG, the Company offers its
customers value-added systems integration services up to, and including,
installation (e.g., "turnkey" systems assembly of departmental servers,
workstations, hardware and software "bundling" and light manufacturing). The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Although management measures the
profitability of its business through the results of these two segments, the
Company's segments have similar economic characteristics and, as such, the
results of operations have been aggregated and separate disclosure is not
presented.

     Foreign sales for the years ended December 31, 1997, 1998 and 1999 were
approximately $6,700,000, $31,000,000 and $47,200,000, respectively.

     During the years ended December 31, 1997, 1998 and 1999, approximately 65%,
80% and 82%, respectively, of the Company's net sales were generated from the
sale of IBM products.

                                      -43-

<PAGE>


     One customer accounted for approximately 11%, 18% and 16% of the Company's
net sales in 1997, 1998 and 1999, respectively. No other single customer
accounted for more than 10% of the Company's net sales.

     Long-lived assets in foreign countries as of December 31, 1999 and 1998
were approximately $11,066,642 and $4,440, respectively. There were no
long-lived assets in foreign countries as of December 31, 1997.

13.  EXTRAORDINARY CHARGE:

     During the year ended December 31, 1998, in connection with the repayment
of its outstanding debt obligations, the Company recorded an extraordinary
charge of $2,338,000, net of tax, resulting from a prepayment penalty, the write
off of unamortized discounts relating to certain warrants issued to debt holders
and other related expenses.

14.  RESTRUCTURING CHARGE:

     The consolidated statements of operations for 1999 include pre-tax charges
totaling $11.3 million related to the restructuring of corporate functions and
the recognition of impaired assets. Of this amount, $2.8 million represents
costs associated with the consolidation of facilities and elimination of
redundant back-office functions. The costs associated with the restructuring
principally include lease termination costs ($500,000), leasehold and other
asset disposals ($1.4 million) and personnel (a total of 38 employees, primarily
in administration, finance and information technology) severance costs
($900,000). The remaining $8.5 million represents asset impairment charges
related to recorded goodwill and fixed assets. These impairment charges
principally include the write off of goodwill ($7.0 million) related to
unprofitable business activities acquired in previous purchases (Target
Solutions, Inc., International Data Products, LLC and UniDirect, Inc.), the
operations of which the Company has terminated as part of its restructuring. The
balance of the impairment charge relates to the write off of unproductive
electronic commerce assets ($1.5 million).

     As of December 31, 1999, the Company had approximately $800,000 remaining
in its restructuring and asset impairment reserve, primarily consisting of
severance. The Company expects that all activities and expenditures related to
this restructuring will be completed by June 30, 2000.

15.  EXECUTIVE RETENTION AGREEMENT:

     During the year ended December 31, 1999 the Company executed an Executive
Retention Agreement (the "Agreement") with its Chief Executive Officer, P. Scott
Munro ("Mr. Munro"). Included in the agreement is a provision for a recourse
loan ("loan") to Mr. Munro for approximately $2,500,000 with a stated interest
rate of 4.9%. Mr. Munro executed the loan provision on May 10, 1999 and used the
proceeds to exercise approximately 480,000 options under the revised terms of
the Company's Employee Stock Option Plan. The loan is due and payable, including
principal and interest, in May 2002. If Mr. Munro remains employed with the
Company, the loan, and accrued interest, will be forgiven as follows: $800,000
after the first quarter of 2000 and the balance on May 9, 2002. The $2,500,000
note receivable from Mr. Munro is shown as a reduction to stockholders' equity.
The loan provision of the Agreement also allows for Mr. Munro to borrow up to an
additional $1,100,000 under the same terms and conditions noted above. On
September 10, 1999, Mr. Munro executed the remaining portion of the loan
provision and borrowed the additional $1,100,000 available to him. The
$1,100,000 note receivable from Mr. Munro is included in other assets. Upon the
occurrence of a Change of Control (as defined in the agreement), Mr. Munro's
obligation to pay the then outstanding balance of the loan (including unpaid
principal and accrued interest thereon) shall be forgiven and the promissory
notes shall be canceled. As noted in Note 16 the Company has agreed to merge
with a subsidiary of Avnet, Inc. ("Avnet"). If the acquisition of the Company by
Avnet is completed, the loan will be forgiven.

16.  SUBSEQUENT EVENT:

     On March 2, 2000 the Company agreed to merge with a subsidiary of Avnet, so
that it would become a wholly owned subsidiary of Avnet. The acquisition has
been approved by the boards of directors of both companies and is subject to
approval by the stockholders of the Company and regulatory review. If the merger
is completed,

                                      -44-

<PAGE>


depending upon the average of the closing trading price of Avnet's common stock
during the 15 days ending on the fifth day prior to the vote of the Company's
stockholders, the Company's common stockholders will receive between 0.15494 and
0.11452 of a share of Avnet common stock for each share of the Company's stock
they own. The transaction is expected to close in June 2000. If the merger is
not completed, the Company may be required to pay Avnet a termination fee of
$750,000, and the Company may be required to pay Avnet an additional fee of
$3.75 million if it enters into an acquisition agreement with another company
within a year of termination of the Avnet merger agreement.

     Avnet is a Phoenix, Arizona based distributor of semiconductors,
interconnect, passive and electromechanical components and computer products. At
its last fiscal year end, Avnet reported sales of approximately $6.35 billion.

                                      -45-

<PAGE>


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          ---------------------------------------------------------------
          FINANCIAL DISCLOSURE
          --------------------

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
         --------------------------------------------------

EXECUTIVE OFFICERS AND DIRECTORS

     The following table sets forth certain information regarding the executive
officers and directors of the Company as of February 24, 2000.
<TABLE>
<CAPTION>
<S>                                         <C>     <C>

Name                                        Age     Position
P. Scott Munro(1)....................       43      Chairman of the Board, Chief Executive Officer and Secretary
Carlton Joseph Mertens II............       34      Chief Operating Officer, President and Director
Dennis J. Polk.......................       33      Senior Vice President of Corporate Finance
Robert O'Reilly......................       47      Senior Vice President of Human Resources
Angelo Guadagno(2)...................       57      Director
Mike Gunnells(3).....................       39      Director
Guy M. Lammle(1).....................       47      Director
K.  William Sickler(3)...............       50      Director
J. Larry Smart(1)(2).................       51      Director
<FN>

----------
(1)      Member of the Nominating Committee.
(2)      Member of the Compensation Committee.
(3)      Member of the Audit Committee.
</FN>
</TABLE>

     P. SCOTT MUNRO has served as Chief Executive Officer and Secretary of the
Company since July 1995. Mr. Munro has also served as Chairman of the Board
since January 1998 and served as a Director of the Company from July 1995. From
January 1993 to July 1995, Mr. Munro was President, Computer Systems Division of
the Company, and from July 1990 to January 1993, he served as Senior Vice
President, Computer Systems Division of the Company. Prior to 1990, Mr. Munro
served as a General Manager for both Future Electronics, Inc., a distributor of
electronic components, and Arrow Electronics, Inc., a distributor of computer
products.

     CARLTON JOSEPH MERTENS II has served as a Director of the Company and as
Chief Operating Officer since September 1997. From 1984 to September 1997, Mr.
Mertens was an active member of the management team of SMS, a computer systems
integration company, and served as Executive Vice President of SMS from 1991 to
September 1997 prior to its acquisition by the Company.

     DENNIS J. POLK currently serves as Senior Vice President of Corporate
Finance, but he has resigned effective March 31, 2000. From 1988 to 1995, Mr.
Polk held staff and management positions at Grant Thornton LLP. In 1995, Mr.
Polk joined Savoir as corporate controller and has held several positions in
finance and operations. Mr. Polk is a Certified Public Accountant.

     ROBERT O'REILLY has served as Senior Vice President of the Company
since  September  1997 and prior to that time served as Vice  President of Human
Resources  from February  1996 and Director of Human  Resources  from  September
1995.  Prior to joining  the  Company,  Mr.  O'Reilly  was a  Director  of Human
Resources,  with special  emphasis on  recruitment,  training  and  development,
during his 10-year  career with  Future  Electronics,  Inc.,  a  distributor  of
electronic components.

     ANGELO GUADAGNO has served as a Director of the Company since August 1997.
Currently Mr. Guadagno is an adjunct professor at Boston University and Chief
Executive Officer of Skycady, Inc., a Boston, Massachusetts, based consulting
firm. From 1989 to 1997, he was employed by Data General Corp., a manufacturer
of servers,

                                      -46-

<PAGE>


storage systems and related software, where he served as Vice President of
Worldwide Channel Sales, Vice President of Americas Sales and Services and Vice
President of North American Sales. During his tenure at Data General he also
served as: Vice President of U.S. Sales from 1994 to 1996; Vice President,
American Sales and Services from 1990 to 1994; and Vice President of North
American Sales Division from 1989 to 1990.

     MIKE GUNNELLS has served as a Director of the Company since October 1999.
Since June 1998, he has served as President and CEO of MCBA Inc., an e-commerce
consulting company. From 1992 to 1998, Mr. Gunnells was President and CEO of
MCBA Systems, a computer systems integration company.

     GUY M. LAMMLE has served as a Director of the Company since August 1998. He
has served as Chairman of the Board, Chief Executive Officer and Director of
NxTrend Technology, Inc., a software and sales company, since February 1980 and
assumed the additional title of President in October 1996. From 1974 to 1980,
Mr. Lammle was employed with the Burroughs Corporation, a computer hardware
company, progressing from Sales Representative to Zone Manager and finally
District Product Manager.

     K. WILLIAM SICKLER has served as a Director of the Company since July 1993.
Mr. Sickler has served as Chief Executive Officer and President of Gadzoox
Networks, Inc., a provider of gigabit fibre channel networking products, since
April 1996. From July 1995 to April 1996, he was Executive Director of Software
Business Development for Seagate Technology, a software developer and
manufacturer of disk drives, with responsibility for analysis of potential
software company acquisitions. From December 1992 to July 1995, Mr. Sickler was
President and Chief Executive Officer of Network Computing, Inc., a provider of
network management software for local area networks.

     J. LARRY SMART has served as a Director of the Company since October 1995.
From October 1995 to January 1998, he also served as Chairman of the Board of
the Company. Since July 1999, Mr. Smart has served as Chairman of the Board of
Visioneer, Inc., a developer of personal desktop management products. From March
1997 to March 1999, Mr. Smart served as President and Chief Executive Officer of
Visioneer, Inc. (prior to Visioneer, Inc. merging with ScanSoft, Inc.), and
served as Chairman of the Board of Directors of that company from February 1997
until assuming the position of President and Chief Executive Officer. From July
1995 until March 1997, he was Chairman of the Board, President and Chief
Executive Officer of StreamLogic Corporation, a data storage company. From March
1994 to February 1995, Mr. Smart was President and Chief Executive Officer of
Maxtor Corporation, a data storage company. From July 1991 to February 1995, Mr.
Smart was President and Chief Executive Officer of Southwall Technologies, Inc.,
a materials sciences company.

     The Company currently has authorized seven (7) members of the Board of
Directors. All directors are elected to hold office until the next annual
meeting of stockholders of the Company and until their successors have been duly
elected and qualified. Officers are elected at the first meeting of the Board of
Directors following the stockholders' meeting at which the directors are elected
and serve at the discretion of the Board of Directors. There are no family
relationships among any of the directors or executive officers of the Company.

     SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules of the Securities and Exchange Commission (the "Commission") thereunder
require the Company's directors, executive officers and the beneficial owners of
more than ten percent of the Company's common stock to file reports of their
ownership and change in ownership of the Company's common stock with the
Commission. Based solely upon a review of such reports filed electronically with
the Commission, the Company believes that all reports required by Section 16(a)
of the Exchange Act to be filed by its directors, executive officers and ten
percent beneficial stockholders during the last fiscal year were filed on time,
except that Mike Gunnells, appointed to the Board in October 1999, will be
filing a late Form 3.

                                      -47-

<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION
          ----------------------

     The following table provides certain summary information for the years
ended December 31, 1997, 1998 and 1999 concerning compensation paid to the
Company's Chief Executive Officer and to the Company's three other named
executive officers whose compensation exceeded $100,000 in 1999 and one
individual who would have been a named executive officer but for the fact that
he was not serving as an executive officer at December 31, 1999 (the "Named
Executive Officers").
<TABLE>
<CAPTION>

                                            SUMMARY COMPENSATION TABLE

                                                               Annual Compensation        Long-Term
                                                ----------------------------------------
                                                                                         Compensation
                                                                                            Awards
                                                                                          Securities
                                       Fiscal                            Other Annual     Underlying      All Other
    Name and Principal Position         Year    Salary($)    Bonus($)   Compensation($)   Options(#)   Compensation($)
    ---------------------------         ----    ---------    --------   ---------------   ----------   ---------------
<S>                                     <C>      <C>         <C>              <C>          <C>               <C>

P. Scott Munro...................       1999     495,000     229,500          --                --           --
     Chairman of the Board, Chief       1998     400,406     261,049          --           450,000           --
     Executive Officer and Secretary    1997     302,485     119,398          --           150,000           --
Carlton J. Mertens(1)............       1999     350,000     128,587          --           100,000           --
     President and Chief Operating      1998     270,000     148,717          --                --           --
     Officer                            1997      67,579      32,500          --            45,716           --

James W. Dorst(2)................       1999     235,917      37,500          --                --           --
     Chief Financial Officer            1998     227,750      74,610          --            50,000           --
                                        1997     192,333      51,872          --            30,000           --
Dennis J. Polk(3)................       1999     166,675      39,375          --            75,000           --
     Senior Vice President of
     Corporate Finance
Robert O'Reilly(4)...............       1999     200,000      42,500          --            25,000           --
     Senior Vice President of Human     1998     176,000      62,175          --            50,000           --
     Resources                          1997     142,517      36,578          --            30,000           --
<FN>

----------
(1)      Mr. Mertens became an executive officer of the Company during 1997.
(2)      Mr. Dorst resigned from the Company during 1999.
(3)      Mr. Polk became an executive officer of the Company in 1999 and has resigned effective March 31, 2000.
(4)      Mr. O'Reilly became an executive officer of the Company during 1997.

</FN>
</TABLE>

                                      -48-

<PAGE>


RECENT OPTION GRANTS

     The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1999 to the Named Executive
Officers.

                                         OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>

                                             Percent of                                   Potential Realizable
                                               Total                                     Value at Assumed Annual
                               Number of      Options                                     Rates of Stock Price
                              Securities     Granted to                                  Appreciation for Option
                              Underlying     Employees     Exercise or                          Term($)(3)
                                Options      in Fiscal     Base price     Expiration   ----------------------------
           Name              Granted(#)(1)    Year(2)       ($/Share)        Date           5%            10%
           ----              -------------  ------------   -----------    ----------   -----------     --------

<S>                            <C>            <C>              <C>         <C>          <C>            <C>

P. Scott Munro........              --           --              --           --             --                --

Carlton J. Mertens ...         100,000        13.54%           9.00         1/4/09      566,005         1,434,368

James W. Dorst........              --           --              --           --             --                --

Dennis J. Polk........          25,000         3.39%           9.00         1/4/09      141,501          358,592
                                50,000         6.77%           4.63        10/19/09     145,182          368,303

Robert O'Reilly.......          25,000         3.39%           4.63        10/19/09      72,591          184,151

<FN>

----------
(1)  These options have a 10-year term and vest at the rate of
     twenty-five (25%) per year over a four-year period. These options have
     accelerated vesting upon a change of control of the Company.
(2)  Based on options to purchase an aggregate of 738,500 shares of Common
     Stock granted during fiscal 1999.
(3)  Amounts represent hypothetical gains that could be achieved for the
     respective options if exercised at the end of the option term. These gains
     are based on assumed rates of stock appreciation of five percent
     (5%) and ten percent (10%) compounded annually from the date the respective
     options were granted to their expiration date and are not presented to
     forecast possible future appreciation, if any, in the price of the Common
     Stock. The gains shown are net of the option exercise price, but do not
     include deductions for taxes or other expenses associated with the
     exercise of the options or the sale of the underlying shares of Common
     Stock. The actual gains, if any, on the stock option exercises will depend
     on the future performance of the Common Stock, the optionee's continued
     employment through applicable vesting periods and the date on which the
     options are exercised.
</FN>
</TABLE>

     The following table shows the stock options exercised during the fiscal
year ended December 31, 1999 and the number of shares of Common Stock
represented by outstanding stock options held as of December 31, 1999 by each of
the Named Executive Officers.
<TABLE>
<CAPTION>

                AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES(1)

                                  Number of Shares Acquired    Number of Securities      Value of Unexercised
                                         on Exercise          Underlying Unexercised    In-the-Money Options at
                                           Shares                Options at Fiscal         Fiscal Year-End ($)
                                        Exercised Value         Year-End Exercisable/         Exercisable/
                                         Realized($)               Unexercisable              nexercisable
                                       -------------------------------------------------------------------------
<S>                                     <C>        <C>             <C>        <C>           <C>         <C>

P. Scott Munro(2)...................... 476,718    $1,777,749      25,000 /        --       $28,125 /         --
Carlton J. Mertens.....................      --            --      22,858 /   122,858            -- /         --
James W. Dorst.........................  50,000       179,371       6,250 /        --         7,031 /         --
Dennis J. Polk.........................      --            --      30,000 /   110,000        19,688 /   $150,063
Robert O'Reilly........................      --            --      53,750 /    96,250        32,344 /     99,406
<FN>

----------
(1)  Based on a per share price of $7.125, the closing price of the Common Stock
     as reported by The Nasdaq National Market on December 31, 1999,
     the last trading day of the fiscal year.
(2)  Pursuant to an Amendment of Stock Option Agreements, dated as of May 10,
     1999, between the Company and Mr. Munro, the Company has accelerated the
     vesting of 385,000 shares underlying stock options so that they are fully
     vested. In addition, the Company has permitted Mr. Munro to exercise stock
     options to purchase 400,000 shares prior to vesting in the underlying
     shares. Exercises of the 400,000 stock options are subject, if not
     otherwise accelerated, to the Company's right to repurchase at cost upon
     Mr. Munro's termination from service with

                                      -49-

<PAGE>


     the Company or attempted disposition of unvested shares. The 400,000
     shares vest ratably on a monthly basis over the vesting periods set forth
     in the stock option agreements for each of the option grants. If the
     acquisition of the Company by Avnet is completed, all of Mr. Munro's
     shares will be fully  vested and the Company's right of repurchase will
     lapse. For a discussion of vesting of stock options following a change
     in control, see the subsection below entitled "Change in Control."
</FN>
</TABLE>

COMPENSATION OF DIRECTORS

     The Company's outside directors (i.e., those who are not employees of the
Company) receive an annual retainer of $20,000, plus $750 for each board meeting
attended. The Company pays for directors' liability insurance and has entered
into indemnification agreements with each of its directors. At the 1994 Annual
Meeting of Stockholders, the stockholders approved the adoption of the 1994
Stock Option Plan, which has been amended several times since its adoption. The
1994 Stock Option Plan, as amended, provides for the grant of an option of
15,000 shares of the Common Stock to certain directors who are not employees
following their initial election or appointment and an option for 4,000 shares
of Common Stock at every regular annual meeting at which they are re-elected.
The exercise price of the options is the fair market value of the Common Stock
on the date of each respective grant and the options vest over a four-year
period. In September 1998 and June 1999, the Board of Directors made
discretionary grants of nonstatutory stock options to each of the outside
directors to purchase 10,000 and 4,000 shares, respectively, of Common Stock at
an exercise price of $6.00 and $9.50 per share, respectively.

CHANGE IN CONTROL

     Stock options held by the Company's directors and Named Executive Officers
under the Company's Stock Option Plans will become fully vested and exercisable
following a change in control of the Company. A "change in control" means the
occurrence of any of the following events: (i) stockholder approval of a merger
or consolidation of the Company with any other corporation resulting in a change
in fifty percent (50%) or more of the total voting power of the Company; (ii)
stockholder approval of a plan of complete liquidation of the Company or an
agreement for the sale or disposition of all or substantially all of the
Company's assets; or (iii) any person becomes the beneficial owner of more than
fifty percent (50%) of the Company's total outstanding securities. Further
arrangements concerning change in control are described below under "Employment
Agreements."

EMPLOYMENT AGREEMENTS

     The Company has entered into an employment agreement with P. Scott Munro
dated January 22,1998. Pursuant to the terms of the agreement, as amended, Mr.
Munro receives a base salary of $495,000 per year and is eligible to receive a
bonus of up to $270,000 per year, subject to achievement of certain performance
goals. If Mr. Munro is terminated without cause, he will be entitled to receive
his base salary for twelve (12) months following his termination. The Company
has entered into an Executive Retention Agreement with P. Scott Munro dated as
of May 10, 1999. Included in the Executive Retention Agreement is a provision
which provides that if Mr. Munro is terminated without cause or his
responsibilities are reduced within twelve (12) months following a change in
control and such reduction in responsibilties is not for cause, any resignation
of employment by Mr. Munro as a consequence of such reduction in responsibilites
will be treated as a termination of employment without cause and he will receive
a severance payment equal to 200% of his annual base salary plus his annualized
target incentive. Also included in the Executive Retention Agreement is a
provision for a recourse loan to Mr. Munro for approximately $2,500,000 with a
stated interest rate of 4.9%. Mr. Munro executed the loan provision on May 10,
1999 and used the proceeds to exercise approximately 480,000 options under the
revised terms of the Company's Employee Stock Option Plan. The loan is due and
payable, including principal and interest, in May 2002. If Mr. Munro remains
employed with the Company, the loan, and accrued interest, will be forgiven as
follows: $800,000 after the first quarter of 2000 and the balance on May 9,
2002. The loan provision of the Executive Retention Agreement also allows for
Mr. Munro to borrow up to an additional $1,100,000 under the same terms and
conditions noted above. On September 10, 1999, Mr. Munro executed the remaining
portion of the loan provision and borrowed the additional $1,100,000 available
to him. Upon the occurrence of a change of control (as defined in the Executive
Retention Agreement), Mr. Munro's obligation to pay the then outstanding balance
of the

                                      -50-

<PAGE>

loan (including unpaid principal and accrued interest thereon) shall be
forgiven and the promissory notes shall be canceled. If the acquisition of the
Company by Avnet is completed, Mr. Munro's loan will be forgiven.

     The Company has also entered into employment agreements with other
management personnel as follows: (i) an employment agreement with Dennis J. Polk
dated November 1, 1998, amended on January 11, 1999 and November 1, 1999,
pursuant to which Mr. Polk receives a base salary of $225,000 per year and is
eligible to receive a bonus of six months base salary in the event of a change
in control; and (ii) an employment agreement with Robert O'Reilly dated January
22, 1998, pursuant to which Mr. O'Reilly receives a base salary of $200,000 per
year and is eligible to receive a bonus of up to $50,000 per year. In addition
to the foregoing, pursuant to each of their agreements with the Company, if Mr.
Polk or Mr. O'Reilly is terminated for cause, such person will be entitled to
receive his base salary and bonus through the date of his termination. If Mr.
Polk or Mr. O'Reilly is terminated without cause, such person will be entitled
to receive his base salary for six (6) months following his termination. If Mr.
Polk's or Mr. O'Reilly's responsibilities are reduced twelve (12) months
following a change in control and such reduction in responsibilities is not for
cause, any resignation of employment as a consequence of such reduction in
responsibilities will be treated as a termination of employment without cause.

     The Company has entered into an employment agreement with Carlton Joseph
Mertens II dated September 30, 1997, pursuant to which Mr. Mertens receives a
base salary of $350,000 per year and is eligible to receive a bonus of up to
$150,000 per year, subject to achievement of certain performance goals. If Mr.
Mertens is terminated for cause, he will be entitled to receive his base salary
and bonus due through the date of his termination. If Mr. Mertens is terminated
without cause or if Mr. Mertens terminates his employment with the Company for
certain specified reasons, he will be entitled to receive his base salary for
nine (9) months following his termination; such reasons include assignment or
alteration by the Company of Mr. Mertens' duties, responsibilities or
obligations materially inconsistent with his position with the Company after
notice of Mr. Mertens' objections thereto, failure of the Company to provide to
Mr. Mertens the salary or bonuses described above, relocation of the Company's
IBM Operational Headquarters outside of San Antonio, Texas, any requirement by
the Company for Mr. Mertens to relocate anywhere other than San Antonio, Texas
and instructions by the Company given to Mr. Mertens to violate any applicable
law after notice of Mr. Mertens' objections.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Angelo Guadagno and J. Larry Smart are the members of the Compensation
Committee.

                                      -51-

<PAGE>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

     The following table sets forth information as to the beneficial ownership
of the Capital Stock of the Company as of February 24, 2000, by: (i) each person
known to the Company to beneficially own more than five percent (5%) of the
Capital Stock of the Company; (ii) each of the Company's directors; (iii)
certain of the Company's executive officers; and (iv) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>

                                                                             Shares
                                                                          Beneficially
                     Name of Beneficial Owner (1)                           Owned (1)         Percent (2)
 ------------------------------------------------------------------      --------------       -----------
<S>                                                                         <C>                   <C>

Astoria Capital Partners, L.P. (3)
        6600 SW 92nd Avenue, Suite 370
        Portland, OR 97223......................................            1,877,430             13.56%
 Robert Fleming, Inc. (4)
        320 Park Avenue, 11th Floor
        New York, NY 10022......................................            1,487,112             10.26%
 Strome Susskind Investment Management, L.P. (5)
        100 Wilshire Blvd., 15th Floor
        Santa Monica, CA 90401..................................            1,259,697              8.91%
 John M. Harkins (6)
        4955 Corporate Drive
        Huntsville, AL 35806....................................            1,200,000              8.90%
 Michael N. Gunnells - Director (7)
        4955 Corporate Drive
        Huntsville, AL 35806....................................            1,185,000              8.78%
 ROI Capital Management, Inc. (8)
        17 E. Sir Francis Drake Blvd., Suite 225
        Larkspur, CA 94939......................................              960,826              6.98%
 P. Scott Munro - Director and Executive Officer (9)
        254 Hacienda Avenue
        Campbell, California 95008..............................              516,458              3.82%
 Carlton Joseph Mertens II - Director & Executive Officer (10)
        6550 North Loop 1604 East
        San Antonio, Texas 778247...............................              460,000              3.41%
 Dennis Polk - Executive Officer (11) ..........................               22,083                  *
 Robert O'Reilly - Executive Officer (12) ......................               30,855                  *
 Guy M. Lammle - Director.......................................               33,537                  *
 J. Larry Smart - Director (13) ................................               26,000                  *
 K.  William Sickler - Director (14) ...........................                7,500                  *
 Angelo Guadagno - Director (15) ...............................                2,500                  *
 All executive officers and directors as a group (16) ..........            2,283,933             16.81%
<FN>

----------

*    Less than one percent (1%).

(1)  Unless otherwise indicated, the beneficial owner has sole voting and
     dispositive power over the shares reported in the table. Includes shares of
     Common Stock and shares of Series A Preferred Stock on an as-converted
     basis. Information with respect to beneficial ownership is based upon
     information obtained from the stockholders and from the Company's transfer
     agent. To the Company's knowledge, unless otherwise indicated, the persons
     and entities named in the table have sole voting and sole investment power
     with respect to all shares beneficially owned, subject to community
     property laws where applicable. Beneficial ownership is determined in
     accordance with the rules of the Securities and Exchange Commission and
     includes voting and investment power with respect to securities. Shares of
     Common Stock issuable upon conversion of shares of Series A Preferred
     Stock, upon exercise of stock options exercisable within 60 days

                                      -52-

<PAGE>


     of February 24, 2000 or upon exercise of warrants that are currently
     exercisable or exercisable within 60 days of February 24, 2000 are deemed
     to be outstanding and to be beneficially owned by the person presently
     entitled to exercise for the purpose of computing the percentage ownership
     of such person but are not treated as outstanding for the purpose of
     computing the percentage ownership of any other person. Each share of
     Series A Preferred Stock is currently convertible at any time into shares
     of the Common Stock at a conversion ratio of 1.1953125 shares of Common
     Stock for each share of Series A Preferred Stock and is entitled to vote,
     without conversion, together with the Common Stock as a single class on
     an as-converted basis.

(2)  Based on 13,489,569 shares of Common Stock, 1,850,012 shares of Series
     A Preferred Stock (equivalent to shares of Common Stock on an as-converted
     basis) outstanding as of February 24, 2000.

(3)  Includes 1,526,500 shares of Common Stock, 207,000 shares of Series A
     Preferred Stock and warrants to purchase 103,500 shares of Common Stock.
     Common Stock ownership is based on a Schedule 13G/A dated February 15,
     2000.

(4)  Includes 487,510 shares of Common Stock, 533,000 shares of Series A
     Preferred Stock and warrants to purchase 362,500 shares of Common Stock.
     Common Stock ownership based on a Schedule 13G dated February 9, 2000.

(5)  Based on a Schedule 13G/A filed March 18, 1999 by Strome Susskind
     Investment Management, L.P., includes 603,591 shares of Common Stock,
     387,012 shares of Series A Preferred Stock and warrants to purchase
     193,506 shares of Common Stock.

(6)  Ownership totals are based on a Schedule 13D dated June 5, 1998 filed
     by Mr. Harkins, as well as shares issued to Mr. Harkins thereafter.

(7)  Ownership totals are based on a Schedule 13D dated June 5, 1998 filed
     by Mr. Gunnells, as well as shares issued to Mr. Gunnells thereafter.

(8)  Includes 689,576 shares of Common Stock, 160,000 shares of Series A
     Preferred Stock and warrants to purchase 80,000 shares of Common Stock.
     Common Stock ownership is based on a Schedule 13G/A dated February 15,
     2000.

(9)  Includes 25,000 shares subject to stock options that are presently
     exercisable. Also includes shares subject to a right of repurchase held
     by the Company pursuant to an Amendment of Stock Option Agreements, dated
     as of May 10, 1999, which vest ratably on a monthly basis over the vesting
     periods set forth in the stock option agreements for each of the option
     grants. If the acquisition of the Company by Avnet is completed, all of
     Mr. Munro's shares will be fully vested and the Company's right of
     repurchase will lapse. For a discussion of vesting of stock options
     following a change in control, see the subsection entitled "Change in
     Control" under Item 11 above.

(10) Ownership totals are based on a Schedule 13D dated June 5, 1998 filed
     by Mr. Mertens.

(11) Includes 21,250 shares subject to stock options that are presently
     exercisable or will become exercisable within 60 days of February 24, 2000.

(12) Includes 28,750 shares subject to stock options that are presently
     exercisable or will become exercisable within 60 days of February 24, 2000.

(13) Includes 12,500 shares subject to stock options that are presently
     exercisable or will become exercisable within 60 days of February 24, 2000.

(14) Includes 7,500 shares subject to stock options that are presently
     exercisable or will become exercisable within 60 days of February 24, 2000.

                                      -53-

<PAGE>


(15) Includes 2,500 shares subject to stock options that are presently
     exercisable or will become exercisable within 60 days of February 24, 2000.

(16) Includes 97,500 shares subject to stock options that are presently
     exercisable or will become exercisable within 60 days of February 24, 2000.
</FN>
</TABLE>

CHANGES IN CONTROL

     On March 2, 2000 the Company agreed to merge with a subsidiary of Avnet,
Inc., so that it would become a wholly owned subsidiary of Avnet. The
acquisition has been approved by the boards of directors of both entities and is
subject to approval by the stockholders of Savoir and regulatory review. If the
merger is completed, depending upon the average of the closing trading price of
Avnet's common stock during the 15 days ending on the fifth day prior to the
vote of the Company's stockholders, the Company's common stockholders will
receive between 0.15494 and 0.11452 of a share of Avnet common stock for each
share of Savoir stock they own. The transaction is expected to close in June. If
the merger is not completed, the Company may be required to pay Avnet a
termination fee of $750,000, and the Company may be required to pay Avnet an
additional fee of $3.75 million if it enters into an acquisition agreement with
another company within a year of termination of the Avnet merger agreement.

     Avnet, Inc. is a Phoenix, Arizona based distributor of semiconductors,
interconnect, passive and electromechanical components and computer products. At
its last fiscal year end, Avnet reported sales of approximately $6.35 billion.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

(a)  Transactions with Management and Others

     The Company has entered into an Executive Retention Agreement with P. Scott
Munro dated as of May 10, 1999. Included in the Executive Retention Agreement is
a provision for a recourse loan to Mr. Munro for approximately $2,500,000 with a
stated interest rate of 4.9%. Mr. Munro executed the loan provision on May 10,
1999 and used the proceeds to exercise approximately 480,000 options under the
revised terms of the Company's Employee Stock Option Plan. The loan is due and
payable, including principal and interest, in May 2002. If Mr. Munro remains
employed with the Company, the loan, and accrued interest, will be forgiven as
follows: $800,000 after the first quarter of 2000 and the balance on May 9,
2002. The loan provision of the Executive Retention Agreement also allows for
Mr. Munro to borrow up to an additional $1,100,000 under the same terms and
conditions noted above. On September 10, 1999, Mr. Munro executed the remaining
portion of the loan provision and borrowed the additional $1,100,000 available
to him. Upon the occurrence of a change of control (as defined in the Executive
Retention Agreement), Mr. Munro's obligation to pay the then outstanding balance
of the loan (including unpaid principal and accrued interest thereon) shall be
forgiven and the promissory notes shall be canceled. If the acquisition of us by
Avnet is completed, Mr. Munro's loan will be forgiven.

     The Company has also entered into an Amendment of Stock Option Agreements
with Mr. Munro, dated as of May 10, 1999. Pursuant to this amendment, the
Company has accelerated the vesting of 385,000 shares underlying stock options
so that they are fully vested. In addition, the Company has permitted Mr. Munro
to exercise stock options to purchase 400,000 shares prior to vesting in the
underlying shares. Exercises of the 400,000 stock options are subject, if not
otherwise accelerated, to the Company's right to repurchase at cost upon Mr.
Munro's termination from service with the Company or attempted disposition of
unvested shares. The 400,000 shares vest ratably on a monthly basis over the
vesting periods set forth in the stock option agreements for each of the option
grants. If the acquisition of the Company by Avnet is completed, all of Mr.
Munro's shares will be fully vested and the Company's right of repurchase will
lapse. For a discussion of vesting of stock options following a change in
control, see the subsection entitled "Change in Control" under Item 11 above.

(b)  Certain Business Relationships

     Not applicable.

                                      -54-

<PAGE>


(c)  Indebtedness of Management

     For a discussion of the loan to and promissory notes of P. Scott Munro, see
Item 13(a) above.

                                      -55-

<PAGE>


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
          ----------------------------------------------------------------

(a)  1.   Financial Statements

          The financial statements listed below appear on the pages indicated:
<TABLE>
<CAPTION>

                                                                                                Page Number
                                                                                                -----------
<S>                                                                                                 <C>

Consolidated Balance Sheets, December 31, 1998 and 1999.................................            26
Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999          27
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1998
   and 1999.............................................................................            28
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999          29
Notes to Consolidated Financial Statements..............................................            30


     2.   Financial Statement Schedules

          The financial statement schedules listed below appear on the pages indicated:


          Schedule II--Valuation and Qualifying Accounts and Reserves                               61
</TABLE>


     3.   Exhibits

     See the exhibits listed under Item 14(c) or filed or incorporated by
reference herein. Each management contract or compensation plan or arrangement
required to be filed has been identified.

(b)  Reports on Forms 8-K

     None.

(c)  Exhibits

     The exhibits listed below are filed or incorporated by reference herein.

   EXHIBIT
   -------

     2.1       Agreement and Plan of Reorganization dated March 17, 1997 by
               and among the Company, WMT Acquisition Corp., Target Solutions,
               Inc. and Lee Adams, filed as Exhibit 2.1 to the Company's
               Current Report on Form 8-K filed with the Commission on April
               1, 1997, and incorporated herein by this reference.

                                      -56-

<PAGE>


   EXHIBIT
   -------

     2.2+ ++   Stock Purchase Agreement dated June 4, 1997 by and among the
               Company, Star Management Services, Inc., Harvey E. Najim and
               Carlton Joseph Mertens II, filed as Exhibit 2.1 to the
               Company's Current Report on Form 8-K filed with the Commission
               on July 17, 1997, and incorporated herein by this reference.

     2.3+ ++   Third Amendment to Stock Purchase Agreement dated September 30,
               1997 by and among the Company, Star Management Services, Inc.,
               Harvey E. Najim and Carlton Joseph Mertens II, filed as Exhibit
               2.1 to the Company's Current Report on Form 8-K filed with the
               Commission on October 10, 1997, and incorporated herein by this
               reference.

     2.4       Purchase Agreement Assignment between the Company and the Agent
               dated September 30, 1997, filed as Exhibit 10.5 to the
               Company's Current Report on Form 8-K filed with the Commission
               on October 10, 1997, and incorporated herein by this reference.

     2.5       Asset Purchase Agreement dated November 29, 1996 by and among
               the Company, International Data Products, LLC, Oliver-Allen
               Corporation, Inc., International Data Products and Financial,
               Ltd., Alan M. Bynder and Michael R. Duhaime, filed as Exhibit
               10.25 to the Company's Annual Report on Form 10-K for the year
               ended December 31, 1996 and incorporated herein by reference.

     2.6       Certificate of Ownership and Merger dated as of November 21,
               1997, filed as Exhibit 2.1 to the Company's Current Report on
               Form 8-K filed with the Commission on November 24, 1997, and
               incorporated herein by this reference.

     2.7+ ++   Agreement and Plan of Reorganization dated November 22, 1997,
               by and among Savoir Technology Group, Inc., MCBA Systems, Inc.,
               Michael N. Gunnells and John Harkins, filed as Exhibit 2.1 to
               the Company's Current Report on Form 8-K filed with the
               Commission on December 22, 1997, and incorporated herein by
               this reference.

     2.8       Second Amendment to Agreement and Plan of Reorganization dated
               April 23, 1998, by and among Savoir Technology Group, Inc., STG
               Acquisition Corp., MCBA Systems, Inc., Michael N. Gunnells and
               John Harkins, filed herewith.

     2.9       First Amendment to Agreement and Plan of Reorganization dated
               March 27, 1998, by and among Savoir Technology Group, Inc., STG
               Acquisition Corp., MCBA Systems, Inc., Michael N. Gunnells and
               John Harkins, filed as Exhibit 2.12 to the Company's Amendment
               on Form S-2/A to its Registration Statement on Form S-2 filed
               with the Commission on April 3, 1998 and incorporated herein by
               this reference.

     2.10*     Asset Purchase Agreement by and between Business Partner
               Solutions, Inc., a subsidiary of Savoir Technology Group, Inc.
               and REAL Applications Ltd. dated as of September 8, 1998, filed
               as Exhibit 2.1 to the Company's Current Report on Form 8-K
               filed with the Commission on September 23, 1998 and
               incorporated herein by this reference.

     3(i)(a)   Restated Certificate of Incorporation of Savoir Technology
               Group, Inc., a Delaware corporation, filed as Exhibit 3(ii) to
               the Company's Amendment on Form 8-K/A to its Current Report on
               Form 8-K dated July 23, 1997, filed on August 14, 1997 and
               incorporated herein by this reference.

     3(i)(b)   Certificate of Amendment of the Certificate of Designation,
               Preferences and Rights of the Company's Series A Preferred
               Stock, filed as Exhibit 3.1(b) to the Company's Registration
               Statement on Form S-3 dated April 29, 1999, and incorporated
               herein by this reference.

                                      -57-

<PAGE>


   EXHIBIT
   -------

     3(i)(c)   Certification of Designation, Preferences and Rights of the
               Company's Series B Preferred Stock, filed as Exhibit 3.1 to the
               Company's Current Report on Form 8-K dated October 10, 1997,
               and incorporated herein by this reference.

     3(ii)     Amended and Restated Bylaws of Savoir Technology Group, Inc., a
               Delaware corporation, filed as Exhibit 3.2 to the Company's
               Annual Report on Form 10-K for the year ended December 31, 1997
               and incorporated herein by this reference.

     4.1       Registration and Put Rights Agreement among the Company and the
               Purchasers dated September 30, 1997, filed as Exhibit 4.2 to
               the Company's Current Report on Form 8-K dated October 10,
               1997, and incorporated herein by this reference.

     4.2       Warrant Agreement of Western Micro Technology, Inc. between the
               Company and the Purchasers dated September 30, 1997 filed as
               Exhibit 4.3 to the Company's Current Report on Form 8-K dated
               October 10, 1997, and incorporated herein by this reference.

     4.3       Common Stock Purchase Warrant in favor of Robert Fleming Inc.,
               filed as Exhibit 4.4 to the Company's Current Report on Form
               8-K dated October 10, 1997, and incorporated herein by this
               reference.

     4.4       Common Stock Purchase Warrant in favor of CanPartners
               Investments IV, LLC filed as Exhibit 4.5 to the Company's
               Current Report on Form 8-K dated October 10, 1997, and
               incorporated herein by this reference.

     4.5       Warrant Agreement of Western Micro Technology, Inc. between the
               Company and ICC dated September 30, 1997, filed as Exhibit 4.9
               to the Company's Current Report on Form 8-K dated October 10,
               1997, and incorporated herein by this reference.

     4.6       Registration and Put Rights Amendment between the Company and
               ICC, filed as Exhibit 4.10 to the Company's Current Report on
               Form 8-K dated October 10, 1997, and incorporated herein by
               this reference.

     4.7       Common Stock Purchase Warrant in favor of ICC, filed as Exhibit
               4.11 to the Company's Current Report on Form 8-K dated October
               10, 1997, and incorporated herein by this reference.

     9.1       Voting Agreement among the Company and certain holders of the
               Series A Preferred Stock of the Company dated as of December 31,
               1998, filed as Annex B to the Company's Definitive Proxy
               Statement on Schedule 14A dated April 6, 1999, and incorporated
               herein by this reference.

     10.1      Lease Agreement dated February 2, 1998, by and between Green
               Mountain Ventures I, Ltd., a Texas limited partnership and the
               Company's subsidiary Business Partner Solutions, Inc., a Texas
               corporation, filed as Exhibit 10.1 to the Company's Current
               Annual Report on Form 10-K for the year ended December 31, 1997
               and incorporated herein by this reference.

     10.2**    Employment Letter between the Company and P. Scott Munro dated
               January 22, 1998, filed as Exhibit 10.17 to the Company's
               Annual Report on Form 10-K for the year ended December 31, 1997
               and incorporated herein by this reference.

     10.3**    Employment Letter between the Company and James W. Dorst dated
               January 22, 1998, filed as Exhibit 10.18 to the Company's
               Annual Report on Form 10-K for the year ended December 31, 1997
               and incorporated herein by this reference.

                                      -58-

<PAGE>

   EXHIBIT
   -------

     10.4**    Employment Letter between the Company and Robert O'Reilly dated
               January 22, 1998, filed as Exhibit 10.19 to the Company's
               Annual Report on Form 10-K for the year ended December 31, 1997
               and incorporated herein by this reference.

     10.5**    Employment Letter between the Company and Carlton Joseph
               Mertens II dated September 30, 1997, filed as part of Exhibit
               2.1 to the Company's Current Report on Form 8-K filed with the
               Commission on July 16, 1997 and incorporated herein by this
               reference.

     10.6**    Amendment of Stock Option Agreements by and between the Company
               and P. Scott Munro, filed as Exhibit 10.1 to the Company's
               Quarterly Report on Form 10-Q for the quarterly period ended
               June 30, 1999, and incorporated herein by this reference.

     10.7**    Executive Retention Agreement, dated as of May 10, 1999, by and
               between the Company and P. Scott Munro, filed as Exhibit 10.2 to
               the Company's Quarterly Report on Form 10-Q for the quarterly
               period ended June 30, 1999, and incorporated herein by this
               reference.

     10.8**    Email Agreement, dated March 13, 2000, between P. Scott Munro
               and the Company.

     10.9**    Promissory Note, dated May 10, 1999, of P. Scott Munro in favor
               of the Company, filed as Exhibit 10.3 to the Company's Quarterly
               Report on Form 10-Q for the quarterly period ended June 30,
               1999, and incorporated herein by this reference.

     10.10**   Promissory Note, dated September 13, 1999, of P. Scott Munro in
               favor of the Company, filed herewith.

     10.11*    Solution Provider Agreement by and between Business Partner
               Solutions, Inc., a subsidiary of Savoir Technology Group, Inc.
               and REAL Applications Ltd. dated as of September 8, 1998, filed
               as Exhibit 10.1 to the Company's Current Report on Form 8-K
               dated September 8, 1998 and incorporated herein by this
               reference.

     10.12     Inventory and Working Capital Financing Agreement dated
               September 4, 1998 by and among the Company, Business Partners
               Solutions, Inc. and MCBA Systems, Inc., filed as Exhibit 10.2
               to the Company's Quarterly Report on Form 10-Q for the
               quarterly period ended September 30, 1998, and incorporated
               herein by this reference.

     10.13     Amendment to Inventory and Working Capital Financing Agreement,
               dated as of May 21, 1999, by and among the Company, Business
               Partner Solutions, Inc., MCBA Systems, Inc. and IBM Credit
               Corporation, filed as Exhibit 10.4 to the Company's Quarterly
               Report on Form 10-Q for the quarterly period ended June 30,
               1999, and incorporated herein by this reference.

     10.14     Industry Remarketer Affiliate Agreement between the Company and
               Sirius Computer Solutions, Ltd. (included in Exhibit 2.3).

     10.15     Amendment Number One to Industry Remarketer Affiliate Agreement
               between the Company and Sirius Computer Solutions, Ltd., dated
               as of December 31, 1998, filed as Exhibit 10.7 to the Company's
               Annual Report on Form 10-K for the fiscal year ended December
               31, 1998, and incorporated herein by this reference.

     10.16     Amendment Number Two to Industry Remarketer Affiliate Agreement
               between the Company and Sirius Computer Solutions, Inc., dated
               as of November 30, 1999, filed herewith.

                                      -59-

<PAGE>


   EXHIBIT
   -------

     10.17     The 1994 Stock Option Plan of Western Micro Technology, Inc. as
               amended and restated on May 18, 1997, filed as Exhibit A to the
               Company's Definitive Proxy Statement as filed with the
               Commission on June 27, 1997, is hereby incorporated by
               reference.

     10.18     Amendment to the 1994 Stock Option Plan of Western Micro
               Technology, Inc., dated as of June 29, 1999, filed herewith.

     10.19     The 1995 Employee Stock Purchase Plan of Western Micro
               Technology, Inc., filed with the Company's Revised Definitive
               Proxy Statement as filed with the Commission on September 13,
               1995, is hereby incorporated by reference.

     10.20     Amendment to the 1995 Employee Stock Purchase Plan of Western
               Micro Technology, Inc., dated as of June 29, 1999, filed
               herewith.

     10.21**   Employment Letter between the Company and Dennis J. Polk, dated
               November 1, 1998, and amendments thereto dated January 11, 1999
               and November 1, 1999, filed herewith.

     21.1      List of Subsidiaries.

     23.1      Consent of Independent Accountants

     24.1      Power of Attorney

     27.1      Financial Data Schedule.
--------------------

+    Confidential Treatment was granted by the Commission with respect
to certain portions of this exhibit.

++   Schedules omitted from this exhibit will be furnished to the Commission
upon request.

*    Confidential Treatment requested pursuant to a request for confidential
treatment filed with the Commission on September 23, 1998. The portions of the
exhibit for which confidential treatment has been requested have been omitted
from the exhibit. The omitted information has been filed separately with the
Commission as part of the confidential treatment request.

**   Indicates management contract or compensation plan or arrangement.

(d)  Financial Statement Schedules

     The financial statement schedules listed below appear on the pages
indicated:

                                                                    Page Number
                                                                    -----------
     Schedule II--Valuation and Qualifying Accounts and Reserves        61


     All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule or because the information required is included in the Consolidated
Financial Statements or Notes thereto.

                                      -60-

<PAGE>

<TABLE>
<CAPTION>

                                                                                                    SCHEDULE II

                                           SAVOIR TECHNOLOGY GROUP, INC.

                                  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
         (in thousands)

                                            Balance at                                               Balance at
                                            Beginning                                                 End of
                                            of Period    Additions(1)    Other(2)    Deductions(3)     Period
                                            ----------   ------------    --------    -------------   -----------
<S>                                           <C>           <C>            <C>           <C>           <C>

Year ended December 31, 1997:
Allowance for doubtful accounts.....           $411          $472          $80           $644           $319

Year ended December 31, 1998:
Allowance for doubtful accounts.....           $319          $842          $60           $121          $1,100

Year ended December 31, 1999:
Allowance for doubtful accounts.....          $1,100        $1,702         $60           $826          $2,036
<FN>

----------
(1)  Charged to costs and expenses.
(2)  Reserves recorded for acquisitions.
(3)  Accounts written off against the reserve.
</FN>
</TABLE>

                                      -61-

<PAGE>

START
                                   SIGNATURES


     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON MARCH 28, 2000.

                                   SAVOIR TECHNOLOGY GROUP, INC.



                                   By          /s/ P. Scott Munro
                                      --------------------------------------
                                                 P. Scott Munro
                                             Chief Executive Officer



                                   By        /s/ Dennis J. Polk
                                      ---------------------------------------
                                                  Dennis J. Polk
                                     Senior Vice President Corporate Finance


                                POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints P. Scott Munro and Dennis J. Polk and
each of them, as his attorney-in-fact, with full power of substitution, for him
in any and all capacities, to sign any amendments to this Report on Form 10-K
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact, or his substitute or substitutes, may
do or cause to be done by virtue hereof.

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>

                   SIGNATURE                                           TITLE                              DATE
                   ---------                                           -----                              ----
<S>                                               <C>                                                <C>

            /s/ P. Scott Munro
--------------------------------------------           Chairman of the Board, Chief Executive        March 28, 2000
               P. Scott Munro                                  Officer and Secretary
                                                           (Principal Executive Officer)

           /s/ Dennis J. Polk
--------------------------------------------          Senior Vice President Corporate Finance        March 28, 2000
               Dennis J. Polk                       (Principal Financial and Accounting Officer)


        /s/ Carlton Joseph Mertens II
--------------------------------------------      Chief Operating Officer, President and Director    March 28, 2000
          Carlton Joseph Mertens II


           /s/ Angelo Guadagno
--------------------------------------------                          Director                       March 28, 2000
               Angelo Guadagno

                                      -62-

<PAGE>



           /s/ Mike Gunnells
--------------------------------------------                          Director                       March 22, 2000
                Mike Gunnells


          /s/ Guy M. Lammle
--------------------------------------------                          Director                       March 23, 2000
                Guy M. Lammle


          /s/ K. William Sickler
--------------------------------------------                          Director                       March 24, 2000
             K.  William Sickler


         /s/ J. Larry Smart
--------------------------------------------                          Director                       March 24, 2000
               J. Larry Smart
</TABLE>

                                      -63-