United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                               AMENDMENT NO. 1 TO
                                    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, 1996


                                       OR


/ /             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 0-11560
                                                -------

                         WESTERN MICRO TECHNOLOGY, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

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


           Securities registered under Section 12(b) of the Act: None
          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, Without Par Value


      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 at least the past 90 days.

                               YES /X/    NO / /

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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 voting stock held by nonaffiliates of
the registrant was approximately $44,759,567 on February 28, 1997.

      The aggregate number of outstanding shares of Common Stock, without par
value, of the registrant was 4,509,244 shares as of February 28, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

      None.


<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                             INDEX TO 1996 FORM 10-K

Item No.                                                                   Page
--------                                                                   ----

PART I.........................................................................1
    ITEM 1.   BUSINESS.........................................................1
    ITEM 2.   PROPERTIES.......................................................8
    ITEM 3.   LEGAL PROCEEDINGS................................................9
    ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............9

PART II...................................................................... 10
    ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
              STOCKHOLDER MATTERS............................................ 10
    ITEM 6.   SELECTED FINANCIAL DATA........................................ 11
    ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS...................................... 12
    ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................... 16
    ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE............................ 33

PART III..................................................................... 34
    ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............. 34
    ITEM 11.  EXECUTIVE COMPENSATION......................................... 36
    ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT..................................................... 38
    ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 40

PART IV...................................................................... 41
    ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
              8-K............................................................ 41


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


      When used in this Report, the words "estimate," "project," "intend" and
"expect" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially. For a discussion of certain of such
risks, see "Business--Factors That May Affect Future Results." Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. Western Micro Technology, Inc. (the "Company")
undertakes no obligation to publicly release updates or revisions to these
statements.

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<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 THE COMPANY'S PLANS AND EXPECTATIONS. THE
COMPANY'S 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 "--FACTORS THAT MAY AFFECT FUTURE RESULTS,"
AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS REPORT.

GENERAL

      Western Micro Technology, Inc. is a value-added distributor and reseller
of commercial mid-range computer systems (files servers and workstations),
peripheral equipment and a full range of storage products and software. The
Company also integrates and configures personal computers, workstations and
small servers, as well as provides and remarkets installation and technical
support services. Management believes the Company is one of the top ten
resellers of all International Business Machines Corporation ("IBM") mid-range
systems and one of the top four resellers of IBM's RS/6000 mid-range computer
systems. In 1996, the Company had over $44.4 million in sales of IBM mid-range
systems, $30.3 million of which were RS/6000 systems. Since the divestiture of
its components distribution business in July 1995, the Company has focused upon
expanding its mid-range distribution and reseller business through a combination
of acquisitions and internal growth. Whereas sales revenues from the Company's
systems business were $21.3 million for the quarter ended September 30, 1995,
revenues from this business were $37.8 million for the quarter ended December
31, 1996.

      The Company distributes a focused line of mid-range systems to value-added
resellers ("VARs"), industry remarketers ("IRs") and independent software
vendors ("ISVs") who incorporate commercial applications software and sell an
integrated computer system to end-user customers. Recognizing the consolidation
trend in the mid-range distribution industry, the Company commenced its
acquisition strategy in December 1994 with the acquisition of First Computer
Corporation ("FCC"). Over the past nine quarters, the Company has completed five
additional acquisitions. Through its acquisition of International Data Products,
LLC ("IDP") in November 1996, the Company initiated its own IR business, buying
IBM mid-range systems from IBM under a special program for industry remarketers
and reselling them directly to end users. In addition, the Company offers its
personal computer and workstation customers a single source for their hardware,
software and service needs through its Computer and Peripherals Group ("CPG").
The end users of the Company's systems represent a wide variety of industries
including financial, instrumentation, telecommunications, computer, industrial
and consumer products. In 1996 the Company had approximately 1,000 customers,
none of which represented more than 7% of the Company's net sales.

BUSINESS STRATEGY

      The Company's objective is to improve upon its position as a leading
value-added distributor and service provider of commercial mid-range computer
systems, peripherals and related products. The Company's strategy for achieving
this objective is to increase its sales revenues, leverage its expanding
customer base and achieve growth in the higher-margin service segment of its
business. To implement this strategy, the Company intends to:

      PURSUE AND EFFECTIVELY INTEGRATE STRATEGIC ACQUISITIONS. The Company has
been an aggressive participant in the mid-range system distribution channel
consolidation, completing five acquisitions since December 1994. These
transactions increased product and services offerings, enhanced presence in
major domestic markets and improved the infrastructure of the existing business.
The Company intends to capitalize on continuing industry

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<PAGE>


consolidation by actively seeking complementary acquisitions which can add
sales, improve operating leverage, provide experienced personnel, broaden its
services offerings and strengthen the Company's presence in targeted markets. As
consolidation continues and the number of smaller, independent mid-range
distributors declines, the Company anticipates shifting its focus to the
acquisition of complementary network service providers. These businesses, which
provide network configuration, installation and maintenance services, would
allow the Company to expand the higher-margin services segment of its business.
Management believes that these acquisition opportunities are currently and will
continue to be available as there are still a significant number of smaller,
regional independent service providers, the majority of which are privately held
with limited access to the working capital necessary for growth.

      ESTABLISH PROPRIETARY LONG-TERM RELATIONSHIPS WITH LARGER CUSTOMERS.
Recognizing that limited access to capital has constrained the growth of many
national mid-range VARs, the Company's business strategy includes making
minority equity investments in a select group of VARs as part of an arrangement
whereby the Company will become each VAR's exclusive supplier of products
offered by the Company. The Company believes that such investments will enable
it to provide needed growth capital to its customers, capture sales, acquire
technical expertise and solidify long-term relationships with these customers.
Furthermore, the Company believes it can provide its VARs with favorable pricing
and credit terms as well as allow the VARs to participate in a larger network of
potential customers and services to which the Company has access.

      EXPAND AND STRENGTHEN VENDOR RELATIONSHIPS. The Company believes that much
of its success comes from its strong relationships with a relatively small
number of vendors. The Company continuously enhances its vendor relationships by
aggressively pursuing co-marketing efforts, actively participating in advisory
councils and customer groups and maintaining strong relationships with key
vendor executives. The Company was recently named an IBM Premier Business
Partner, a distinction awarded only to the top 2% of IBM's partners and
affiliates. The Company continually reviews its vendor mix and identifies new
vendors that the Company believes offer the best long-term supplier prospects.
The Company plans to continue to selectively add to its base of vendors.

      INCREASE ITS SALES OF HIGHER-MARGIN, VALUE-ADDED SERVICES. As the trend
toward outsourcing continues, the Company believes it has the opportunity to
capitalize on this higher-margin segment of its business by providing more
value-added services to its customer base. The Company intends to increase the
quantity and quality of value-added services offered by acquiring and
integrating companies that have a significant service component to their
business. Management believes that by offering customers a variety of
configuration, installation and maintenance services, the Company will permit
its customers to focus on their core competencies, limit their investment in
working capital and improve product quality. In addition, the Company intends to
focus on expanding the value-added assembly portion of its business. The Company
believes it can often provide these services at lower costs than customers would
incur on their own, due to the Company's purchasing efficiencies and trained
technical support staff, while typically earning higher gross margins for the
Company than are achieved by pure system distribution sales. Moreover,
value-added services enhance the Company's relationships with customers, who
come to rely on the Company's expertise and efficiency in providing services.

      CONTINUE TO FOCUS ON MIDDLE-TIER VALUE-ADDED RESELLER AND INDEPENDENT
SOFTWARE VENDOR CUSTOMERS. While manufacturers such as IBM have been pushed by
their cost structures to pursue larger orders and sell direct only to larger
customers, the Company has focused on reselling systems to VARs which sell to
small- and medium-sized end users. These VARs generally do not have the
purchasing power to buy direct from manufacturers and cannot be served by
manufacturers on a cost-effective basis because they often require substantial
technical product assistance, while ordering a relatively small number of
mid-range systems. Consequently, they must rely on distributors to source their
mid-range systems requirements. Moreover, the Company believes that much of the
growth experienced by the mid-range systems industry is driven by the formation
of, and innovation by, smaller, entrepreneurial VARs, which continually provide
a growing customer base for distributors, resulting in additional sales for the
Company.


                                        2


<PAGE>


DISTRIBUTION AND SERVICES

      The Company's revenues are derived primarily from two business divisions:
the Mid-Range Systems Division and the Computer and Peripherals Group ("CPG").

      MID-RANGE SYSTEMS DIVISION. The distribution of mid-range computer systems
in 1996 accounted for approximately 75% of the Company's net sales. Products
distributed include mid-range servers, peripheral equipment and software. Within
this division, the Company represents four major manufacturers, IBM, Data
General, NCR and Unisys. In 1996, approximately 50% of the Company's net sales
came from mid-range and other products manufactured by IBM and 25% from net
sales related to its other vendors. The Company's IBM product line includes the
RS/6000 and AS/400 systems, with the substantial majority of sales generated
from the RS/6000 product line. Recently, the Company was named as one of a
handful of distributors to qualify for IBM's Authorized Assembly Program
("AAP"). This program allows the Company to utilize its integration facilities
to assemble custom RS/6000 configurations, allowing for shorter delivery times
to customers and a reduction in required inventory levels of preconfigured
systems.

      COMPUTER AND PERIPHERALS GROUP. Management believes that the national
trend toward outsourcing of value-added integration and light manufacturing
services represents a continuing growth opportunity for the Company. In fiscal
1996, CPG contributed approximately 25% of the Company's net sales at gross
margins ranging from 17% to 25%. With the acquisition of Star Technologies, Inc.
("STI") in November 1996, the Company increased its commitment to future growth
in this area. STI possesses significant expertise in "turnkey" systems assembly
of personal computers. The Company believes its new state-of-the-art integration
and sales facility in Irvine, California (which will commence operations in May
1997) will provide additional integration capacity and corporate presence in the
important Southern California market. The Company intends to offer its personal
computer and workstation customers a single source for their hardware, software
and service needs and to make available to such customers a wide range of pre-
and post-sales support from its technical support group.

      The Company's principal customers for Company-assembled personal computers
and workstations are OEMs, who market the systems under their own label, or
under the Company's private-brand name, "Antares(R)." The Company also markets
personal computers and related products to large corporate purchasers, but does
not sell to individual or retail customers. It is anticipated that as a result
of the STI acquisition, the Company will be able to offer Company-assembled
smaller systems along with the significant number of mid-range servers it
currently sells.

      The Company currently provides CPG services from its integration centers
in Campbell and Irvine, California. The Company's Northern California
integration facility has been evaluated for ISO 9000 certification, with the
Irvine facility slated for evaluation for such certification in the near future.

SALES AND MARKETING

      The Company focuses on selling and marketing a relatively small number of
high quality mid-range systems and integrated products. The Company's sales,
sales support, and product management organizations are organized by vendor into
autonomous business units that sell and support only products offered by that
particular vendor. This focused selling organization is preferred both by
customers and manufacturers. The Company believes its customers require sales
support from sales professionals who are dedicated to a particular vendor and
who can provide technical support on the increasingly complex servers and
systems offered by the Company's mid-range vendors. The Company also believes
that manufacturers prefer to have dedicated distributors who are focused solely
on their products and are not marketing a competing vendor's product line.

      Sales are coordinated by sales managers and product managers whose
responsibilities include supplier and product selection and pricing.
Compensation for sales and marketing personnel is based primarily on attainment
of specified gross profit margins, return on assets and inventory turns.

                                        3


<PAGE>


      As of December 31, 1996, the Company had approximately 52 direct sales
personnel. The Company has a national geographic presence with major sales
offices in Campbell and Irvine, California, Colorado Springs, Colorado, Burr
Ridge, Illinois, Framingham, Massachusetts and San Antonio, Texas. The Company's
current customer base is concentrated in the West and Midwest. The Company's
sales offices are supported by a centralized marketing department located in
Burr Ridge, Illinois (a suburb of Chicago).

OPERATIONS

      MID-RANGE SYSTEMS DIVISION. The principal goal of the Company's
distribution business is to provide customers with rapid, accurate delivery of
products as well as to provide quality configuration and technical support. The
Company utilizes a computerized system of inventory control to assist in
marketing its products and to coordinate purchases from manufacturers. Every
location and employee is linked through the Company's wide area network ("WAN")
to provide detailed inventory status, sales information, a complete on-line
operations guide (with detailed process descriptions and flowcharts) and current
and potential customer prospect information.

      COMPUTER AND PERIPHERALS GROUP. The Company offers its customers a wide
variety of value-added systems integration services ("turnkey" systems assembly
of personal computers, workstations, hardware and software "bundling," and light
manufacturing). The Company also provides its personal computer and workstation
customers a single source for hardware, software, and service needs and makes
available to such customers a wide range of pre- and post-sales support from its
technical support group. In addition to building state-of-the-art workstations,
the Company specializes in building systems to specification using older
technology, which is in demand by companies seeking fully compatible expansion
of installed configurations.

      For both the Mid-Range Systems Division and CPG, the Company's computer
system automatically determines price and availability of inventory and can
allocate inventory to bills of material (if required). The system instructs
warehouse personnel to pull products from specific warehouse locations stored in
a manner designed to optimize warehouse usage and ease of retrieval.

      The Company has inventory stocking locations in Irvine and Campbell,
California, Colorado Springs, Colorado, Burr Ridge, Illinois and Framingham,
Massachusetts. The Company's primary warehouse is located in Campbell,
California. In addition, the Company has its major integration facility in
Campbell, California, with other integration facilities in Irvine, California,
Burr Ridge, Illinois and Framingham, Massachusetts.

VENDORS

      With the sale of the Company's components distribution business in July
1995, the Company made the strategic decision to reduce product lines and
concentrate efforts on the major mid-range product vendors. Given the complexity
of the mid-range products offered and the technically demanding environments
into which many of its servers were sold, the Company believed that focusing its
efforts on becoming extremely knowledgeable about products manufactured from a
few major vendors would be more efficient and profitable than diffusing
resources over a large number of new vendors.

      To become an authorized distributor, the Company typically enters into a
non-exclusive agreement with a manufacturer that is cancelable by either party
upon 30 to 120 days prior written notice. Several of the franchise agreements
with the manufacturers provide that (i) the manufacturer is obligated, in the
event the manufacturer cancels the franchise agreement, to repurchase all of the
manufacturer's products in the Company's inventory, (ii) the Company has the
right to return discontinued products and, up to a specified percentage, current
inventory, in exchange for other products, and (iii) the Company has price
protection in the form of cash refunds or credits for purchase of additional
products, when the prices of products in the Company's inventory have been
reduced by the manufacturer.


                                        4

<PAGE>

      The Company currently acts as a distributor for approximately 30
manufacturers of mid-range computer systems, peripheral equipment and software.
The major mid-range systems vendors are IBM, Data General Corporation ("Data
General"), NCR Corporation ("NCR") and Unisys Corporation ("Unisys") and, for
the year ended December 31, 1996, these suppliers accounted for approximately
80% of the Company's net sales (with IBM accounting for approximately 50% of net
sales for the same period). CPG offers products from Boca Research, Digi
International, Link, Lotus, Sony, Tivoli, Wyse, DTK, Micronics, Hitachi,
Platinum, SCO and others.

COMPETITION

      The markets in which the Company competes are extremely competitive and
are characterized by rapid technological change and intense price competition.
In mid-range systems distribution, the Company competes with national, regional,
and local distributors such as Dickens Data Systems, Inc., Gates/Arrow
Commercial Systems, a division of Arrow Electronics, Inc., Hamilton Hall-Mark
Computer Products, a subsidiary of Avnet, Inc., Star Management Services, Inc.,
and SupportNet, Inc. In some limited circumstances, the Company competes with
its own vendors. For mid-range systems sales made directly to end users, the
Company competes with a number of VARs, some of which are customers of the
Company's distribution business. In personal computer and workstation systems
integration, the Company has a number of national and local competitors.

EMPLOYEES

      As of December 31, 1996, the Company had approximately 180 full-time
employees, of whom approximately 135 were in operations, and the balance of whom
were in corporate administration. Approximately 70 of the employees engaged in
operations were sales personnel, all of whom participate in ongoing training
regarding technological advances in their respective areas.

      The Company is not a party to any collective bargaining agreement and
considers its employee relations to be good.

SEASONALITY

      Although the Company's business is not seasonal to any material extent,
its business is influenced by trends affecting the electronics industry in
general and mid-range and personal computer markets in particular. For example,
the Company's largest vendor, IBM, sells approximately 40% of its products in
the last calendar quarter, which in the future could have an effect on the
Company's sales from quarter to quarter.

BACKLOG

      Although the Company receives volume purchase orders, not all such orders
will necessarily result in sales, as most orders are subject to revision or
cancellation without penalty. Consequently, the Company does not believe that
backlog is a meaningful indicator of sales for future periods.

IMPACT OF ENVIRONMENTAL REGULATIONS

      The Company believes that compliance with federal, state, and local
provisions regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment will not have a material
effect upon its capital expenditures, operations, or competitive position.

INSURANCE

      The Company presently has broad insurance coverage including property
damage, business interruption, earthquake, general liability, product liability
and directors and officers coverage. As a result of reduced

                                        5


<PAGE>

availability of certain types of coverage offered by the insurance
industry and increased premium costs, the Company may, in the future, be forced
or may elect to become self-insured for certain risks.

FACTORS THAT MAY AFFECT FUTURE RESULTS

      INDUSTRY CONSOLIDATION; ABILITY TO MAINTAIN MOST FAVORABLE VOLUME DISCOUNT
STATUS. The systems distribution industry is currently experiencing a
consolidation of distributors, which has resulted in the mergers of certain of
the Company's major competitors. To the extent that any increased sales volumes
resulting from the mergers relate to the products of IBM, these mergers may
result in raising the sales volume threshold required to maintain most favorable
volume discount status with IBM. In furtherance as its business strategy, and in
order to maintain most favorable volume discount status with IBM, the Company
has recently completed several acquisitions and is actively engaged in an
ongoing search for additional acquisitions. The Company intends to continue to
aggressively seek acquisitions of businesses that are complementary to the
Company's business in order to strengthen the Company's business and market
position. However, there can be no assurance that the Company will be successful
in completing any future acquisitions and the failure by the Company to
successfully complete additional acquisitions would have a material adverse
effect on the Company's business, financial condition and results of operations.

      SUPPLIER CONCENTRATION. During the year ended December 31, 1996,
approximately 50% of the Company's net sales was generated from the sale of
products purchased from IBM. The Company's business, financial condition and
results of operations are dependent upon the Company's relationship with IBM and
upon the market for IBM products. Any disruption or change in the Company's
relationship with IBM or in the manner in which IBM distributes its products,
the failure of IBM to develop new products which are accepted by the Company's
customers or the failure by the Company to maintain sufficient sales volumes of
certain IBM products to maintain most favorable volume discount status, would
have a material adverse effect upon the Company's business, financial condition
and results of operations.

      The balance of the Company's net sales is derived from products of a
relatively limited number of other suppliers, with approximately 25% derived
from systems products manufactured by Data General, NCR and Unisys. The loss of
a major supplier or the interruption of certain supplier relationships, the
inability of any of these suppliers to successfully develop, manufacture or sell
new products, and any decrease in the sales or market acceptance of these
suppliers' products, could materially and adversely affect the Company's
business, financial condition and results of operations.

      ACQUISITIONS AND EXPANSION. Acquisitions have played an important role in
the implementation of the Company's business strategy and the Company believes
that additional acquisitions are critical to the Company's future growth,
development and continued ability to compete effectively in the marketplace.
Prior acquisitions have placed substantial demands on the Company's management
and financial resources. The integration of the acquired companies' operations
have on occasion been slower, more complex and more costly than originally
anticipated. There can be no assurance that the combined companies will realize
the full cost savings or revenue enhancements the Company expects to realize as
a result of the recent acquisitions and the consolidation of certain of the
operations of the acquired companies or that such savings or enhancements will
be realized at the points in time currently anticipated. Furthermore, there can
be no assurance that any cost savings which are realized will not be offset by
increases in other expenses or operating losses. The Company will encounter
similar uncertainties and risks with respect to any future acquisitions it may
make.

      SUBSTANTIAL COMPETITION. The Company competes with national, regional, and
local distributors such as Dickens Data Systems, Inc., Gates/Arrow Commercial
Systems, a division of Arrow Electronics, Inc., HallMark Computer Products, a
subsidiary of Avnet, Inc., Sirius Computer Solutions, Inc., SupportNet, Inc.
and, in some limited circumstances, competes with its own vendors. The Company
has experienced and expects 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 the Company. Accordingly, such
competitors or future

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<PAGE>


competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources to
the development, promotion and sales of their products than the Company.
Competitors which are larger than the Company may be able to obtain pricing and
terms from vendors that are more favorable than the pricing and terms accorded
to the Company. As a result, the Company may be at a disadvantage when competing
with these larger companies.

      FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING. The Company's
operations to date have required substantial amounts of capital and as a result
the Company maintains a line of credit secured by substantially all of the
Company's assets. In order to pursue the Company's expansion and acquisition
strategy, the Company will need to obtain additional financing. Although the
Company believes it has sufficient funds, or alternate source of funds, to carry
on its business through 1997, in order to achieve the growth (including possible
acquisitions) contemplated by the Company's business plan, the Company will need
to raise additional amounts through public or private debt and/or equity
financings. There can be no assurance that such additional financing will be
available. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of the shareholders of the
Company will be reduced and shareholders may experience additional dilution.
There can be no assurance that additional financing will be available on
acceptable terms, if at all and failure to obtain such financing, if necessary,
could adversely affect the Company's business, financial condition and results
of operations.

      FLUCTUATIONS IN OPERATING RESULTS. The Company's past operating results
have been, and its future operating results will be, subject to fluctuations
from quarter to quarter and on an annual basis due to a variety of factors,
including, without limitation, the cost and effect of acquisitions, the addition
or loss of a key supplier or customer, unexpected customer defaults on payments
due to the Company, price competition, changes in the mix of products sold
through distribution channels and in the mix of products purchased by OEMs, and
changes in the supply and demand for mid-range computer systems, peripheral
equipment, software and related services. 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 computers,
and order cancellations or rescheduling. In addition, a substantial portion of
the Company's sales are made in the last few days of a quarter. Accordingly, the
Company's quarterly results of operations are difficult to predict and delays in
the closings of sales near the end of a quarter could cause quarterly revenues
to fall substantially short of anticipated levels and, to a greater degree,
adversely affect profitability. The Company's future operating results are
expected to fluctuate as a result of these and other factors, which could have a
material adverse effect on the Company's business, operating results and
financial condition.

      SEASONALITY. While the Company's business is not generally affected by
seasonal trends, its business is influenced by trends affecting its suppliers
and customers. For example, the Company's largest vendor, IBM, sells
approximately 40% of its products in the last calendar quarter, which in the
future could have an effect on the Company's revenues from quarter to quarter.
Due to the Company's recent significant growth through acquisitions, and IBM's
recent prominence as a supplier to the Company, the Company has not yet
experienced any material seasonal variations in its operating results, but such
seasonal variations may occur in the future, and could have a material adverse
effect on the Company's business, operating results and financial condition.

      RAPID TECHNOLOGICAL CHANGES, PRICE REDUCTIONS AND INVENTORY RISK. The
market for products sold by the Company is extremely competitive and is
characterized by declining selling prices over the life of a particular product
and rapid technological changes. Since the Company acquires inventory in advance
of product shipments, and because the markets for the Company's products are
volatile and subject to rapid technological and price changes, there is a risk
that the Company will forecast incorrectly and stock excessive or insufficient
inventory of particular products. Although the Company has stock rotation rights
and price protection with certain vendors permitting it to return discontinued
products, or receive price protection (should the vendor reduce the price of
product that is already in the Company's inventory) in the form of cash refunds
or credits for the purchase of additional product, if the Company is forced to
sell its inventory for less than its targeted or traditional margins it could
have a material adverse effect upon the Company's financial condition and
results of operations. The markets in which the Company competes currently are
subject to intense price

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<PAGE>

competition and the Company expects additional price and product
competition as other companies enter these markets and new products and
technologies are introduced. Increased competition may result in further price
reductions, reduced gross margins and loss of market share, any of which could
materially and adversely affect the Company's business, financial condition and
results of operations.

      CREDIT FACILITY AGREEMENT: LIMITATIONS AND REQUIREMENT OF CONSENT. The
Company's credit facility agreement with IBM Credit Corporation ("ICC") is
structured to provide favorable financing for the purchase of IBM products, and
provides a limited amount of additional financing to carry the inventory of
third-party products. The Company presently has no other facility for financing
the purchase of products from third parties. While the ICC facility is adequate
for the Company's present purchases of products of third-party vendors, if the
Company increases the purchase of such products, it may need to obtain
additional inventory financing, in which case it will need to obtain a
modification or waiver of its credit facility agreement with ICC (which is
presently secured by all of the assets of the Company, including all inventory
purchased from third-party vendors). The Company's credit facility with ICC is
not sufficient to provide the necessary funding for the future acquisitions
contemplated by the Company's business plan. There can be no assurance that such
additional financing will be available to the Company when needed or on
acceptable terms, or that IBM will consent to modifying the current credit
facility agreement in order to allow such alternate financing.

      MANAGEMENT OF GROWTH; DEPENDENCE ON KEY PERSONNEL. Since the sale of its
components distribution business in July 1995, the Company has experienced
significant growth in the number of its employees and in the scope of its
operating and financial systems, resulting in increased responsibilities for the
Company's management. To manage future growth effectively, the Company will need
to continue to improve its operational, financial and management information
systems, procedures and controls, and expand, train, motivate, retain and manage
its employee base. There can be no assurance that the Company will be able to
manage its growth effectively, and failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations.

      The Company's future success depends in part on the continued service of
its key sales, marketing and executive personnel, and its ability to identify
and hire additional personnel. Competition for such personnel is intense and
there can be no assurance that the Company can retain and recruit adequate
personnel to operate its business. The loss of key personnel could have a
material adverse effect on the Company's business and operating results. The
Company does not maintain key man insurance on any of its employees.


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

      The Company leases all facilities used in its business. The following
table summarizes the principal properties occupied by the Company:

<TABLE>
<CAPTION>
                                                               EXPIRATION DATE
                LOCATION                       SQUARE FOOTAGE      OF LEASE
                --------                       --------------  ---------------

<S>                                                <C>               <C> 
ADMINISTRATIVE AND SALES OFFICE:
      Campbell, California....................     35,563            2000
OTHER MAJOR FACILITIES:
      Irvine, California (3)(4)...............     42,000            2004
      Burr Ridge, Illinois (1)(2)(3)(4).......     16,900            2003
      Framingham, Massachusetts (1)(3)(4).....     11,200            2000

----------

(1)  Warehouse; (2) Distribution; (3) Integration Center; (4) Sales Office.
</TABLE>

                                        8

<PAGE>

      The Company also leases sales offices in Colorado Springs, Colorado;
Atlanta, Georgia; Mt. Laurel, New Jersey; and San Antonio, Texas, which range in
size from 500 to 2,500 square feet.

      The Company believes its facilities are suitable for their uses and are,
in general, adequate for the Company's current needs. The Company believes that
lease extensions or replacement space may be obtained for all of its leased
facilities upon the expiration of the current lease terms, in most cases at
rates which are not materially higher than those currently in effect.


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

      None.


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

      None.

                                        9

<PAGE>

                                     PART II


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

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

      The Company's Common Stock is traded on The Nasdaq Stock Market under the
symbol WSTM. The following table sets forth, for the periods indicated, high and
low sales price information as reported by The Nasdaq Stock Market.

<TABLE>
<CAPTION>
                                       Year Ended December 31,
                      -------------------------------------------------------
                               1996                             1995
                      -----------------------         -----------------------
                         High           Low             High            Low
                         ----           ---             ----            ---
<S>                   <C>            <C>              <C>            <C> 
First Quarter         $    7.00      $   4.63         $   7.50       $   4.00
Second Quarter        $   10.75      $   6.50         $   6.38       $   2.25
Third Quarter         $    9.00      $   5.88         $   6.00       $   2.94
Fourth Quarter        $   12.25      $   8.13         $   6.25       $   5.00
</TABLE>

      (b) As of February 28, 1997, there were approximately 1,450 beneficial
shareholders and 195 shareholders of record. The Company has never paid a
dividend and has no current plans to do so.

                                       10

<PAGE>

<TABLE>
ITEM 6.   SELECTED FINANCIAL DATA  (in thousands, except per share data)
          -----------------------
<CAPTION>
                                                                            Year Ended December 31,
                                                -----------------------------------------------------------------------
Income Statement Data                                1996          1995            1994           1993           1992
---------------------                                ----          ----            ----           ----           ----
<S>                                             <C>            <C>             <C>             <C>            <C>      
Net sales                                       $  131,697     $  106,462      $  119,285      $  96,843      $  80,478
Selling, general and administrative
      expense                                       14,123         13,703          16,968         16,768         15,165
Restructuring costs                                    --           3,600              --          1,510             --
Income (loss) from continuing
operations                                           2,614         (5,098)         (1,002)        (1,091)          (385)
Discontinued operations, net of tax                    --              --             387            524            427
Net income (loss)                               $    2,338     $   (5,098)     $     (615)     $    (567)     $      42

Per share:
Income (loss) from continuing
      operations
      -Primary                                  $      .51     $    (1.36)     $    (0.27)     $   (0.31)     $   (0.12)
      -Fully Diluted                                   .50          (1.36)          (0.27)         (0.31)         (0.11)
Income (loss) from discontinued
      operations
      -Primary                                  $      --      $       --      $     0.10      $    0.15      $    0.13
      -Fully Diluted                                   --              --            0.10           0.15           0.12
Net income (loss) per share:
      -Primary                                  $      .51     $    (1.36)     $    (0.17)     $   (0.16)     $    0.01
      -Fully diluted                                   .50          (1.36)          (0.17)         (0.16)          0.01
Number of shares used in per share calculation:
      -Primary                                       4,510          3,756           3,669          3,474          3,320
      -Fully diluted                                 4,663          3,756           3,669          3,474          3,418
</TABLE>

<TABLE>
<CAPTION>
                                                                                December 31,
                                                  ----------------------------------------------------------------------
Balance Sheet Data                                    1996          1995          1994           1993           1992
------------------                                    ----          ----          ----           ----           ----
<S>                                               <C>            <C>            <C>           <C>            <C>       
Working capital                                   $    7,448     $    7,312     $  12,334     $   12,021     $   10,836
Net trade accounts receivable                     $   25,943     $   14,258     $  15,170     $   13,365     $   10,035
Inventories                                       $   26,142     $   15,251     $  18,959     $   17,467     $   13,391
Total assets                                      $   63,276     $   35,899     $  37,898     $   34,975     $   27,426
Capital lease obligations, less current portion   $       53     $      117     $      65     $       52     $       96
Shareholders' equity                              $   15,714     $   11,004     $  14,424     $   13,976     $   13,635
</TABLE>


      Amounts for 1993 and 1992 have been restated to reflect the 1994
discontinuation of the Testing Division (see Note 7 of the Notes to Financial
Statements) and the 1994 acquisition of First Computer Corporation accounted for
as a pooling of interests (see Note 11 of the Notes to Financial Statements).

                                       11

<PAGE>

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

      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 THE COMPANY'S PLANS AND EXPECTATIONS. THE
COMPANY'S 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 ABOVE IN "BUSINESS--FACTORS THAT MAY AFFECT FUTURE
RESULTS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS REPORT.

RECENT ACQUISITIONS AND DIVESTITURE TRANSACTIONS

      ACQUISITIONS

      On November 18, 1995, the Company acquired all of the Common Stock of
International Parts, Inc. ("IPI"), a privately held company, in exchange for
300,000 shares of the Company's Common Stock. The agreement between the Company
and IPI (the "IPI Agreement") contains an earn-out provision which allows for
the former IPI shareholders to earn up to an additional 300,000 shares of the
Company's Common Stock based on 30% of gross profit dollars generated for
certain fiscal year 1996 and 1997 sales (as defined in the IPI Agreement) in
excess of $418,550 per quarter. The stock so issued is to be valued at an
average of prevailing market closing stock prices at each quarterly payment
date. During 1996 the Company issued 39,108 shares, valued at $320,000, related
to this earn-out provision. The acquisition has been accounted for as a purchase
with the result that IPI operations are included in the Company's financial
statements commencing on the date of purchase. In connection with this purchase,
the Company has recorded approximately $2,600,000 of goodwill. For the fiscal
year ended December 31, 1994, IPI had revenues of approximately $15,200,000, and
net income of approximately $90,000.

      On January 2, 1996, the Company acquired the assets of R&D Hardware
Systems Company of Colorado ("R&D"), a privately held company, in exchange for
$1,000,000 in cash and 125,000 shares of the Company's Common Stock. The
agreement between the Company and R&D (the "R&D Agreement") contains an earn-out
provision which allows R&D to earn up to an additional 125,000 shares of the
Company's Common Stock based on attainment of gross profit targets for certain
fiscal year 1996 and 1997 sales (as defined in the R&D Agreement) up to a
cumulative value of $855,000. As of December 31, 1996, approximately 33,000
shares, at an average price of $9.98 per share, had been earned under this
provision. The assets purchased primarily consisted of certain inventories and
trade accounts receivable of R&D. The acquisition has been accounted for as a
purchase with the result that R&D operations are included in the Company's
financial statements commencing on the date of purchase. In connection with this
acquisition, the Company recorded approximately $1,400,000 of goodwill and other
intangible assets. For the year ended December 31, 1995, R&D had revenues of
approximately $9,557,000, and net income of approximately $446,000.

      On November 7, 1996, the Company acquired the net assets of Star
Technologies, Inc. ("STI"), a privately held company, in exchange for 113,263
shares of the Company's Common Stock (valued at $8.38 per share, for a total
consideration of $950,000). The agreement between the Company and STI (the "STI
Agreement") contains an earn-out provision which allows STI to earn up to an
additional $2,400,000 of the Company's Common Stock based on the attainment of
gross profit targets for certain fiscal year 1997 and 1998 sales (as defined in
the STI Agreement). An additional 89,418 shares were issued by the Company on
November 7, 1996 and placed in escrow for this earn-out provision. If STI does
not meet the earn-out provision targets, the appropriate number of shares will
be returned to the Company. The assets purchased primarily consisted of certain
inventories and trade accounts receivable of STI. The acquisition has been
accounted for as a purchase with the result that STI operations are included in
the Company's financial statements commencing on the date of purchase. In
connection with this acquisition, the Company recorded approximately $400,000 of
goodwill and other intangible assets. For the year ended June 30, 1996, STI had
revenues of approximately $7,500,000, and net income of approximately $40,000.

      On November 29, 1996, the Company acquired the net assets of International
Data Products, LLC ("IDP"), a privately held company, for $265,000 in cash and
assumed net liabilities of $424,000. The agreement between the Company and IDP
(the "IDP Agreement") contains an earn-out provision which allows IDP to earn up
to 140,000

                                       12

<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


shares of the Company's Common Stock based on the attainment of gross
profit targets for certain fiscal year 1997 and 1998 sales (as defined in the
IDP Agreement). The value of the shares will be based on the average daily
closing price of the Company's Common Stock at the end of the earn-out period,
December 31, 1998. The assets purchased primarily consisted of certain
inventories and trade accounts receivable of IDP. The acquisition has been
accounted for as a purchase with the result that IDP operations are included in
the Company's financial statements commencing on the date of purchase. In
connection with this acquisition, the Company recorded approximately $780,000 of
goodwill and other intangible assets. For the year ended December 31, 1995, IDP
had unaudited revenues of approximately $4,611,000, and net income of
approximately $2,000.

      REPTRON DIVESTITURE

      On July 26, 1995, the Company sold its electronics components distribution
assets to Reptron Electronics Inc. ("Reptron"). The transaction, valued at
approximately $12,500,000, consisted of a $9,200,000 payment in cash and the
assumption of $3,300,000 in accounts payable. Of the $9,200,000 cash payment,
$1,000,000 was held back in escrow for six months to secure certain specified
rights in favor of Reptron, as set forth in the purchase agreement. The sale,
which was approved by the Company's shareholders, included the Company's
semiconductor component inventory, certain receivables, furniture and equipment.
In addition, Reptron assumed certain building and equipment lease obligations.
As a result of this sale, the Company recorded a restructuring charge of
$3,600,000. Of this amount, $2,376,000 was for non-cash write-offs comprised of
$1,353,000 in goodwill and a $1,023,000 increase to long-term inventory-related
reserves. Severance and other exit-related charges related to the sale comprised
the remaining $1,224,000. In February 1996, approximately $211,000 was
distributed from the escrow to the Company and the balance was paid to Reptron.
Concurrently with the distribution of the escrow funds, Reptron returned
approximately $789,000 of designated assets, valued at historical cost, to the
Company. These designated assets were primarily comprised of semiconductor
inventories. As of December 31, 1996, the Company did not have any inventory
related to the Reptron transaction.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

      The Company's net sales and gross profits for the year ended December 31,
1996 were generated entirely from the computer systems distribution business, as
the Company sold its components distribution business in July 1995.

      Net sales for the year ended December 31, 1996 of $131,697,000 were 24%
higher than net sales of $106,462,000 for the year ended December 31, 1995.
Gross profit as a percentage of net sales for the years ended December 31, 1996
and 1995 was 13% and 12%, respectively. Prior period results include
semiconductor distribution sales of approximately $28,248,000 and computer
system sales of approximately $78,214,000, resulting in a year-to-year 68%
increase in computer system sales. Computer system sales rose due to the
expansion of the Company's computer systems distribution business, general
market demand for mid-range computer systems and the acquisitions of IPI, R&D,
STI and IDP. The gross profit percentage increased in 1996 versus 1995 primarily
due to the fact that the Company was able to secure increased purchase discounts
from its vendors as a result of higher sales volume.

      Selling, general and administrative expense increased 3% in the year ended
December 31, 1996 versus the year ended 1995 due to higher labor expense from
necessary personnel increases as a result of increased sales, higher
depreciation expense as a result of additions to Company infrastructure, and
higher amortization expense as a result of increased goodwill related to
acquisitions. As a percentage of net sales, selling, general and administrative
expense decreased from 13% in 1995 to 11% in 1996. The decrease is a result of
rapid revenue growth, expense management and economies of scale.

      The Company's effective tax rate in 1996 was 11%, versus the statutory
rate of 34%. This differential is due primarily to the utilization of net
operating loss carryforwards.

                                       13

<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


      Interest expense increased 15% in the fiscal year ended December 31, 1996
as compared with the year ended December 31, 1995. The increase was due
primarily to an increase in borrowings required to fund the Company's growth and
acquisitions. A decrease in the interest rate partially offset the effect of
increased borrowings.

      The increase in other income in 1996 is primarily due to commissions
generated from assisting customers in finding lease financing for acquired
computer systems as well as a gain recognized on the sale of equipment.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

      Net sales for the year ended December 31, 1995 of $106,462,000 were 11%
lower than the net sales of $119,285,000 for the year ended December 31, 1994.
Gross profit as a percentage of net sales was 12% and 14%, respectively, for the
years ended December 31, 1995 and 1994. Net sales decreased in 1995 due to the
sale of the Company's semiconductor component business to Reptron in July 1995.
Net sales related to the ongoing computer systems business were $78,214,000 for
the year ended December 31, 1995 as compared to $59,934,000 for the same period
in 1994, an increase of 31%. Semiconductor component sales, representing the
balance of the reported consolidated net sales, decreased 53% as a result of the
sale of the net assets of the semiconductor distribution business in July 1995
and the continued loss of semiconductor component lines in the 19 month period
ending with the date of the sale of the Company's component assets. The decrease
in gross profit was attributable to the lower average gross profit of systems
products sold at the time as well as a decrease in average component selling
prices prior to the sale of the Company's components assets. The Reptron sale
early in the third quarter of 1995 allowed for a significant increase in the
mid-range computer systems sales, as the Company focused its efforts solely on
this business.

      Selling, general and administrative expense as a percentage of net sales
decreased to 13% in the year ended December 31, 1995 from 14% in the year ended
December 31, 1994. The decrease in selling, general and administrative expense
is due to several factors, of which the most significant is the sale of the
Company's component distribution assets and the transfer of employees and
infrastructure associated with that business to Reptron. In the management of
its ongoing computer systems business, the Company had a reduction in force,
consolidated its executive, administrative, distribution and integration
facilities into one location, and aggressively cut back controllable
sales-related expenses, which included the modification of management
compensation plans with such compensation determined in part as a function of
return on assets. For the year ended December 31, 1994, the Company recorded a
non-recurring, non-cash charge of $393,000 to account for the compensation
element of certain First Computer Corporation ("FCC") restricted stock awards
exchanged for publicly traded shares of the Company's Common Stock when FCC was
acquired on December 1, 1994.

      As a result of the sale of the Company's component distribution assets to
Reptron, the Company recorded a restructuring charge of $3,600,000. Of this
amount, $2,376,000 was for non-cash write-offs comprised of $1,353,000 in
goodwill and a $1,023,000 increase to inventory reserves. Severance and other
exit-related charges related to the sale comprised the remaining $1,224,000.

      Interest expense decreased 4% in the fiscal year ended December 31, 1995
as compared with the year ended December 31, 1994, mainly due to a decrease in
general bank borrowings for the year, as the proceeds received from the sale of
the semiconductor distribution assets were used to reduce short-term debt.

      Effective September 30, 1994, the Company discontinued its Testing
Division operations in North Carolina, as a result of its sole customer,
Mitsubishi, discontinuing its testing business with the Company. For the period
ended December 31, 1994, income from discontinued operations, net of income tax,
of $450,000 was reduced by a $63,000 estimated loss on disposition, consisting
primarily of expense related to an employment agreement offset by gains on the
sale of testing equipment.


                                       14

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      Net cash used in operating activities during the year ended December 31,
1996 totaled $1,017,000 compared to net cash provided by operations of
$3,719,000 for the same period in the preceding year. The net use of cash was a
result of significant increases in accounts receivable and inventory ($9,648,000
and $9,831,000, respectively), as a result of increased sales volume and
acquisitions, which were only partially offset by an increase in accounts
payable ($15,591,000). The fiscal year ended December 31, 1995 had positive cash
flow from operating activities due to the sale of the component assets to
Reptron, which reduced, at the time of sale, accounts receivable and inventory
by approximately $9,200,000 and accounts payable by approximately $3,300,000.

      Net cash used in investing activities totaled $2,818,000 for fiscal year
1996 compared to $1,172,000 in the prior year. The investing activities for 1996
consisted of the R&D and IDP asset purchases as well as continuing leasehold,
internal computer hardware and software investments made at the Company's
headquarters and sales offices.

      Net cash provided by financing activities totaled $3,673,000 during 1996
compared to net cash used of $2,139,000 for 1995. Short-term borrowings
increased due to the need to fund increased working capital requirements as a
result of increased sales and acquisitions.

      The Company has available a $25,000,000 line of credit with a financial
institution that bears interest at the financial institution's prime lending
rate (8.25% as of December 31, 1996) plus 1.50%. Borrowings under the line of
credit are based on eligible accounts receivable and inventory, as defined, and
are collateralized by substantially all assets of the Company. The facility is
renewable annually and contains restrictive covenants which include the
maintenance of minimum revenue, profit and tangible net worth ratios, as
defined. The Company was not in compliance with the tangible net worth covenant
at December 31, 1996. The financial institution granted a waiver for the
specific violation. Borrowings under this line of credit were $11,277,000 at
December 31, 1996. Based on eligible assets, as of December 31, 1996, the
Company had borrowings available of approximately $5,300,000. The weighted
average interest rates for the Company's borrowings during 1996 and 1995 were
9.2% and 10.6%, respectively.

      The Company has required substantial working capital to finance accounts
receivable, inventories and capital expenditures and has financed its working
capital requirements, capital expenditures and acquisitions primarily through
borrowings from financial institutions and cash generated from operations. The
Company believes that its existing cash and available bank borrowings will be
sufficient to fund the Company's operations through the end of 1997. The Company
is actively considering other alternatives for raising additional cash including
a public or private equity or debt financing or other credit arrangement. There
can be no assurance that the Company will be able to obtain additional financing
on acceptable terms or at sufficient levels.

                                       15

<PAGE>

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

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders
Western Micro Technology, Inc.
Campbell, California

We have audited the accompanying consolidated balance sheets of Western Micro
Technology, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Western Micro
Technology, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

                                      COOPERS & LYBRAND L.L.P.



San Jose, California
January 31, 1997


                                       16


<PAGE>


<TABLE>
                         WESTERN MICRO TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   ----------

<CAPTION>
                                                                                              December 31,
                                                                                   ------------------------------
                                   ASSETS                                              1996               1995
                                                                                       ----               ----
<S>                                                                                <C>                <C>        
Current assets:
  Cash                                                                             $         384      $       546
  Trade accounts receivable, net of allowance for doubtful
        accounts of $411 in 1996 and $380 in 1995                                         25,943           14,258
  Inventories                                                                             26,142           15,251
  Other current assets                                                                     2,254            1,705
                                                                                   -------------      -----------
        Total current assets                                                              54,723           31,760

Property and equipment, net                                                                3,276            1,720
  Goodwill, net of accumulated amortization of $293 in 1996 and $12 in
  1995                                                                                     4,937            2,206
Other assets                                                                                 340              213
                                                                                   -------------      -----------

        Total assets                                                               $      63,276      $    35,899
                                                                                   =============      ===========

                                 LIABILITIES
Current liabilities:
  Notes payable                                                                    $      11,277      $     7,040
  Current portion of capital lease obligations                                                58               86
  Accounts payable                                                                        33,956           15,950
  Accrued expenses                                                                         1,984            1,372
                                                                                   -------------      -----------
        Total current liabilities                                                         47,275           24,448

Capital lease obligations, less current portion                                               53              117
Other                                                                                        234              330
                                                                                   -------------      -----------
                                                                                          47,562           24,895

Commitments and contingencies (Notes 4, 9 and 11)

                            SHAREHOLDERS' EQUITY
Preferred stock, without par value:
  Authorized:  10,000,000 shares;
  Issued and outstanding:  none
Common stock, without par value:
  Authorized:  10,000,000 shares;
  Issued and outstanding:  4,488,131 shares in 1996 and 4,009,988
        shares in 1995                                                                   17,959            15,587
Retained deficit                                                                         (2,245)           (4,583)
                                                                                   ------------       -----------
        Total shareholders' equity                                                       15,714            11,004
                                                                                   ------------       -----------

        Total liabilities and shareholders' equity                                 $     63,276       $    35,899
                                                                                   ============       ===========

      The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       17


<PAGE>

<TABLE>
                         WESTERN MICRO TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   ----------

<CAPTION>
                                                                             Year Ended December 31,
                                                              -------------------------------------------------
                                                                    1996              1995              1994
                                                                    ----              ----              ----
<S>                                                           <C>               <C>                <C>         
Net sales                                                     $    131,697      $     106,462      $    119,285
Cost of goods sold                                                 114,389             93,416           102,662
                                                              ------------      -------------      ------------
          Gross profit                                              17,308             13,046            16,623

Selling, general and administrative expenses                        14,123             13,703            16,968
Restructuring costs                                                                     3,600
Interest expense                                                       978                850               884
Other income                                                          (407)                (9)              (10)
                                                              ------------      -------------      ------------
          Income (loss) from continuing operations
          before income taxes                                        2,614             (5,098)           (1,219)

Income tax (expense) benefit                                          (276)                                 217
                                                              ------------      -------------      ------------
          Income (loss) from continuing operations                   2,338             (5,098)           (1,002)

Discontinued operations:
     Income from operations, net of income tax                                                              450
     Estimated loss on disposition                                                                          (63)
                                                              ------------      -------------      ------------
          Net income (loss)                                   $      2,338      $      (5,098)     $       (615)
                                                              ============      =============      ============

Net income (loss) per common share:
Continuing operations                                         $       0.50      $       (1.36)     $      (0.27)
Discontinued operations                                                                                    0.10
                                                              ------------      -------------      ------------
          Net income (loss) per share                         $       0.50      $       (1.36)     $      (0.17)
                                                              ============      =============      ============

Number of shares used in per share calculations                       4,663             3,756             3,669
                                                              =============     =============      ============

      The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       18

<PAGE>

<TABLE>
                         WESTERN MICRO TECHNOLOGY, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   ----------

<CAPTION>
                                                            Common Stock                     Retained
                                                ------------------------------------         Earnings
                                                     Shares               Amount             (Deficit)             Total
                                                     ------               ------             ---------             -----
<S>                                                   <C>            <C>                  <C>                  <C>         
Balances, January 1, 1994                             3,618,076      $        12,831      $        1,145       $     13,976
          Exercise of stock options                      51,513                  150                                    150
          Stock compensation                                                     393                                    393
          Issuance of common stock                       35,004                  254                                    254
          Retirement of shares                           (2,586)                 (61)                (15)               (76)
          Tax benefit from the exercise of
              stock options                                                      342                                    342
          Net loss                                                                                  (615)              (615)
                                                ---------------      ---------------      --------------       ------------

Balances, December 31, 1994                           3,702,007               13,909                 515             14,424
          Exercise of stock options                       7,981                   18                                     18
          Issuance of common stock                      300,000                1,660                                  1,660
          Net loss                                                                                (5,098)            (5,098)
                                                ---------------      ---------------      --------------       ------------

Balances, December 31, 1995                            4,009,988               15,587             (4,583)            11,004
          Exercise of stock options                       92,157                  331                                   331
          Issuance of common stock                       366,789                1,949                                 1,949
          Issuance under employee stock
              purchase plan                               19,197                   92                                    92
          Net income                                                                               2,338              2,338
                                                ----------------     ----------------     --------------       ------------

Balances, December 31, 1996                            4,488,131     $         17,959     $       (2,245)      $     15,714
                                                ================     ================     ==============       ============

      The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       19

<PAGE>

<TABLE>
                         WESTERN MICRO TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   ----------
<CAPTION>
                                                                                        Year Ended December 31,
                                                                        -----------------------------------------------------
                                                                              1996               1995               1994
                                                                              ----               ----               ----
<S>                                                                     <C>                 <C>               <C>             
Cash flows from operating activities:
      Net income (loss)                                                 $         2,338     $      (5,098)    $          (615)
      Adjustments to reconcile net income (loss) to net cash
         (used in) provided by operating activities:
         (Gain) loss on disposal of property and equipment                          (11)              (68)                 87
         Depreciation and amortization                                              983               527                 557
         Provision for doubtful accounts receivable                                 120               291                 302
         Provision for restructuring costs                                                          3,600
         Compensation associated with restricted stock grants                                                             393
         Change in assets and liabilities:
              Trade accounts receivable                                          (9,648)              421              (1,819)
              Inventories                                                        (9,831)            2,035              (1,430)
              Other current assets                                                 (478)             (110)                178
              Other assets                                                         (484)             (154)                  4
              Accounts payable                                                   15,591             4,001                (443)
              Accrued expenses and other liabilities                                403            (1,726)               (459)
                                                                        ---------------     -------------     ---------------
                Net cash (used in) provided by operating                         (1,017)            3,719              (3,245)
                   activities                                           ---------------     -------------     ---------------

Cash flows from investing activities:
      Acquisition of businesses, net of cash acquired                              (640)
      Acquisitions of property and equipment                                     (2,200)           (1,364)               (575)
      Proceeds from sale of property and equipment                                   22               192
                                                                        ---------------     -------------     ---------------
                Net cash used in investing activities                            (2,818)           (1,172)               (575)
                                                                        ---------------     -------------     ---------------
Cash flows from financing activities:
      Net proceeds (repayments) under notes payable                               3,434            (2,135)              3,087
      Proceeds from exercise of stock options                                       331                18                  74
      Proceeds from employee stock purchase plan                                     92
      Repayment of capital leases and equipment loan                               (184)             (123)                (75)
      Proceeds from equipment loan                                                                    101                 115
      Tax benefit from the exercise of stock options                                                                      342
                                                                        ---------------     -------------     ---------------
                Net cash provided by (used in) financing                          3,673            (2,139)              3,543
                   activities
Net increase (decrease) in cash                                                    (162)              408                (277)

Cash, beginning of year                                                             546               138                 415
                                                                        ---------------     -------------     ---------------

Cash, end of year                                                       $           384     $         546     $           138
                                                                        ===============     =============     ===============

      The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       20

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------

1.    Summary of Significant Accounting Policies:
      ------------------------------------------

      NATURE OF OPERATIONS:

      Western Micro Technology, Inc. (the Company) is a distributor of
      commercial mid-range computer systems, peripheral equipment, software and
      attendant services. Prior to July 26, 1995, the Company's operations also
      included distribution of electronic components (see Note 12). The
      Company's primary sales office and distribution center, from which it
      ships to customers throughout the United States, is located in Northern
      California. In addition to the Northern California location, the Company
      has distribution centers in Massachusetts and Illinois and has sales
      offices throughout the United States. The principal customers of the
      Company are value-added-resellers, computer system integrators and
      original equipment manufacturers located in the U.S.

      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. During 1994, the Company acquired
      First Computer Corporation (FCC) in a business combination accounted for
      as a pooling of interests. Accordingly, 1994 financial information herein
      has been restated to reflect the combined operations of these companies
      (see Note 11).

      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. No single
      customer accounted for more than 10% of the outstanding accounts
      receivable balance at December 31, 1996 and 1995.

      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 effect operating results. During
      the years ended December 31, 1996, 1995 and 1994, approximately 50%, 30%
      and 10%, respectively, of the Company's revenue was generated from the
      sales of products purchased from one of the Company's vendors.

      FAIR VALUE OF FINANCIAL INSTRUMENTS:

      Carrying amounts of certain of the Company's financial instruments
      including cash and cash equivalents, accounts receivable, accounts payable
      and other accrued liabilities approximate fair value due to their short
      maturities. Based on borrowing rates currently available to the Company
      for loans with similar terms, the carrying value of capital lease
      obligations and notes payable obligations also approximate fair value.

                                       21

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


1.    Summary of Significant Accounting Policies (CONTINUED):
      ------------------------------------------

      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 (first-in, first-out) or net realizable
      value. 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.

      GOODWILL:

      Goodwill represents the excess cost over the fair value of identifiable
      net assets of businesses acquired and is being amortized on a
      straight-line basis over fifteen years.

      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 applies these funds to offset direct costs of
      selling, general, and administrative expenses.

      STOCK-BASED COMPENSATION:

      In October 1995, the Financial Accounting Standards Board issued Statement
      of Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
      Stock-Based Compensation," which is effective for the

                                       22

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


1.    Summary of Significant Accounting Policies (CONTINUED):
      ------------------------------------------

      Company's financial statements for fiscal years beginning after December
      15, 1995. SFAS No. 123 allows companies to either account for stock-based
      compensation under the new provisions of SFAS No. 123 or under the
      provisions of Accounting Principles Board Opinion No. 25 (APB No. 25),
      "Accounting for Stock Issued to Employees," but requires pro forma
      disclosure in the footnotes to the financial statements as if the
      measurement provisions of SFAS No. 123 had been adopted. The Company
      accounts for its stock-based compensation in accordance with the
      provisions of APB No. 25 and presents disclosures required by SFAS No.
      123.

      LONG-LIVED ASSETS:

      In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
      "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
      Assets to be Disposed Of," was issued. SFAS No. 121 requires that
      long-lived assets and certain identifiable intangibles to be held and used
      or disposed of by an entity be reviewed for impairment whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
      not be recoverable. During 1996, the Company adopted this statement and
      determined that no impairment loss need be recognized for applicable
      assets of continuing operations.

      NET INCOME (LOSS) PER SHARE:

      Net income (loss) per share is computed using the weighted average number
      of common and common equivalent shares (when dilutive) outstanding during
      each period.


2.    Property and Equipment:

<TABLE>
     Property and equipment consist of the following (IN THOUSANDS):

<CAPTION>
                                                                         December 31,
                                                          ------------------------------------------
                                                                 1996                     1995
                                                                 ----                     ----
<S>                                                       <C>                      <C>              
          Computer and office equipment                   $           4,728        $           4,112
          Leasehold improvements                                        682                      812
                                                          -----------------        -----------------
                                                                      5,410                    4,924
          Accumulated depreciation and amortization                  (2,134)                  (3,204)
                                                          -----------------        -----------------
                                                          $           3,276        $           1,720
                                                          =================        =================
</TABLE>

      The Company leases various equipment and vehicles under capital leases,
      all of which have been accounted for as installment purchases (Note 3).
      Accordingly, capitalized costs of $357,000 and $310,000, net of
      accumulated amortization of $253,000 and $163,000 at December 31, 1996 and
      1995, respectively, are included in property and equipment.


3.    Notes Payable and Capital Lease Obligations:
      -------------------------------------------

      NOTES PAYABLE:

      The Company has available a $25,000,000 line of credit with a financial
      institution that bears interest at the financial institution's prime
      lending rate (8.25% as of December 31, 1996) plus 1.50%. Borrowings under

                                       23

<PAGE>


                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------

3.    Notes Payable and Capital Lease Obligations (CONTINUED):
      -------------------------------------------

      the line of credit are based on eligible accounts receivable and
      inventory, as defined, and are collateralized by substantially all assets
      of the Company. The facility is renewable annually and contains
      restrictive covenants which include the maintenance of minimum revenue,
      profit and tangible net worth ratios, as defined. The Company was not in
      compliance with the tangible net worth covenant at December 31, 1996. The
      financial institution granted a waiver as of December 31, 1996 for the
      specific violation. Borrowings under this line of credit were $11,277,000
      at December 31, 1996. Based on eligible assets, as of December 31, 1996,
      the Company had borrowings available of approximately $5,300,000. The
      weighted average interest rates for the Company's borrowings during 1996
      and 1995 were 9.2% and 10.6%, respectively.

      CAPITAL LEASE OBLIGATIONS:

      The Company leases property and equipment under capital leases which
      expire through 2000. At December 31, 1996, future minimum payments under
      capital leases are as follows (IN THOUSANDS):

          1997                                                $       71
          1998                                                        24
          1999                                                        20
          2000                                                        12
                                                              ----------
          Minimum lease payments                                     127
          Less amount representing interest                           16
                                                              ----------
          Present value of minimum lease payments                    111
          Less current portion                                        58
                                                              ----------
                                                              $       53

4.    Operating Lease Commitments:
      ---------------------------

      The Company leases its warehouse and office space under operating leases.
      These leases expire through 2003 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 five years.

      The total rent expense, net of sublease income, was $722,000, $934,000 and
      $1,222,000 for 1996, 1995 and 1994, respectively.

<TABLE>
      Future minimum rental commitments for all noncancelable operating leases
      are as follows (IN THOUSANDS):

<CAPTION>
                Years Ending December 31,
                -------------------------
                        <S>                       <C>       
                           1997                   $        621
                           1998                            567
                           1999                            570
                           2000                            320
                           2001                            139
                        Thereafter                         162
                                                  ------------
                                                  $      2,379
                                                  ============
</TABLE>

                                       24

<PAGE>


                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


5.    Income Taxes:
      ------------

<TABLE>
      The provision for (benefit from) income taxes consist of the following (in
      thousands):

<CAPTION>
                                                Federal             State               Total
                                                -------             -----               -----
<S>                                          <C>                <C>                 <C>          
     1996:
         Current                             $         223      $          53       $         276
         Deferred
                                             -------------      -------------       -------------
                                             $         223      $          53       $         276
                                             =============      =============       =============
     1995:
         Current
         Deferred
                                             -------------      -------------       -------------
                                             $           -      $           -       $           -
                                             =============      =============       =============
     1994:
         Current                             $          41      $                   $          41
         Deferred
                                             -------------      -------------       -------------
                                             $          41      $           -       $          41
                                             =============      =============       =============
</TABLE>

      The 1994 provision for income taxes consists of a benefit of $217,000 for
      continuing operations and a provision of $258,000 for discontinued
      operations.

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

<TABLE>
<CAPTION>
                                                                                 Year Ended
                                                                                December 31,
                                                                        ----------------------------
                                                                        1996         1995       1994
                                                                        ----         ----       ----
<S>                                                                     <C>         <C>        <C>  
Statutory tax (benefit) rate                                             34 %        (34)%      (34)%
Goodwill and other nondeductible expenses                                 4           11         14
Benefit resulting from utilization of federal NOL                       (33)                     (3)
State taxes, net of federal benefit                                       6
Change in valuation reserve                                                           23         30
                                                                       ----         ----       ----
                                                                         11 %          - %        7 %
                                                                       ====         ====       ====
</TABLE>

<TABLE>
      The components of the net deferred tax asset are as follows (IN
      THOUSANDS):

<CAPTION>
                                                             December 31,
                                               ---------------------------------------
                                                     1996                   1995
<S>                                            <C>                    <C>             
Deferred tax assets:
Accounts receivable reserve                    $             93       $            154
Accumulated depreciation                                     83                     61
Uniform inventory capitalization                            248                    119
Inventory reserve                                           314                    475
Other nondeductible reserves                                124                    418
Other                                                       111                    276
Federal and state NOL                                       915                  1,679
Valuation allowance                                      (1,888)                (3,182)
                                               ----------------       ----------------
                                               $              -       $              -
                                               ================       ================
</TABLE>

                                       25

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------

5.    Income Taxes (CONTINUED):
      ------------

      At December 31, 1996, the Company had net operating loss carryforwards of
      approximately $2,400,000 and $1,900,000 available to offset future taxable
      income for federal and state tax purposes, respectively. Excluded from the
      above amounts are net operating losses generated by the
      exercise/dispositions of stock options of $2,000,000 and $1,000,000 for
      federal and state tax purposes, respectively. The operating loss
      carryforwards expire from 1997 to 2010, if not utilized.


6.    Shareholders' Equity:
      --------------------

      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          Number           Price            Total
                                                Available           of              per              (in
                                                for Grant         Shares           Share          thousands)
                                                ---------         ------           -----          ---------
<S>                                            <C>             <C>              <C>               <C>      
Balances, January 1, 1994                         225,998         305,298       $2.00-$9.25        $   1,158
         Additional shares reserved               150,000
         Options granted                         (635,000)        635,000       $6.00-$8.13            4,288
         Options exercised                                        (51,513)      $2.13-$3.00             (150)
         Options terminated                       294,441        (294,441)      $2.13-$9.25           (2,058)
                                               ----------      ----------                          ---------
Balances, December 31, 1994                        35,439         594,344       $2.00-$8.75            3,238
         Options granted                         (342,500)        342,500       $2.25-$5.63            1,151
         Options exercised                                         (7,981)      $2.00-$2.50              (18)
         Options terminated                       324,375        (324,375)      $2.25-$8.25           (1,869)
                                               ----------      ----------                          ---------
Balances, December 31, 1995                        17,314         604,488       $2.00-$8.75            2,502
         Additional shares reserved               400,000
         Options granted                         (441,000)        441,000       $5.00-$10.34           3,367
         Options exercised                                        (92,157)      $2.00-$6.13             (331)
         Options terminated                        23,750         (23,750)      $3.38-$8.25             (108)
                                               ----------      ----------                          ---------
Balances, December 31, 1996                            64         929,581       $2.00-$10.34       $   5,430
                                               ==========      ==========                          =========
</TABLE>

      At December 31, 1996, there were 929,645 shares of common stock reserved
      for issuance under the Company's stock option plans and outstanding
      options for 187,956 shares of common stock were exercisable. In June 1994,
      the Board of Directors gave certain employees the right to cancel certain
      outstanding stock options and receive new options with an exercise prices
      of $6.00 per share (the fair market value as of the date of grant).
      Options for 200,000 shares of common stock at original exercise prices
      ranging from $8.13 to $8.50 per share were canceled, and new options for a
      like number of shares were issued in fiscal 1994. The new options retained
      the vesting of the canceled options. Income tax benefits related to the
      exercise of nonqualified stock options, to the extent recognized, have
      been recorded as additional proceeds.

                                       26

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


6.    Shareholders' Equity (CONTINUED):
      --------------------

      EMPLOYEE STOCK PURCHASE PLAN:

      The Company implemented an Employee Stock Purchase Plan (the Plan) in
      November 1995, under which 175,000 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, 1996, 19,197 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.


<TABLE>
      The following table summarizes information with respect to stock options
      outstanding at December 31, 1996:

<CAPTION>
                                      Options Outstanding                            Options Exercisable
                    -------------------------------------------------------    ------------------------------------
                                        Weighted Average
                         Number             Remaining            Weighted           Number          Weighted
Range of Exercise   Outstanding at     Contractual Life         Average        Exercisable at       Average
     Prices            12/31/96             (Years)          Exercise Price       12/31/96        Exercise Price
-------------------------------------------------------------------------------------------------------------------
<C>                      <C>                    <C>               <C>               <C>               <C>  
$2.00-$2.75              166,081                8.03              $2.26             55,456            $2.28
$3.38-$5.00              205,000                8.43              $4.26             43,750            $3.90
$5.25-$7.50              284,000                8.86              $5.96             70,000            $5.97
$8.25-$10.34             274,500                9.21              $9.05             18,750            $8.35
                         -------                                                   -------
$2.00-$10.34             929,581                8.72              $5.84            187,956            $4.64
                         =======                                                   =======
</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 1996 and 1995:

<TABLE>
<CAPTION>
                                                    Group A                            Group B
                                        ------------------------------     -----------------------------
                                            1996             1995              1996             1995
                                        -------------    -------------     -------------    ------------

<S>                                         <C>              <C>               <C>              <C> 
Risk-free Interest Rates                    5.17             7.68              5.25             7.64
Expected Life                              5 years          5 years           4 years          4 years
Volatility                                 87.42%           87.42%            87.42%           87.42%
</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 1996 and 1995
      was $7.64 and $3.34 respectively.

      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 for 1996:

                                       27

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------

6.    Shareholders' Equity (CONTINUED):
      --------------------

<TABLE>
          <S>                                                  <C>  
          Risk-free Interest Rates                              5.25%
          Expected Life                                        2 years
          Volatility                                           87.42%
</TABLE>

      The weighted average fair value of those purchase rights granted in 1996
      was $4.80.

<TABLE>
      The following pro forma income (loss) information has been prepared
      following the provisions of SFAS No. 123 (amounts in thousands except per
      share data):

<CAPTION>
                                                                        1996                      1995
                                                               ----------------------    ---------------------
          <S>                                                  <C>                       <C>                   
          Net income (loss) - pro forma                        $                1,750    $              (5,213)
                                                               ======================    =====================

          Net income (loss) per share - pro forma              $                 0.38    $               (1.39)
                                                               ======================    =====================
</TABLE>

      The above pro forma effects on 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.


7.    Discontinued Operations:
      -----------------------

      As of September 30, 1994, the Company reported its Testing Division as
      discontinued operations. Operating results of these divisions are included
      in the Consolidated Statements of Operations under the caption
      "Discontinued Operations: Income from Operations, Net of Income Tax." The
      related net assets are immaterial. Operating results for the discontinued
      operations were as follows (in thousands):

<TABLE>
<CAPTION>
                                             Year Ended
                                          December 31, 1994
                                          -----------------
          <S>                                   <C>   
          Net sales                             $2,116
          Income tax provision                  $  258
          Income from operations                $  450
</TABLE>


8.    Supplemental Cash Flow Information (in thousands):
      ----------------------------------

      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

<TABLE>
      Cash paid for interest and income taxes was:

<CAPTION>
                                              Years Ended December 31,
                                  --------------------------------------------
                                      1996             1995             1994
                                      ----             ----             ----
     <S>                          <C>               <C>              <C>     
     Interest                     $    1,021        $    895         $    762
     Income taxes                 $       66        $                $     37
</TABLE>

                                       28

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


8.    Supplemental Cash Flow Information (in thousands) (CONTINUED):
      ----------------------------------

<TABLE>
      SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

<CAPTION>
                                                               Years Ended December 31,
                                               -------------------------------------------------
                                                     1996                1995             1994
                                                     ----                ----             ----
     <S>                                       <C>                  <C>                <C>     
     Capital lease obligations                 $                    $         79        $     16
     Common stock issued in connection
       with acquisitions                       $       1,949        $      1,660        $    254
     Retirement of shares                      $                    $                   $     76
</TABLE>


9.    Contingencies:
      -------------

      The Company is engaged in certain legal and administrative proceedings
      incidental to its normal business activities. While it is not possible to
      determine the ultimate outcome of these actions at this time, management
      believes that any liabilities resulting from such proceedings, or claims
      which are pending or known to be threatened, will not have a material
      adverse effect on the Company's consolidated financial position or results
      of operations.

      The Company has employment agreements with nine employees which provide
      for aggregate cash severance payments of up to $1,321,000 in the event of
      termination without cause, or pursuant to a change in control.


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,
      1996, 1995 or 1994.


11.   Business Combinations:
      ---------------------

      On November 29, 1996, the Company acquired the net assets of International
      Data Products, LLC ("IDP"), a privately held company, for $265,000 in cash
      and assumed net liabilities of $424,000. The agreement between the Company
      and IDP (the "Agreement") contains an earn out provision which allows IDP
      to earn up to 140,000 shares of the Company's common stock based on the
      attainment of gross profit targets for certain fiscal year 1997 and 1998
      sales (as defined in the Agreement). The value of the shares will be based
      on the average daily closing price of the Company's common stock at the
      end of the earn out period, December 31, 1998. The assets purchased
      primarily consisted of certain inventories and trade accounts receivable
      of IDP. The acquisition has been accounted for as a purchase with the
      result that IDP operations are included in the Company's financial
      statements since the date of purchase. In connection with the acquisition,
      the Company recorded approximately $780,000 of goodwill and other
      intangible assets. For the

                                        29

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


11.   Business Combinations (CONTINUED):
      ---------------------


      year ended December 31, 1995, IDP had unaudited revenues of approximately
      $4,611,000 with net income of approximately $2,000.

      On November 7, 1996, the Company acquired the net assets of Star
      Technologies, Inc. ("Star"), a privately held company, for $950,000, which
      was paid in 113,263 shares of the Company's common stock at an average
      price of $8.38. The agreement between the Company and Star (the
      "Agreement") contains an earn-out provision which allows Star to earn up
      to an additional $2,400,000 of the Company's common stock based on the
      attainment of gross profit targets for certain fiscal year 1997 and 1998
      sales (as defined in the Agreement). An additional 89,418 shares were
      issued by the Company on November 7, 1996 and placed in escrow for the
      earn-out provision. If Star does not meet the earn-out provision targets,
      the appropriate amount of shares will be returned to the Company. The
      assets purchased primarily consisted of certain inventories and trade
      accounts receivable of Star. The acquisition has been accounted for as a
      purchase with the result that Star operations are included in the
      Company's financial statements since the date of purchase. In connection
      with the acquisition, the Company recorded approximately $400,000 of
      goodwill and other intangible assets. For the year ended June 30, 1996,
      Star had revenues of approximately $7,500,000 with net income of
      approximately $40,000.

      On January 2, 1996, the Company acquired the assets of R&D Hardware
      Systems Company of Colorado ("R&D"), a privately held company, for
      $1,000,000 and 125,000 shares of the Company's common stock. The agreement
      between the Company and R&D (the "Agreement") contains an earn-out
      provision which allows R&D to earn up to an additional 125,000 shares of
      the Company's common stock based on attainment of gross profit targets for
      certain fiscal year 1996 and 1997 sales (as defined in the Agreement) up
      to a cumulative value not to exceed $855,000. As of December 31, 1996,
      approximately 33,000 shares, at an average price of $9.98, have been
      earned under this provision. The assets purchased primarily consisted of
      certain inventories and trade accounts receivable of R&D. The acquisition
      has been accounted for as a purchase with the result that R&D operations
      are included in the Company's financial statements since the date of
      purchase. In connection with the acquisition, the Company recorded
      approximately $1,400,000 of goodwill and other intangible assets. For the
      year ended December 31, 1995, R&D had revenues of approximately $9,557,000
      with net income of approximately $446,000.

      On November 18, 1995, the Company acquired all of the common stock of
      International Parts, Inc. ("IPI"), a privately held company for 300,000
      shares of the Company's common stock. The agreement between the Company
      and IPI (the "Agreement") contains an earn-out provision which allows for
      IPI to earn up to an additional 300,000 shares of the Company's common
      stock based on 30% of gross profit dollars generated for certain fiscal
      year 1996 and 1997 sales (as defined in the Agreement) in excess of
      $418,550 per quarter. The stock so issued is valued at an average of
      prevailing market closing stock prices at each quarterly payment date.
      During 1996 the Company issued 39,108 shares, valued at $320,000, related
      to this earn out provision. The acquisition has been accounted for as a
      purchase with the result that IPI operations are included in the Company's
      financial statements since the date of purchase. In connection with this
      purchase, the Company has recorded approximately $2,600,000 of goodwill.
      For the fiscal year ended December 31, 1994, IPI had revenues of
      approximately $15,200,000 with net income of approximately $90,000.

      On December 1, 1994, the Company acquired all of the common stock of First
      Computer Corporation ("FCC"), a privately held company, for 328,943 shares
      of the Company's common stock. FCC was also involved in the distribution
      of midrange computer systems. Under terms of the merger agreement, FCC
      stockholders received for each of their shares of common stock .741485
      shares of the Company's common stock. The merger has been accounted for as
      a pooling of interests and, accordingly, the consolidated

                                       30

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


11.   Business Combinations (CONTINUED):
      ---------------------

      financial statements have been restated to include the amounts and results
      of the operations of FCC for the year ended December 31, 1994.

<TABLE>
      Revenue and net income (loss) from the continuing and discontinued
      operations of the separate companies for the eleven months ended December
      1, 1994 and the year ended December 31, 1993 are presented below:

<CAPTION>
                                                            Eleven Months
                                                                Ended            Year Ended
                                                             December 1,        December 31,
                                                                1994                1993
                                                               ------              ------
                                                             (unaudited)
<S>                                                        <C>                  <C>          
Revenue:
Western Micro Technology, Inc.                             $       103,996      $      93,623
FCC                                                                  6,886              6,129
                                                           ---------------      -------------
Combined                                                   $       110,882      $      99,752
                                                           ===============      =============
Net income (loss):
Western Micro Technology, Inc.                             $          (405)     $        (590)
FCC                                                                   (258)                23
                                                           ---------------      -------------
Combined                                                   $          (663)     $        (567)
                                                           ===============      =============
</TABLE>


12.   Sale of Components Business and Restructuring Charge:
      ----------------------------------------------------

      On July 26, 1995, the Company sold its electronics components distribution
      assets to Reptron Electronics Inc. ("Reptron"). The transaction, valued at
      approximately $12,500,000, consisted of a $9,200,000 payment in cash and
      the assumption of $3,300,000 in accounts payable. Of the $9,200,000 cash
      payment, $1,000,000 was held back in escrow for six months to serve as a
      source of certain specified rights within the purchase agreement with
      Reptron. The sale, which was approved by the Company's shareholders,
      included the Company's semiconductor component inventory, certain
      receivables, furniture and equipment. In addition, Reptron assumed certain
      building and equipment lease obligations. As a result of this sale, the
      Company recorded a restructuring charge of $3,600,000. Of this amount,
      $2,376,000 was for non-cash write-offs comprised of $1,353,000 in goodwill
      and a $1,023,000 increase to long-term inventory related reserves.
      Severance and other exit related charges related to the sale comprised the
      remaining $1,224,000. In February 1996, approximately $211,000 was
      distributed from the escrow to the Company and the balance was paid to
      Reptron. Concurrent with the distribution of the escrow funds, Reptron
      returned approximately $789,000 of designated assets, valued at historical
      cost, to the Company. These designated assets were primarily comprised of
      semiconductor inventories. As of December 31, 1996 the Company did not
      have any inventory related to the Reptron transaction.


13.   Subsequent Event:
      ----------------

      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 of the Company. Additional consideration
      can be earned by TSI by meeting certain defined gross profit targets
      through fiscal year 2000. The acquisition will be accounted for as a
      purchase with the result that future TSI operations will be included in
      the Company's financial statements from the date of purchase. In
      connection with the 

                                       31

<PAGE>

                         WESTERN MICRO TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------


      acquisition, the Company expects to record approximately $2,500,000 of
      goodwill and other intangible assets. For the year ended December 31,
      1996, TSI had unaudited revenues of approximately $16,000,000 with net
      income of approximately $200,000.

                                       32

<PAGE>

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

      None.

                                       33

<PAGE>

                                    PART III


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

      DIRECTORS AND EXECUTIVE OFFICERS.

      (a)   Directors
            ---------

      JAMES J. HEFFERNAN, 55, was elected as a Director of the Company in
October 1995. Since January 1996, he has been Chief Financial Officer and a
director of US Web Corporation, a franchisor of World Wide Web developers. From
March 1995 to January 1996, he was Chief Financial Officer of Interlink Computer
Sciences, a software company. Prior to such time, Mr. Heffernan was Chairman of
the Board and Chief Financial Officer of Panoramic, Inc., a software company.
Panoramic filed for Chapter 11 bankruptcy in May 1991 and all of its assets were
sold to Computer Associates, Inc. From June 1994 to June 1995, Mr. Heffernan was
a board member of International Microcomputer Software, Inc. From 1987 through
1989, he was Vice President of Finance and Chief Financial Officer of Software
Publishing, Inc.

      JEROME A. MARTIN, 56, was elected as a Director of the Company in October
1995 and has been active in the business development of the Company since
December 1994. Mr. Martin was President and Chairman of the Board of First
Computer Corporation ("FCC"), a systems distributor founded by Mr. Martin in
1976. In December 1994, the Company acquired FCC, which became a wholly-owned
subsidiary of the Company.

      P. SCOTT MUNRO, 40, was appointed as a Director of the Company in, and has
been the President, Chief Executive Officer and Secretary of the Company since,
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.

      K. WILLIAM SICKLER, 47, was elected as a Director of the Company in July
1993. Currently, Mr. Sickler is Chief Executive Officer and President of Gadzoox
Microsystems, Inc., a provider of gigabit fibre channel networking products.
Prior to April 1996, he was Executive Director of Software Business Development
for Seagate Technology, a manufacturer of disk drives and software developer,
with responsibility for analysis of potential software company acquisitions.
Until July 1995, Mr. Sickler was President and Chief Executive Officer of
Network Computing, Inc., a provider of network management software for local
area networks. From 1980 to 1992, he was employed by Ungermann-Bass, Inc., a
provider of networking products and services. His most recent position was that
of Chief Operating Officer. Prior to that, he held the positions of Vice
President of Operations and Vice President of Manufacturing and Quality.

      J. LARRY SMART, 49, was elected as a Director of the Company and was
appointed as Chairman of the Board in October 1995. He has been Chairman of the
Board, President and Chief Executive Officer of StreamLogic Corporation, a data
storage company, since July 1995. 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 science company.

      WILLIAM H. WELLING, 63, was appointed a Director of the Company in April
1993. Since September 1989, he has served as Chairman of the Board and Chief
Executive Officer of Xiox Corporation, a telecommunications software company.
Since September 1983, he has been Managing Partner of Venture Growth Associates
partnerships.

      (b)  Executive Officers
           ------------------

      P. SCOTT MUNRO, 40, see "Directors" above.

      JAMES DORST, 42, joined the Company in May 1995 as Chief Financial
Officer. From 1994 to 1995, Mr. Dorst was Chief Financial Officer of Accolade,
Inc., an entertainment software developer. From 1986 through 1993, he

                                       34

<PAGE>

was the Chief Financial Officer of Drypers Corporation, a manufacturer of
consumer disposable products. Prior to 1986, he was employed by the public
accounting firm of Coopers & Lybrand L.L.P.

      DONALD A. COCHRANE, 41, was promoted to the position of Senior Vice
President, Sales and Marketing in July 1995. Mr. Cochrane joined the Company in
March 1993 as General Manager, Reseller Division and was promoted in February
1994 to Vice President, Reseller Division. From 1989 to 1993 he was Director,
Reseller Sales, at NeXT Computer, a software company; from 1985 to 1988, he was
Manager of Peripherals Product Marketing for Apple Computer; from 1983 to 1985
he was Vice President of Sales and Marketing for Mountain Computer; and from
1982 to 1983, he was Western Regional Sales Manager for Mountain Computer.

      (c)  Key Personnel
           -------------

      MICHAEL E. MERRIMAN, 54, was appointed Vice President of Information
Technology in September 1996. Mr. Merriman joined the Company in 1994 with the
acquisition of First Computer Corporation. As one of the founders of FCC, Mr.
Merriman held several positions in his eighteen year tenure, including
President. Prior to that, he was an executive officer of a systems consulting
firm, Applied Information Development, which he co-founded in 1968.

      SCOTT ROBERTSON, 40, joined the Company in September 1995 as Director of
Logistics and was appointed Vice President of Operations in April 1996. Prior to
joining the Company, Mr. Robertson was General Manager of the Custom Computer
Products Group of Arrow Electronics, Inc.

      ROBERT O'REILLY, 44, joined the Company in February 1996 as Director of
Human Resources and was appointed Vice President of Human Resources in May 1996.
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. Mr. O'Reilly has also worked in the
academic field and played professional hockey.

      FRED J. CUEN, 39, joined the Company in January 1996 as General Manager,
IBM Business Unit and was appointed Vice President and General Manager, IBM
Business Unit in October 1996. Prior to joining the Company, Mr. Cuen was
employed by IBM, and held management positions in research, manufacturing, sales
and marketing during his 20-year career.


      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 and executive officers 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, the Company believes
that all reports required by Section 16(a) of the Exchange Act to be filed by
its directors and executive officers during the last fiscal year were filed on
time, except that Jerome Martin reported the sale of 10,000 shares of Common
Stock approximately ten months late and Messrs. Munro and Cochrane reported the
purchase of 2,019 and 1,133 shares, respectively, of Common Stock under the
Company's employee stock purchase plan approximately nine months late.


                                       35

<PAGE>

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

      The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer and to the Company's
two other executive officers (the "named executive officers"), for the fiscal
years ended December 31, 1996, 1995 and 1994.

<TABLE>
                           SUMMARY COMPENSATION TABLE

<CAPTION>
                                                                                                Long-Term
                                                                                                Compensa-  
                                                           Annual Compensation                 tion 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                       1996         $221,286       $122,564        --                125,000              --
  President, Chief Executive         1995          173,660        152,530        --                 60,000              --
  Officer and Secretary              1994          161,234         75,550        --                100,000(1)       $3,414(2)

James W. Dorst                       1996          150,000         47,867        --                 20,000              --
  Chief Financial Officer            1995          100,000         30,640      $20,833(3)           50,000              --

Donald A. Cochrane(4)                1996          150,000         66,384        --                 40,000              --
  Former Senior Vice                 1995          106,980         82,629        --                 37,500              --
  President, Sales and
  Marketing

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

(1)   Certain of the Company's executive officers received stock options in
      1994, which options were subsequently repriced later in the year. The
      rules of the Securities and Exchange Commission require that both the
      original option grant and the repriced option be reported as separate
      grants of stock options. However, since the original options received in
      1994 were canceled at the time of repricing, the grantees were entitled
      only to the amount of the shares covered by the repriced options. See also
      "--Change in Control."
(2)   Consists of medical costs covered by the Company's medical reimbursement
      plan.
(3)   Mr. Dorst served as a consultant to the Company until he was hired by the
      Company in May 1995. During his consultancy with the Company, he was paid
      $20,833.
(4)   Mr. Cochrane became an executive officer of the Company in July 1995.
</TABLE>

      The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1996 to the Company's named
executive officers.

<TABLE>
                                         OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
                                                                                                Potential Realuzable Value at
                             Number of          Percent of                                         Assumed Annual Rates of
                            Securities         Total Options                                    Stock Price Appreciation for
                            Underlying          Granted to      Exercise or                               Option Term(2)
                              Options          Employees in     Base Price      Expiration      -------------------------------
        Name                Granted(#)        Fiscal Year(1)     ($/Share)         Date              5%                 10%
        ----                ----------        --------------    -----------     ----------      ------------      -------------
<S>                            <C>                     <C>             <C>       <C>            <C>               <C>          
P. Scott Munro                 40,000(3)               9.6%            $5.00     01/18/06       $  125,778.93     $  318,748.49
                               85,000(4)              20.3%            $9.00     09/27/06          481,104.49      1,219,212.98
James W. Dorst                 20,000(3)               4.8%            $9.00     09/27/06          113,201.03        286,873.64
Donald A. Cochrane             20,000(4)               4.8%            $5.00     01/18/06           62,889.46        159,374.25
                               20,000(3)               4.8%            $9.00     09/27/06          113,201.03        286,873.64

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

(1)   Based on options to purchase an aggregate of 421,000 shares of Common
      Stock granted during fiscal 1996.
(2)   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

                                       36

<PAGE>

      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. 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.
(3)   These options vest at the rate of twenty-five percent (25%) per year over
      a four-year period. See also "--Change in Control."
(4)   These options vest twenty-five percent (25%) over a four-year period
      beginning two years from the date of grant. See also "--Change in
      Control."
</TABLE>

      The following table shows the number of shares of Common Stock represented
by outstanding stock options held by each of the named executive officers as of
December 31, 1996. The Company's Common Stock price as at the close of business
on December 31, 1996 was $12.25.

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

<CAPTION>
                                   Number of Securities                Value of Unexercised
                                  Underlying Unexercised          In-the-Money Options at Fiscal
                                Options at Fiscal Year-End                 Year-End ($)
           Name                  Exercisable/Unexercisable           Exercisable/Unexercisable
           ----                  -------------------------        -------------------------------
<S>                                   <C>                           <C>                        
P. Scott Munro                        79,218 / 207,500              $633,957.25  / $1,250,625.00

James W. Dorst                        12,500 / 57,500                $125,000.00 / $440,000.00

Donald A. Cochrane                    24,375 / 78,125                $187,500.00 / $553,750.00

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

(1)  None of the named executive officers exercised options during the
     fiscal year ended December 31, 1996.
</TABLE>


COMPENSATION OF DIRECTORS

      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 its directors.

      At the 1994 Annual Meeting of Shareholders, the Company approved the
adoption of the Company's 1994 Stock Option Plan, which was amended at the
Company's 1996 Annual Meeting of Shareholders. Among many other benefits, the
1994 Stock Option Plan, as amended, provides for the grant of an option for
10,000 shares of the Company's Common Stock to certain directors who are not
employees following their initial election or appointment and an option for
2,500 shares at every regular annual meeting thereafter at which they are
elected. The exercise price is the fair market value of the shares on the date
of each respective grant and the options vest over a four-year period.

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) shareholder 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)
shareholder 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.

EMPLOYMENT AGREEMENTS

      The Company has entered into an employment agreement with P. Scott Munro
dated January 1, 1996. Pursuant to the terms of the agreement, Mr. Munro
receives a base salary of $203,000 per year and is eligible to receive a bonus
of up to $125,000 a year (up to $25,000 of which is payable quarterly upon
achievement of certain quarterly

                                       37

<PAGE>

performance goals and $25,000 of which is payable annually upon achievement of
certain annual performance goals). Effective July, 1, 1996, Mr. Munro's base
salary was increased to $260,000 and his annual incentive bonus was increased to
$30,000. If Mr. Munro is terminated for cause, he will be entitled to receive
his base salary and bonus due through the date of his termination. If Mr. Munro
is terminated without cause, he will be entitled to receive his base salary for
twelve (12) months following his termination. If Mr. Munro's responsibilities
are reduced within twelve (12) months following a change in control, as defined
above, and such reduction in responsibilities is not for cause, any resignation
of employment by Mr. Munro 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 James W. Dorst
dated June 12, 1995. Pursuant to the terms of the agreement, Mr. Dorst receives
a base salary of $150,000 per year and is eligible to receive a bonus of up to
$50,000 per year, subject to achievement of certain performance goals. If Mr.
Dorst is terminated for cause, he will be entitled to receive his base salary
and bonus due through the date of his termination. If Mr. Dorst is terminated
without cause, he will be entitled to receive his base salary for nine (9)
months following his termination. If Mr. Dorst's responsibilities are reduced
within twelve (12) months following a change in control, as defined above, and
such reduction in responsibilities is not for cause, any resignation of
employment by Mr. Dorst as a consequence of such reduction in responsibilities
will be treated as a termination of employment without cause.

      The Company entered into an employment agreement with Donald A. Cochrane
dated January 1, 1996. Pursuant to the terms of the agreement, Mr. Cochrane
receives a base salary of $150,000 per year and is eligible to receive a bonus
of up to $70,000 a year (up to $15,000 of which is payable quarterly upon
achievement of certain quarterly performance goals and up to $10,000 of which is
payable annually based on the achievement of certain annual performance goals).
Mr. Cochrane's agreement provides that if he is terminated for cause, he will be
entitled to receive his base salary and bonus due through the date of his
termination and if he is terminated without cause, he will be entitled to
receive his base salary for nine (9) months following his termination. If Mr.
Cochrane's responsibilities are reduced within twelve (12) months following a
change in control, as defined above, and such reduction in responsibilities is
not for cause, any resignation of employment by Mr. Cochrane as a consequence of
such reduction in responsibilities will be treated as a termination of
employment without cause.


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

      The following table sets forth information as to the beneficial ownership
of the Company's Common Stock as of March 25, 1997 (unless otherwise indicated),
of each person known to the Company to be the beneficial owner of more than five
percent (5%) of its Common Stock, without par value, and the number of shares
owned by each director, each named executive officer and all executive officers
and directors as a group.


                                       38

<PAGE>

<TABLE>
<CAPTION>
                                                              Shares
                                                           Beneficially
     Name of Beneficial Owner(1)                               Owned            Percent
     ------------------------                              ------------         -------

<S>                                                          <C>                  <C> 
Bernard T. Marren                                            371,400              7.8%
20823 Stevens Creek Blvd., Ste. 400
Cupertino, CA 95014

ROI Capital Management, Inc. ("ROI")                         323,600              6.8%
  and affiliates(2)
One Bush Street, Ste. 1150
San Francisco, CA 94104

Donald A. Cochrane                                            38,723(3)              *

James W. Dorst                                                28,812(3)              *

James J. Heffernan                                             3,125(3)              *

Jerome A. Martin                                              31,842(3)              *

P. Scott Munro                                                87,598(3)           1.9%

K. William Sickler                                            16,875(3)              *

J. Larry Smart                                                17,125(3)              *

William H. Welling                                            16,165(3)              *

All Executive Officers and Directors as a Group              240,264(4)           5.1%
(8 persons)

--------

*     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.

(2)   Based on a Schedule 13D amendment number 1 dated January 26, 1996 filed
      jointly by ROI, ROI Partners, L.P. ("PTRS"), ROI & Lane, L.P. ("R&L"),
      Mark T. Boyer and Mitchell J. Soboleski reporting beneficial ownership as
      follows:

                                    Shares             Shared Voting and
                              Beneficially Owned       Dispositive Power

          ROI                       323,600                 323,600
          PTRS                      201,000                 201,000
          R&L                        24,000                  24,000
          Mr. Boyer                 201,000                 201,000
          Mr. Soboleski             201,000                 201,000


      Messrs. Boyer and Soboleski are the sole shareholders of ROI and
      respectively, President and Secretary. Messrs. Boyer and Soboleski and ROI
      are the general partners of PTRS, which is an investment limited
      partnership. ROI is the managing general partner of R&L, which is an
      investment partnership.

(3)   Includes shares purchasable under the Company's Stock Option Plans, as of
      March 25, 1997 or within sixty (60) days thereafter as set forth below.
      See also "Change in Control" at page 37.

                                       39

<PAGE>

          Donald A. Cochrane:          17,500 shares at $6.00
                                        9,375 shares at $2.25

          James W. Dorst:              12,500 shares at $2.25

          James J. Heffernan:           2,500 shares at $5.63
                                          625 shares at $10.34

          Jerome A. Martin:             3,125 shares at $10.34

          P. Scott Munro:               2,968 shares at $2.13
                                       22,500 shares at $2.25
                                        5,000 shares at $2.75
                                       11,250 shares at $3.63
                                       37,500 shares at $6.00

          K. William Sickler:           7,500 shares at $8.25
                                        3,750 shares at $5.00
                                          625 shares at $10.34

          J. Larry Smart:               2,500 shares at $5.63
                                          625 shares at $10.34

          William H. Welling:           7,500 shares at $8.25
                                        3,750 shares at $5.00
                                          625 shares at $10.34

(4)   Includes 151,718 shares subject to outstanding options held by executive
      officers and directors.
</TABLE>


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

     (a)  Transactions with Management and Others
          ---------------------------------------

          None.

     (b)  Certain Business Relationships
          ------------------------------

           None.

     (c)  Indebtedness of Management
          --------------------------

          None.

                                       40

<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:

                                                                    Page Number
                                                                    -----------

      Consolidated Balance Sheets, December 31, 1996 and 1995           17

      Consolidated Statements of Operations for the years
      ended December 31, 1996, 1995 and 1994                            18

      Consolidated Statements of Shareholders' Equity for
      the years ended December 31, 1996, 1995 and 1994                  19

      Consolidated Statements of Cash Flows for the years
      ended December 31, 1996, 1995 and 1994                            20

      Notes to Consolidated Financial Statements                        21

           2.   Financial Statement Schedules
                -----------------------------

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

                                                                    Page Number
                                                                    -----------

      Schedule II - Valuation and Qualifying Accounts
      and Reserves                                                      45

      Report of Independent Accountants on Financial Statement
      Schedule                                                          46

           3.   Exhibits
                --------

      The exhibits listed under Item 14(c) are filed or incorporated by
reference herein.

      (b)  Reports on Form 8-K
           -------------------

           None.

      (c)  Exhibits
           --------

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

                                       41


<PAGE>


Number    Description
------    -----------

3.1(a)    Articles of Incorporation for Silicon Valley Services, Inc. filed with
          the California Secretary of State on December 30, 1975, filed as
          Exhibit 3-A to the Company's Form S-1, Registration No. 2-86846, is
          hereby incorporated by reference.

3.1(b)    Certificate of Amendment of Articles of Incorporation of Silicon
          Valley Services, Inc. (part of which changed the name of the Company
          to Western Micro Technology, Inc.) filed with the California Secretary
          of State on April 1, 1977, filed as Exhibit 4.2 to the Company's Form
          S-8, Registration No. 33-60778, is hereby incorporated by reference.

3.1(c)    Certificate of Amendment of Articles of Incorporation filed with the
          California Secretary of State on August 30, 1983, filed as Exhibit 4.3
          to the Company's Form S-8, Registration No. 33-60778, is hereby
          incorporated by reference.

3.1(d)    Certificate of Amendment of Articles of Incorporation filed with the
          California Secretary of State on April 5, 1988, filed as Exhibit 3.1
          to the Company's Annual Report on Form 10-K for the year ended March
          31, 1988, is hereby incorporated by reference.

3.2       Amended Bylaws dated June 15, 1994, filed as Exhibit A to the
          Company's Definitive Proxy Statement dated May 23, 1994 as filed with
          the Commission on May 24, 1994, are hereby incorporated by reference.

*10.1     Amended and Restated Incentive and Non-Incentive Stock Option Plan,
          filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for
          the year ended December 31, 1990, is hereby incorporated by reference.

10.2      Amended and Restated 1994 Stock Option Plan of Western Micro
          Technology, Inc., filed as Exhibit B to the Company's Definitive Proxy
          Statement dated May 23, 1994 as filed with the Commission on May 24,
          1994, is hereby incorporated by reference.

10.3      Lease for Saratoga, California facility filed as Exhibit 10.5 to the
          Company's Annual Report on Form 10-K for the year ended March 31, 1987
          is hereby incorporated by reference.

10.4      Amended Lease for Saratoga, California facility dated January 21,
          1992, filed as Exhibit 10.3 to the Company's Annual Report on Form
          10-K for the year ended December 31, 1991, is hereby incorporated by
          reference.

10.5      Master Lease Commitment dated September 25, 1989 and Supplements 8.01
          and 8.02 thereto, filed as Exhibit 10.5 to the Company's Annual Report
          on Form 10-K for the year ended March 31, 1990 is hereby incorporated
          by reference.

10.6      Loan and Security Agreement with CoastFed Business Credit Corporation
          of California dated January 29, 1992, filed as Exhibit 10.9 to the
          Company's Annual Report on Form 10-K for the year ended December 31,
          1991, is hereby incorporated by reference.

10.7      Amendment to Loan Documents between the Company and CoastFed Business
          Credit dated March 27, 1994, filed as Exhibit 10.23 to the Company's
          Quarterly Report on Form 10-Q for the period ended June 30, 1994, is
          hereby incorporated by reference.

10.8      Lease for Irvine, California facility dated October 29, 1993, filed as
          Exhibit 10.18 to the Company's Annual Report on Form 10-K for the
          period ended December 31, 1993, is hereby incorporated by reference.

                                       42

<PAGE>

Number    Description
------    -----------

*10.9     Promissory Note from Ronald H. Mabry dated March 31, 1994, filed as
          Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the
          period ended March 31, 1994, is hereby incorporated by reference.

*10.10    Employment Agreement between the Company and Ronald H. Mabry dated
          April 1, 1994, filed as Exhibit 10.21 to the Company's Quarterly
          Report on Form 10-Q for the period ended March 31, 1994, is hereby
          incorporated by reference.

10.11     Business Partner (Redistributor) Agreement between the Company and
          International Business Machines Corporation dated October 1, 1992
          filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for
          the period ended December 31, 1994, is hereby incorporated by
          reference.

10.12     Business Partner (Redistributor) Agreement between the Company and
          International Business Machines Corporation dated February 28, 1994
          filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for
          the period ended December 31, 1994, is hereby incorporated by
          reference.

*10.13    Employment Agreement between the Company and P. Scott Munro dated June
          1, 1994 filed as Exhibit 10.29 to the Company's Annual Report on Form
          10-K for the period ended December 31, 1994, is hereby incorporated by
          reference.

*10.14    Employment Agreement between the Company and John Ashbaugh dated July
          29, 1994 filed as Exhibit 10.30 to the Company's Annual Report on Form
          10-K for the period ended December 31, 1994, is hereby incorporated by
          reference.

10.15     Asset Purchase Agreement dated May 5, 1995 between the Company and
          Reptron Electronics, Inc., filed as Exhibit 2.1 to the Company's
          Current Report on Form 8-K filed with the Commission on August 9,
          1995, is hereby incorporated by reference.

10.16     Agreement and Plan of Reorganization dated November 18, 1995 between
          the Company and International Parts, Inc., filed as Exhibit 2.1 to the
          Company's Current Report on Form 8-K filed with the Commission on
          December 4, 1995 is hereby incorporated by reference.

10.17     Asset Purchase Agreement dated January 2, 1996 between the Company and
          R&D Hardware Systems Company of Colorado, filed as Exhibit 2.1 to the
          Company's Current Report on Form 8-K filed with the Commission on
          January 17, 1996, is hereby incorporated by reference.

*10.18    Employment Letter between the Company and P. Scott Munro dated January
          18, 1996, filed as Exhibit 10.18 to the Company's Annual Report on
          Form 10-K for the year ended December 31, 1995, is hereby incorporated
          by reference.

*10.19    Employment Letter between the Company and Donald A. Cochrane dated
          January 18, 1996, filed as Exhibit 10.19 to the Company's Annual
          Report on Form 10-K for the year ended December 31, 1995, is hereby
          incorporated by reference.

*10.20    Employment Letter between the Company and James W. Dorst dated June
          12, 1995, filed as Exhibit 10.20 to the Company's Annual Report on
          Form 10-K for the year ended December 31, 1995, is hereby incorporated
          by reference.

10.21     Lease Agreement between MP Hacienda, Inc. and the Company dated July
          15, 1995, filed as Exhibit 10.21 to the Company's Annual Report on
          Form 10-K for the year ended December 31, 1995, is hereby incorporated
          by reference.

                                       43

<PAGE>


10.22     Amendment to Loan Documents dated November 20, 1995 between the
          Company and Coast Business Credit, filed as Exhibit 10.22 to the
          Company's Annual Report on Form 10-K for the year ended December 31,
          1995, is hereby incorporated by reference.

+10.23    Inventory and Working Capital Financing Agreement dated December 1,
          1996 by and between IBM Credit Corporation and the Company, and
          Amendment #1 thereto.

+10.24    Asset Purchase Agreement dated November 7, 1996 by and among the
          Company, Star Technologies, Inc. and the Shareholders of Star
          Technologies, Inc. Schedules to this Agreement omitted from this
          report will be furnished to the Commission upon request.

+10.25    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. Schedules to this Agreement omitted from this
          report will be furnished to the Commission upon request.

+11.1     Statement re Computation of Per Share Earnings.

+23.1     Consent of Coopers & Lybrand L.L.P.

+24.0     Power of Attorney.

+27.0     Financial Data Schedule.

*         Denotes management compensation plan or arrangement.
+         Filed previously.


         (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                                                        45

         Report of Independent Accountants on Financial Statement
         Schedule                                                        46



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 financial
statements or notes thereto.

                                       44

<PAGE>

                                                                     SCHEDULE II

<TABLE>
                         WESTERN MICRO TECHNOLOGY, INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                                 (IN THOUSANDS)
                                   ----------

<CAPTION>
                                     Balance at                                                  Balance
                                     Beginning                                                    at End
                                     of Period      Additions(1)    Other(2)   Deductions(3)    of Period
                                     ---------      ------------    --------   -------------    ---------
<S>                                      <C>            <C>         <C>            <C>              <C> 
Year ended December 31, 1994:   
Allowance for doubtful accounts          $882           $302                       $791             $393

Year ended December 31, 1995:
Allowance for doubtful accounts          $393           $291        $200           $504             $380

Year ended December 31, 1996:
Allowance for doubtful accounts          $380           $120        $250           $339             $411

----------

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


                                       45

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

                         ON FINANCIAL STATEMENT SCHEDULE



To the Board of Directors and Shareholders
Western Micro Technology, Inc.:

Our report on the consolidated financial statements of Western Micro Technology,
Inc. and its subsidiaries is included on page 16 in this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 41 of this
Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included herein.

                                              COOPERS & LYBRAND L.L.P.


San Jose, California
January 31, 1997

                                                       46

<PAGE>


                                   SIGNATURES


      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to
Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated:  September 18, 1997            REGISTRANT:

                                      WESTERN MICRO TECHNOLOGY, INC.



                                      By           /s/ P. SCOTT MUNRO*
                                         --------------------------------------
                                                     P. Scott Munro
                                          President and Chief Executive Officer
                                              (Principal Executive Officer)



                                      By           /s/ JAMES W. DORST
                                         --------------------------------------
                                                     James W. Dorst
                                                 Chief Financial Officer
                                                (Principal Financial and
                                                   Accounting Officer)

                                       47


<PAGE>

      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.

           Signature and Title                                       Date
           -------------------                                       ----


           /s/ P. SCOTT MUNRO*                                September 18, 1997
----------------------------------------
             P. Scott Munro
                Director


         /s/ JAMES J. HEFFERNAN*                              September 18, 1997
----------------------------------------
           James J. Heffernan
                Director


          /s/ JEROME A. MARTIN*                               September 18, 1997
----------------------------------------
            Jerome A. Martin
                Director


         /s/ K. WILLIAM SICKLER*                              September 18, 1997
----------------------------------------
           K. William Sickler
                Director


           /s/ J. LARRY SMART*                                September 18, 1997
----------------------------------------
             J. Larry Smart
     Director, Chairman of the Board




         /s/ WILLIAM H. WELLING*                              September 18, 1997
----------------------------------------
           William H. Welling
                Director


*By     /s/ JAMES W. DORST
   -------------------------------------
            James W. Dorst
           Attorney-in-Fact

                                       48