SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]  Quarterly  report  pursuant  to  Section  13 or 15 (d)  of  the  Securities
     Exchange Act of 1934,

     For the quarterly period ended AUGUST 1, 1999 or

[ ]  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

     Commission file number 0-15995

                                 MICROAGE, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                         86-0321346
        (State of incorporation)                              (I.R.S. Employer
                                                             Identification No.)

        2400 South MicroAge Way
               Tempe, AZ                                           85282
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code: (480) 366-2000

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 and
(2) has been subject to such filing requirements for the past 90 days.

                                 Yes [X] No [ ]

The number of shares of the registrant's Common Stock (par value $.01 per share)
outstanding at August 30, 1999 was 20,806,135.
<PAGE>
                                      INDEX

                                 MICROAGE, INC.


PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements (Unaudited)                                     2

          Consolidated balance sheets -- August 1, 1999 and
          November 1, 1998.                                                    2

          Consolidated statements of operations -- Quarters ended August
          1, 1999 and August 2, 1998; 39 weeks ended August 1, 1999 and
          August 2, 1998.                                                      3

          Consolidated statements of cash flows -- 39 weeks ended August
          1, 1999 and August 2, 1998.                                          4

          Notes to consolidated financial statements.                          5

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations.                                           7

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                    15

SIGNATURES                                                                    16

                                        1
<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

                                 MICROAGE, INC.
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                        (in thousands, except share data)

                                     ASSETS
                                                     August 1,      November 1,
                                                       1999            1998
                                                   ------------    ------------
Current assets:
  Cash and cash equivalents                        $     62,042    $     41,894
  Accounts and notes receivable, net                    208,130         529,877
  Inventory, net                                        461,817         486,150
  Other                                                  25,442          24,432
                                                   ------------    ------------
    Total current assets                                757,431       1,082,353

Property and equipment, net                              99,384          92,147
Intangible assets, net                                    7,006         126,105
Other                                                    20,327          14,538
                                                   ------------    ------------
    Total assets                                   $    884,148    $  1,315,143
                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                 $    672,913    $    967,501
  Accrued liabilities                                    32,471          24,279
  Current portion of long-term obligations                3,181           3,095
  Other                                                  10,325           8,868
                                                   ------------    ------------
    Total current liabilities                           718,890       1,003,743

Long-term obligations                                     3,802           5,553
Other long-term liabilities                              15,153          15,361

Stockholders' equity:
  Preferred stock, par value $1.00 per share;
    Shares authorized: 5,000,000
    Issued and outstanding:  none                            --              --
  Common stock, par value $.01 per share;
    Shares authorized: 40,000,000
    Issued: August 1, 1999 - 20,836,384
            November 1, 1998 - 20,284,789                   208             203
  Additional paid-in capital                            211,447         206,720
  Retained earnings (deficit)                           (64,854)         83,729
  Treasury stock, at cost;
    Shares: August 1, 1999 - 30,249
            November 1, 1998 - 16,378                      (498)           (166)
                                                   ------------    ------------
    Total stockholders' equity                          146,303         290,486
                                                   ------------    ------------
    Total liabilities and stockholders' equity     $    884,148    $  1,315,143
                                                   ============    ============

   The accompanying notes are an integral part of these financial statements.

                                        2
<PAGE>
                                 MICROAGE, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                  Quarter ended               39 weeks ended
                                            --------------------------   --------------------------
                                             August 1,      August 2,     August 1,      August 2,
                                               1999           1998          1999           1998
                                            -----------    -----------   -----------    -----------
<S>                                         <C>            <C>           <C>            <C>
Revenue                                     $ 1,514,480    $ 1,441,246   $ 4,615,862    $ 3,947,207

Cost of sales                                 1,415,297      1,354,575     4,328,271      3,702,130
                                            -----------    -----------   -----------    -----------
Gross profit                                     99,183         86,671       287,591        245,077

Operating and other expenses
Operating expenses                               89,495         77,787       284,807        230,500
Restructuring and other one-time charges          5,411             --       139,570          5,600
                                            -----------    -----------   -----------    -----------
    Total                                        94,906         77,787       424,377        236,100
                                            -----------    -----------   -----------    -----------
Operating income (loss)                           4,277          8,884      (136,786)         8,977

Other expenses - net                              8,918          7,385        28,426         27,497
                                            -----------    -----------   -----------    -----------
Income (loss) before income taxes                (4,641)         1,499      (165,212)       (18,520)

Income tax provision (benefit)                   (1,471)         1,473       (16,767)        (6,473)
                                            -----------    -----------   -----------    -----------
Net income (loss)                           $    (3,170)   $        26   $  (148,445)   $   (12,047)
                                            ===========    ===========   ===========    ===========
Net income (loss) per common and
  common equivalent share:
    Basic                                   $     (0.15)   $      0.00   $     (7.25)   $     (0.61)
                                            ===========    ===========   ===========    ===========
    Diluted                                 $     (0.15)   $      0.00   $     (7.25)   $     (0.61)
                                            ===========    ===========   ===========    ===========
Weighted average common and common
  equivalent shares outstanding:
    Basic                                        20,600         19,859        20,475         19,633
                                            ===========    ===========   ===========    ===========
    Diluted                                      20,600         20,305        20,475         19,633
                                            ===========    ===========   ===========    ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                        3
<PAGE>
                                 MICROAGE, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (in thousands)

                                                             39 weeks ended
                                                         ----------------------
                                                         August 1,    August 2,
                                                           1999         1998
                                                         ---------    ---------
Cash flows from operating activities:
  Net loss                                               $(148,445)   $ (12,047)
  Adjustments to reconcile net loss to
    net cash provided by operating activities:
      Depreciation and amortization                         33,175       29,861
      Provision for losses on accounts and
        notes receivable                                    18,895       10,585
      Restructuring and other one-time charges             130,917           --
      Changes in assets and liabilities, net
        of business acquisitions:
        Accounts and notes receivable                      302,141     (149,524)
        Inventory                                           24,333       56,066
        Other current assets                                (1,010)        (757)
        Other assets                                        (7,111)     (18,024)
        Accounts payable                                  (293,682)     167,758
        Accrued liabilities                                  8,192       (7,850)
        Other liabilities                                   (1,251)      10,602
                                                         ---------    ---------
    Net cash provided by operating activities               66,154       86,670

Cash flows from investing activities:
  Purchases of property and equipment                      (40,926)     (36,820)
  Purchases of businesses and investments in
    unconsolidated companies, net of cash acquired          (5,500)          --
                                                         ---------    ---------
    Net cash used in investing activities                  (46,426)     (36,820)

Cash flows from financing activities:
  Proceeds from issuance of stock - stock option and
    employee stock purchase plans                            3,688        3,424
  Net borrowings (payments) under line of credit                --      (30,650)
  Shareholder distributions - pooled companies                  --         (129)
  Net change in long-term obligations                       (3,268)      (2,824)
                                                         ---------    ---------
    Net cash provided by (used in)
      financing activities                                     420      (30,179)
                                                         ---------    ---------
Net increase in cash and cash equivalents                   20,148       19,671

Cash and cash equivalents at beginning of period            41,894       22,279
                                                         ---------    ---------
Cash and cash equivalents at end of period               $  62,042    $  41,950
                                                         =========    =========

   The accompanying notes are an integral part of these financial statements.

                                        4
<PAGE>
                                 MICROAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited  consolidated financial statements of MicroAge,  Inc.
(the "Company") do not include all of the information and footnotes  required by
generally accepted accounting principles for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
accruals)  considered  necessary for a fair statement of results for the periods
have been included. Certain prior year amounts have been reclassified to conform
with current year financial statement presentation. Operating results for the 39
weeks ended August 1, 1999 are not  necessarily  indicative  of the results that
may be expected for the year ending October 31, 1999.  For further  information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended November 1, 1998.

NOTE B - OTHER EXPENSES - NET

Other expenses - net consists of the following (in thousands):

                                   Quarters ended            39 weeks ended
                                ---------------------     ---------------------
                                 Aug. 1,      Aug. 2,      Aug. 1,      Aug. 2,
                                  1999         1998         1999         1998
                                --------     --------     --------     --------
Interest expense                $  1,394     $    457     $  3,209     $  3,791
Expenses from sales of
  accounts receivable              3,829        3,855       10,652       14,425
Amortization expense                 765        2,249        5,974        6,429
Flooring expense                   4,442        2,002       10,361        5,439
Other                             (1,512)      (1,178)      (1,770)      (2,587)
                                --------     --------     --------     --------
                                $  8,918     $  7,385     $ 28,426     $ 27,497
                                ========     ========     ========     ========

NOTE C - RESTRUCTURING AND OTHER ONE-TIME CHARGES

During the quarters ended August 1, 1999 and May 2, 1999, the Company recorded a
total of $139.6 million of restructuring and other one-time  charges,  which are
discussed below. The liability for restructuring  accruals at August 1, 1999 was
$4.0 million.

During the quarter  ended August 1, 1999,  the Company  recorded $5.4 million of
restructuring  and other  one-time  charges ($3.2  million,  or $0.16 per share,
after taxes).  All actions related to this  restructuring were implemented as of
August 1, 1999.  The  restructuring  and other  one-time  charges  included $4.3
million in employee  termination  benefits  (primarily  severance  pay) and $1.1
million for business closure costs.

The charges associated with employee  termination  benefits consist primarily of
severance pay for approximately 250 associates. The reductions were completed by
August  1,  1999  and  occurred  in both  Pinacor,  the  Company's  distribution
business,  and  in  MicroAge  Technology  Services,  the  Company's  integration
business.

                                        5
<PAGE>
During the quarter  ended May 2, 1999,  the  Company  recorded  $134  million of
restructuring  and other  one-time  charges ($124  million,  or $6.07 per share,
after taxes).  The  restructuring  and other  one-time  charges  included a $123
million  write-down of impaired  goodwill;  $8 million for the write-down to net
realizable value of software and equipment no longer utilized by the Company due
to the  implementation of a new branch automation system; $2 million in employee
termination  benefits;  and $1 million for  one-time  contract  termination  and
business closure costs.

The goodwill  written off during the quarter  resulted from businesses  acquired
primarily in fiscal 1997 and fiscal 1998. Recent increased competitive pressures
in the industry as well as operating  losses  caused the Company to reassess the
recoverability  of  its  long-lived  assets.  The  fair  value  of  the  assets,
determined  through a  discounted  cash flow  analysis  as well as other  market
analyses,  was compared to the carrying amount of the assets. The difference was
recorded as a charge to earnings in the second quarter.

The charges  associated  with employee  termination  benefits  during the second
quarter consisted  primarily of severance pay for 79 associates.  The reductions
were completed by May 2, 1999 and occurred in Pinacor and in an imaging business
that the Company decided to exit during the quarter.

All actions related to the second quarter  restructuring  were implemented as of
May 2, 1999.

                                        6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Certain statements  contained in this Item may be  "forward-looking  statements"
within the  meaning of The  Private  Securities  Litigation  Reform Act of 1995.
These  forward-looking  statements  may include  projections  of revenue and net
income and issues that may affect revenue or net income;  projections of capital
expenditures;  plans for  future  operations;  financing  needs or plans;  plans
relating to the Company's products and services; and assumptions relating to the
foregoing.  Forward-looking  statements  are  inherently  subject  to risks  and
uncertainties,  some of which cannot be predicted or  quantified.  Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking information. Some of the important factors
that could cause the Company's  actual results to differ  materially  from those
projected in forward-looking statements made by the Company include, but are not
limited to, the following:  intense competition;  narrow margins;  dependence on
supplier  incentive  funds;  product supply and  dependence on key vendors;  the
impact of Pinacor not being selected as a Compaq Distribution  Alliance Partner;
potential  fluctuations  in  quarterly  results;  risks of declines in inventory
values;  the capital intensive nature of the Company's  business;  dependence on
information  systems;  year 2000  issues;  dependence  on  independent  shipping
companies;  rapid technological  change; and possible volatility of stock price.
Reference is made to Exhibit 99.1 of the  Company's  Report on Form 10-K for the
year ended November 1, 1998 for additional  discussion of the foregoing factors.
The  Company  undertakes  no  obligations  to  publicly  update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

The Company  operates  two  independent  businesses  - a  distribution  business
operated through a wholly-owned  subsidiary,  Pinacor, Inc. ("Pinacor"),  and an
integration  business,  MicroAge Technology  Services ("MTS").  These businesses
have  separate  management  teams,  operate  autonomously  in  their  respective
marketplaces,  and contract with  headquarters for a limited number of services,
such as payroll processing, employee benefits and information services.

RECENT DEVELOPMENTS

During the second  quarter of fiscal  1999,  the Company  experienced  increased
competitive  pressure and other economic  factors that have negatively  impacted
the  Company's  gross  margins  and  operating  results.  In  response  to these
conditions,  the Company,  at the end of the second quarter and the beginning of
the third quarter, took actions to increase gross margins and decrease operating
expenses.  These actions  include price  increases,  the  elimination of several
hundred  positions at Pinacor and MTS, the closure of several  branch  locations
and the exiting of several  businesses  that were no longer  consistent with the
strategic direction of the Company.

In addition,  the Company  reassessed the  recoverability of its goodwill during
the second quarter due to changes in the computer  integration and  distribution
industry as well as recent operating losses.  The Company determined that, based
on cash flow and other market  analyses,  a substantial  portion of its goodwill
was impaired. (See "Note C to the Consolidated Financial Statements").

The Company also completed the  implementation of a new branch automation system
during the second  quarter.  Charges were  recognized  during the second quarter
related to the conversion to the new system as well as for the completion of the
separation of the Company into two independent businesses (Pinacor and MTS).

                                        7
<PAGE>
In connection with these  developments,  the Company recorded  restructuring and
other expenses in the second and third quarters aggregating $157 million,  which
are discussed below.

Restructuring  and other  expenses for the second  quarter  totaled $152 million
($136  million or $6.64 per share after  taxes).  These  charges  included  $123
million for the write-down to net realizable value of goodwill,  $13 million for
the  write off of assets no longer  utilized  or  otherwise  impaired  after the
system  conversion  and  completion of the company  split  described  above,  $8
million  for  severance  and  business  exit  costs and $8  million  related  to
Pinacor's  Latin America  distribution  business.  The charges for Pinacor Latin
America were primarily the result of the continuing  deterioration  of the South
American  economy and consist of receivable  and  inventory  write downs and the
write down of Pinacor's investment in several Latin American companies.

The total second quarter  charges of $152 million include $18 million of charges
that were recorded as components of cost of sales,  operating expenses and other
expense in the  accompanying  statements  of  operations.  The  following  table
illustrates the recognition within the consolidated statements of operations for
the second  quarter of the  restructuring  and other unusual  charges  described
above (in thousands):

                                           Quarter ended May 2, 1999
                                   --------------------------------------------
                                                   Restructuring
                                                     and other
                                   As reported    unusual charges   As adjusted
                                   -----------      -----------     -----------
Cost of sales                      $ 1,569,903      $     6,016     $ 1,563,887
Operating expenses                     106,025            9,773          96,252

Restructuring and other
  one-time charges                     134,159          134,159              --
Operating loss                        (153,546)         149,948          (3,598)
Other expenses - net                    12,260            2,350           9,910
Loss before income taxes           $  (165,806)     $   152,298     $   (13,508)

Restructuring  charges for the third quarter totaled $5 million ($3 million,  or
$0.16 per share after taxes)  related to employee  severance and branch  closure
costs.

                                        8
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the indicated  periods,  data as percentages
of total revenue:

<TABLE>
<CAPTION>
                                                              Quarter ended
                                   ----------------------------------------------------------------
                                     Aug. 1,        May 2,       Jan. 31,     Nov. 1,      Aug. 2,
                                      1999          1999          1999         1998         1998
                                   ----------    ----------    ----------   ----------   ----------
<S>                                <C>             <C>             <C>            <C>            <C>
Revenue (in thousands)             $1,514,480    $1,656,541    $1,444,841   $1,572,824   $1,441,246
Cost of sales (1)                        93.5%         94.4%         93.0%        93.1%        94.0%
                                   ----------    ----------    ----------   ----------   ----------
Gross profit (1)                          6.5           5.6           7.0          6.9          6.0
Operating and other expenses
   Operating expenses (1)                 5.9           5.8           6.2          5.8          5.4
   Restructuring and other one-
     time charges (2)                     0.3           9.2           0.0          0.0          0.0
                                   ----------    ----------    ----------   ----------   ----------
Operating income (loss)                   0.3          (9.4)          0.9          1.1          0.6

Other expenses - net (1)                  0.6           0.6           0.5          0.4          0.5
                                   ----------    ----------    ----------   ----------   ----------
Income (loss) before income taxes        (0.3)        (10.0)          0.4          0.7          0.1

Income tax provision (benefit)           (0.1)         (1.1)          0.2          0.5          0.1
                                   ----------    ----------    ----------   ----------   ----------
Net income (loss)                        (0.2)%        (8.9)%         0.1%         0.2%         0.0%
                                   ==========    ==========    ==========   ==========   ==========
</TABLE>

(1)  Calculations for the quarter ended May 2, 1999 exclude the effects of $18.1
     million of charges discussed above. Inclusion of such expenses would result
     in the following percentage relationship to net sales for the quarter:

     Cost of sales                               94.8%
     Gross profit                                 5.2
     Operating expenses                           6.4
     Other expenses - net                         0.7

(2)  Calculations for the quarter ended May 2, 1999 include the effects of $18.1
     million of charges  excluded from cost of sales,  gross  profit,  operating
     expenses and other expenses as discussed in footnote (1) above.

The following  discussion of results of operations  for the quarter and 39 weeks
ended August 1, 1999 exclude the effect of the  restructuring  and other unusual
charges discussed above in "Recent Developments"

TOTAL REVENUE.  Total revenue of $1.5 billion increased $73 million,  or 5%, for
the quarter  ended  August 1, 1999 as compared  to the quarter  ended  August 2,
1998. This revenue increase included an $18 million,  or 1%, increase in Pinacor
(distribution  business)  revenue  and a $15  million,  or 3%,  increase  in MTS
(integration  business) revenue.  The remaining increase in consolidated revenue
was due to a decrease in the elimination of intercompany  revenue. When compared
to the quarter ended May 2, 1999,  total revenue for the quarter ended August 1,
1999 decreased $142 million,  or 9%. This decrease  included a $156 million,  or
10%,  decrease in Pinacor  revenue  and a $24  million,  or 5%,  decrease in MTS
revenue,  partially  offset by a decrease  in the  elimination  of  intercompany
revenue.

                                        9
<PAGE>
Total revenue  increased $669 million,  or 17%, for the 39 weeks ended August 1,
1999 as compared to the 39 weeks ended  August 2, 1998.  This  revenue  increase
included a $571 million,  or 16%, increase in Pinacor revenue and a $43 million,
or 3%, increase in MTS revenue.  The remaining increase in consolidated  revenue
was due to a decrease in the elimination of intercompany revenue.

The year-over-year  increases in revenue were attributable to sales to resellers
added since August 2, 1998,  increased demand for the Company's major suppliers'
products,  the  Company's  addition of new product  offerings,  service  revenue
growth and the growth of the microcomputer products industry.

The  decreases in revenue in the quarter  ended  August 1, 1999  compared to the
quarter  ended May 2, 1999 are  primarily  due to changes in Pinacor's  sourcing
relationship  with Compaq Computer  Corporation  (see "Changes in Supplier Terms
and  Conditions"),  and to a focus  within  MTS to reduce  unprofitable  product
revenue.  In addition,  the Company  believes  that a portion of the decrease in
volume is  attributable  to a price  increase  instituted by Pinacor  during the
quarter ended May 2, 1999 (see "Gross Profit Percentage").

GROSS PROFIT PERCENTAGE.  The Company's gross profit percentage was 6.5% for the
quarter ended August 1, 1999 and 6.0% for the quarter ended August 2, 1998.  The
gross profit  percentage was 6.4% for the 39 weeks ended August 1, 1999 and 6.2%
for the 39 weeks ended August 2, 1998.

The increase in the Company's gross profit  percentage  during the third quarter
was due to higher  margins in both Pinacor and MTS.  Pinacor  margins  increased
primarily as a result of increased  product trading  margins.  During the second
quarter,   Pinacor   instituted  a  price  increase  and  adjusted   salesperson
compensation  plans to incent  higher margin  sales.  These actions  resulted in
product trading margins  increasing in the latter part of the second quarter and
through the third quarter. These increases were partially offset by lower levels
of supplier funds.

MTS margins increased for the third quarter of fiscal 1999 compared to the third
quarter of fiscal  1998,  as well as  compared  to the second  quarter of fiscal
1999.  The  increase  from the third  quarter  of 1998 was due  primarily  to an
increase in service revenue, which has higher gross margins than product revenue
margins.  The increase from the second  quarter of fiscal 1999 was primarily due
to better utilization of service staff.

Future  gross  profit  percentages  may be  affected  by market  pressures,  the
introduction  of  new  Company  initiatives,  changes  in  revenue  mix,  future
acquisitions,  changes in supplier incentive funds,  changes in suppliers' terms
and   conditions,   the  Company's   utilization   of  early  payment   discount
opportunities,  supplier  pricing  actions,  and other  competitive and economic
pressures.   See  "Potential   Fluctuations  in  Operating  Results"  below  for
information  regarding  industry  trends  that may affect  future  gross  profit
percentages.

OPERATING EXPENSES.  Operating expenses totaled $89 million, or 5.9% of revenue,
for the  quarter  ended  August 1, 1999,  compared  to $78  million,  or 5.4% of
revenue,  for the  quarter  ended  August 2,  1998 and $96  million , or 5.8% of
revenue,  for the quarter ended May 2, 1999.  Operating  expenses increased from
$231 million, or 5.8% of revenue,  for the 39 weeks ended August 2, 1998 to $275
million,  or 6.0% of  revenue,  for the 39  weeks  ended  August  1,  1999.  The
year-over-year  increases are primarily the result of increased business volume.
The  decrease  in dollars  from the second  quarter to the third  quarter of the
current  year  is due to  actions  taken  by the  Company  to  reduce  operating
expenses. See "Recent Developments" for a discussion of actions taken.

                                       10
<PAGE>
OTHER  EXPENSES - NET.  Other  expenses - net  increased to $8.9 million for the
quarter  ended August 1, 1999 from $7.4 million for the quarter  ended August 2,
1998.  Other  expenses - net  decreased to $26.1  million for the 39 weeks ended
August 1, 1999 from $27.5 million for the 39 weeks ended August 2, 1998.

Financing  costs  increased due to increased  average  borrowings as a result of
changes in the Company's major suppliers' policies.  During the first quarter of
fiscal  1999  certain  major  suppliers   changed  the  terms  of  their  credit
arrangements with the Company. These changes include a decrease in the number of
days the Company has to pay for product  purchases  and a decrease in the amount
of  reseller  purchases  from the  Company  that the  suppliers  are  willing to
subsidize.  These changes increased the Company's  working capital  requirements
and financing  costs.  These increases were offset by a decrease in amortization
expense due to the write-down of impaired  goodwill  during the second  quarter.
See "Note C to the Consolidated  Financial Statements" for further discussion of
the impaired goodwill.

INCOME TAX  PROVISION.  As a  percentage  of the loss before tax, the income tax
benefit was 31.7% for the quarter  ended August 1, 1999  compared to a provision
equal to 98.3% of income  before tax for the quarter  ended August 2, 1998.  The
change in the effective tax rate is due to the impact of permanent  differences,
primarily  consisting  of  goodwill  amortization  and meals  and  entertainment
expenses, between book income and taxable income.

CHANGES IN SUPPLIER TERMS AND CONDITIONS

The key suppliers of the Company  provide  various  incentives for promoting and
marketing their product  offerings.  A large portion of the incentives is passed
on to the Company's customers.  However, a portion of the incentives  positively
impact the Company's income.

Beginning  in May 1998,  the major  manufacturers  announced  and/or  instituted
changes in their sales  incentive  programs and inventory  management  programs.
Pursuant to these changes,  the major  manufacturers have (i) reduced the amount
of product  that the  Company is allowed to return,  (ii)  reduced the amount of
price protection coverage offered to the Company and (iii) changed incentives to
programs based on sales of the manufacturers' products, rather than on purchases
of the products from the manufacturers.

In addition,  several of the Company's major suppliers have changed the terms of
their credit arrangements with the Company.  These changes include a decrease in
the number of days the Company has to pay for product  purchases  and a decrease
in the amount of reseller  purchases  from the Company  that the  suppliers  are
willing to subsidize. These changes have increased the Company's working capital
requirements and financing  costs.  Further changes in incentives or other terms
and conditions could have a material  adverse effect on the Company's  operating
results.

During the  quarter  ended May 2, 1999,  the  Company  announced a change in the
Pinacor  product  sourcing   relationship   with  Compaq  Computer   Corporation
("Compaq"). By the end of the Company's fiscal year, Pinacor will begin sourcing
certain  Compaq  products  from other  Compaq  distributors  instead of sourcing
directly from Compaq.  Compaq has  indicated  that Pinacor will continue to be a
Compaq  Channel  partner and will be able to distribute the full range of Compaq
products.  In addition,  Pinacor will continue to order some  products  directly
from Compaq.  During the quarter  ended August 1, 1999,  Compaq sales  decreased
approximately  $75 million,  or 20%,  when  compared to the quarter ended May 2,
1999. The Company expects a further decline in Compaq revenue as the full impact
of the change in the  sourcing  relationship  is  realized.  In  addition to the

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expected  declines in Compaq revenue,  the Company  believes that sales of other
suppliers' products may decrease as customers that purchase Compaq products from
other sources move  purchases of other  products to those  sources.  This change
will have a negative impact on the Company's  operating results,  but the amount
of the impact of this change cannot be determined at this time.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The Company's  operating results may vary  significantly from quarter to quarter
depending  on certain  factors,  including,  but not limited to,  demand for the
Company's information  technology products and services,  the amount of supplier
incentive  funds  received by the Company,  the results of acquired  businesses,
product availability, competitive conditions, new product introductions, changes
in customer order patterns, changes in supplier terms and conditions and general
economic  conditions.  In  particular,   the  Company's  operating  results  are
sensitive  to  changes  in the mix of  product  and  service  revenues,  product
margins, inventory adjustments and interest rates. Although the Company attempts
to control its expense  levels,  these levels are based, in part, on anticipated
revenues. Therefore, the Company may not be able to control spending in a timely
manner  to  compensate  for  any  unexpected  revenue  shortfall.  As a  result,
quarterly  period-to-period  comparisons of the Company's  financial results are
not  necessarily  meaningful  and should not be relied upon as an  indication of
future performance.  In addition,  although the Company's financial  performance
has not  exhibited  significant  seasonality  in the past,  the  Company and the
computer industry in general tend to follow a sales pattern with peaks occurring
near the end of the calendar year, due primarily to special supplier  promotions
and year-end business purchases.

LIQUIDITY AND CAPITAL RESOURCES

Historically,  the  Company  has  financed  its growth and cash needs  primarily
through working capital financing  facilities,  bank credit lines,  common stock
offerings and cash generated from operations. The primary uses of cash have been
to fund increases in inventory and accounts receivable  resulting from increased
sales.  If the Company is successful in achieving  revenue growth in the future,
its  working  capital  requirements  are likely to  increase.  In  addition,  as
discussed above,  changes in supplier payment terms have increased the Company's
working capital requirements.

Cash  provided by  operating  activities  was $66 million for the 39 weeks ended
August 1, 1999 as compared to $87 million for the 39 weeks ended August 2, 1998.
This  decrease  was  primarily  due to  changes  in cash  provided  by  accounts
receivable, inventory and accounts payable. Cash provided by changes in accounts
receivable  increased  $452 million  during the 39 weeks ended August 1, 1999 as
compared  to the 39 weeks ended  August 2, 1998.  This was due to an increase in
receivables  sold to a finance  company.  This was offset by a decrease  in cash
provided by inventory,  which  decreased  $32 million  during the 39 weeks ended
August 1, 1999 as compared to the 39 weeks ended  August 2, 1998.  In  addition,
cash used by changes in accounts  payable  increased  $462 million during the 39
weeks ended August 1, 1999 as compared to the 39 weeks ended August 2, 1998. The
change in cash resulting  from accounts  payable was primarily due to changes in
suppliers' terms. See "Changes in Supplier Terms and Conditions".

Cash used in  investing  activities  was $46  million  during the 39 weeks ended
August 1, 1999 as compared to $37  million  during the 39 weeks ended  August 2,
1998.  This  increase was due to higher  purchases of property and equipment and
due to purchases of businesses and investments in unconsolidated subsidiaries.

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<PAGE>
Cash provided by financing activities was $0.4 million during the 39 weeks ended
August 1, 1999  compared to cash used of $30  million  during the 39 weeks ended
August  2,  1998.  This  change  was  primarily  due to net  payments  under the
Company's  line of credit of $31 million  for the 39 weeks ended  August 2, 1998
compared to no net change for the 39 weeks ended August 1, 1999.

The Company currently  maintains three financing  agreements (the  "Agreements")
with  financing  facilities  totaling $660 million.  The  Agreements  include an
accounts  receivable  facility  (the "A/R  Facility")  and  inventory  financing
facilities (the "Inventory Facilities").

Under the A/R  Facility,  the  Company  has the right to sell  certain  accounts
receivable  from time to time, on a limited  recourse  basis, up to an aggregate
amount of $350 million sold at any given time. At August 1, 1999, the net amount
of sold accounts receivable was $285 million.

The Inventory  Facilities provide for borrowings up to $310 million.  Within the
Inventory  Facilities,  the  Company  has lines of credit  for the  purchase  of
inventory from selected product  suppliers  ("Inventory  Lines of Credit") and a
line of credit for general working capital  requirements  ("Supplemental Line of
Credit").  Payments for products  purchased  under the Inventory Lines of Credit
vary depending upon the product  supplier,  but generally are due between 30 and
45 days from the date of the advance.  Amounts  borrowed under the  Supplemental
Line  of  Credit  may  remain  outstanding  until  the  expiration  date  of the
Agreements  (August  2000).  No interest  or finance  charges are payable on the
Inventory  Lines of Credit if payments are made when due. At August 1, 1999, the
Company  had $188  million  outstanding  under  the  Inventory  Lines of  Credit
(included in accounts payable in the accompanying  Balance Sheets),  and nothing
outstanding under the Supplemental Line of Credit.

Of the $660 million of financing  capacity  represented by the Agreements,  $187
million was unused as of August 1, 1999.  Utilization  of the unused  portion is
dependent upon the Company's collateral availability at the time the funds would
be needed.  There can be no  assurance  that the Company  will be able to borrow
adequate amounts on terms acceptable to the Company.

Borrowings  under  the  Agreements  are  secured  by  substantially  all  of the
Company's  assets,  and the Agreements  contain certain  restrictive  covenants,
including  tangible  net worth  requirements  and ratios of debt to tangible net
worth and current assets to current liabilities.  At August 1, 1999, the Company
was in compliance with these covenants.

The Company has received a commitment  letter from another lender to replace the
Agreements with new financing  facilities,  and is currently  negotiating  final
documentation. Financing costs under the new facilities are expected to increase
from current  levels,  however the amount of any increase  cannot be  determined
until  the new  agreements  are  finalized.  The new  financing  facilities  are
expected to be finalized during the quarter ended October 31, 1999.

In addition to the financing  facilities  discussed above, the Company maintains
an accounts  receivable  purchase  agreement (the "Purchase  Agreement")  with a
commercial  credit  corporation  (the  "Buyer")  whereby  the  Buyer  agrees  to
purchase,  from time to time at its option, on a limited recourse basis, certain
accounts  receivable of the Company.  Under the terms of the Purchase Agreement,
no finance  charges are assessed if the accounts are settled  within forty days.
At August 1, 1999, the net amount of sold accounts receivable under the Purchase
Agreement was $30 million.

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<PAGE>
The Company also  maintains  trade credit  arrangements  with its  suppliers and
other creditors to finance  product  purchases.  A few major suppliers  maintain
security interests in their products sold to the Company.

As discussed  above,  several of the Company's  major suppliers have changed the
terms of their credit  arrangements  with the Company.  These changes  include a
decrease in the number of days the Company has to pay for product  purchases and
a  decrease  in the  amount of  reseller  purchases  from the  Company  that the
suppliers are willing to subsidize.  These changes have  increased the Company's
working capital requirements and financing costs. The additional borrowings that
will be required to pay suppliers on shorter  terms could exceed the  borrowings
available under the Agreements due to collateral constraints.

The  unavailability of a significant  portion of, or the loss of, the Agreements
or trade  credit  from  suppliers  would have a material  adverse  effect on the
Company.

Although the Company has no material capital commitments, the Company expects to
make  capital  expenditures  of  approximately  $5 to  $10  million  during  the
remainder of fiscal 1999.

INFLATION

The Company  believes that inflation has generally not had a material  impact on
its operations.

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<PAGE>
PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1  Form of Administrative  Services Agreement for the Non-qualified  Deferred
      Compensation Plan Document by The Prudential  Insurance Company of America
      with the Company and Pinacor, Inc., dated July 15, 1999.

10.2  Form of Trust  Agreement by and between  Prudential  Trust Company and the
      Company and Pinacor,  Inc. for the  Executive  Supplemental  Savings Plan,
      dated August 1, 1999.

10.3  Form  of  The  Prudential  Insurance  Company  of  America  Administrative
      Services  Agreement  for an  Individually  Designed Plan Document with the
      Company and Pinacor, Inc., dated July 15, 1999.

10.4  Form of Trust  Agreement by and between  Prudential  Trust Company and the
      Company and Pinacor, Inc. for the Retirement Savings Plan, dated August 1,
      1999.

11.   Calculation of net income (loss) per common share.

27.   Financial Data Schedule

(b) The Company  did not file any  reports on Form 8-K during the quarter  ended
August 1, 1999.

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                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                       MICROAGE, INC.
                                       (Registrant)



Date: September 15, 1999               By: /s/ Jeffrey D. McKeever
                                           ------------------------------------
                                           Jeffrey D. McKeever
                                           Chairman of the Board and
                                           Chief Executive Officer



Date: September 15, 1999               By: /s/ James R. Daniel
                                           ------------------------------------
                                           James R. Daniel
                                           Senior Vice President
                                           Chief Financial Officer and Treasurer

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