<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

        |X|        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2003

                                       OR

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

                         COMMISSION FILE NUMBER: 0-21528

                             BELL MICROPRODUCTS INC.
             (Exact name of registrant as specified in its charter)

            CALIFORNIA                                     94-3057566
   (State or other jurisdiction                         (I.R.S. Employer
of incorporation or organization)                    Identification Number)

              1941 RINGWOOD AVENUE, SAN JOSE, CALIFORNIA 95131-1721
           (Address of principal executive office, including zip code)

       Registrant's telephone number, including area code: (408) 451-9400

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None.

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          Common Stock, $.01 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 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 the 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.| |

           Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).

                                  Yes |X| No| |

           The aggregate market value of the voting stock held by non-affiliates
of the registrant, as June 30, 2003, was approximately $81,104,973 based upon
the last sale price reported for such date on the Nasdaq National Market.

           The number of shares of Registrant's Common Stock outstanding as of
March 5, 2004 was 27,057,411.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive Proxy Statement for the Company's Annual Meeting of
Shareholders to be held on May 26, 2004 are incorporated by reference into Part
III of this Form 10-K.
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                                     PART I

ITEM 1.  BUSINESS

FORWARD LOOKING DISCLOSURE

This Annual Report on Form 10-K ("Report") contains " forward-looking
statements" within the meaning of the Private Litigation Reform Act of 1995
regarding future events and the future results of Bell Microproducts Inc that
are based on current expectations, estimates, forecasts, and projects as well as
the beliefs and assumptions of Bell Microproducts Inc management. Words such as
"outlook", "believes", "expects", "appears", "may", "will", "should",
"anticipates" or the negative thereof or comparable terminology, are intended to
identify such forward looking statements. These forward-looking statements are
only predictions and are subject to risks, uncertainties and assumptions that
are difficult to predict. Therefore actual results may differ materially and
adversely from those expressed in any forward-looking statements. Factors that
might cause or contribute to such differences include, but are not limited to,
those discussed in this Report under the section entitled "Risk Factors" and
elsewhere, and in other reports Bell Microproducts Inc. files with the
Securities and Exchange Commission, specifically the most recent reports on Form
8-K and Form 10-Q. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this Annual Report on Form 10-K.
Bell Microproducts Inc. undertakes no obligation to revise or update publicly
any forward-looking statements for any reason.

GENERAL

           Founded in 1987, Bell Microproducts Inc. together with its
subsidiaries, is a leading value-added distributor of storage products and
systems, semiconductors and computer products and peripherals. We market and
distribute our products at various levels of integration, from raw components to
fully integrated, tested and certified systems. We carry over 130 brand name
product lines as well as our own proprietary Rorke Data storage products and
Markvision memory modules. Across our product lines, we emphasize our ability to
combine our extensive product portfolio with comprehensive value-added services.

           We offer components that include disk drives, semiconductors, flat
panel displays and related products, and other storage products and
custom-configured computer products. Our products also include value-added
services such as system design, integration, installation, maintenance and other
consulting services combined with a variety of storage and computer hardware and
software products. In addition, we offer network attached storage (NAS), storage
area network (SAN) and other storage systems, computer platforms, tape drives
and libraries and related software. Our selection of products and technologies,
together with our independence, allows us to offer the best available hardware,
software and service solutions for each customer. Customers can purchase our
components as stand-alone products or in combination with certain value-added
services.

AVAILABLE INFORMATION

           All reports filed electronically by Bell with the Securities and
Exchange Commission ("SEC"), including its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and proxy
statements, and other information and amendments to those reports filed (if
applicable), are accessible at no cost on the Company's web site at
www.bellmicro.com, and they are available by contacting our Investor Relations
at ir@bellmicro.com or 408-451-9400. These filings are also accessible on the
SEC's web site at www.sec.gov. The public may read and copy at prescribed rates
any materials filed by the Company with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain
information for


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the Public Reference Room by calling the SEC at 1-800-SEC-0330.

INDUSTRY

           The storage, semiconductor and computer industries have experienced
significant growth over the past decade, due to rapid growth in Internet usage
and e-commerce; enterprise applications such as enterprise resource planning and
data mining; server, desktop and laptop computers; and wireless communications
as well as a variety of emerging consumer products and applications.

           Traditionally, manufacturers have sold storage, semiconductor and
computer products directly to end users and through both direct and indirect
distribution channels. The use of distribution channels is growing rapidly as
manufacturers focus on core activities such as product design, development and
marketing and begin to divest or outsource other functions. The growth of the
indirect channel reflects the need for manufacturers to increasingly use
distributors for servicing OEMs, VARs, CEMs and system integrators. Customers
are also driving the trend toward indirect distribution due to the value-added
services that distributors often provide. The rapid growth of storage
requirements and the need for sophisticated networked storage systems, such as
NAS and SAN, have also increased enterprise customers' dependence on value-added
service suppliers that can design, integrate, service and support their storage
needs.

           Since the onset of the market downturn more than three years ago,
distributors and vendors have experienced a slowdown of demand and increased
competitive market conditions, resulting from industry maturation, historical
technology overspending and other cyclical factors. Historically, a return of
economic growth has led to a return of growth and market demand for the
industry.

           Network Attached Storage. NAS appliances are advanced storage systems
that attach directly to a local area network. A NAS appliance can be thought of
as a thin file server with built-in storage. Similar to general-purpose servers,
NAS appliances include a central processing unit, an operating system and
internal hard disk drive storage.

           Storage Area Networks. A SAN is an architecture that directly
connects multiple independent servers and storage subsystems through a network
dedicated to storage. A SAN consists of a variety of heterogeneous networking
equipment such as switches, hubs and routers; storage products such as disk
subsystems, tape libraries and optical drives; and storage management software.
A SAN is often connected using a protocol known as Fibre Channel.

           Both the NAS and SAN markets are projected to grow rapidly over the
next few years. The complexity of sophisticated data storage solutions such as
NAS and SAN combined with a shortage of qualified information technology
personnel often requires companies to outsource the research, design,
implementation and support of their networked storage solutions. Accordingly,
significant growth in SAN and NAS is expected to be through indirect
distribution channels.

           In recent years, a growing number of manufacturers began to reduce
the number of distributors they use. Distributors themselves are also choosing
to consolidate because of the competitive advantages that arise from expanded
product offerings and economies of scale. The rapidly changing nature of the
storage, semiconductor and computer industries has required distributors to
significantly expand both their customer base and product and service offerings,
to compete effectively. To be successful within these areas, we believe
distributors must emphasize time-to-market and total cost reductions and focus
on markets in which they have advantages in service, flexibility and component
content. Distributors also need to distinguish themselves through a combination
of value-added services such as consulting, design, implementation and
maintenance as well as more knowledgeable service and technical support.


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OUR STRATEGY

           Our goal is to expand our position as a leading distributor of
storage solutions and systems and computer products and peripherals. We intend
to achieve this goal by leveraging our strengths and implementing the following
strategies:

           Continue to Focus on the Storage Market. We plan to continue to take
advantage of the market opportunities in the storage industry by maintaining our
strategic focus on providing complete storage solutions. For example, we have
devoted significant resources to broadening our range of value-added services,
expanding our marketing efforts, deepening the expertise of our sales force and
offering an extensive range of technologically-advanced products. We believe
that we are well positioned to benefit from the strong growth and favorable
market dynamics of the storage industry.

           Expand our Storage and Complementary Product Lines. We believe that
our ability to offer customers an extensive line of leading storage products
across technologies and manufacturers will continue to be a strong competitive
advantage for us, particularly as it relates to SAN and NAS solutions. Our
selection of products and technologies, together with our independence, allows
us to reliably deliver the optimal package of appropriate hardware, software and
services for each project.

           Expand our International Presence. We intend to deepen our presence
in the United States, and expand our coverage in the major international markets
we serve, including Canada, Latin America and Europe, through internal growth
and strategic acquisitions. Increasingly, multinational companies, including our
manufacturers and customers, requiring products and solutions that are able to
address local operational and reporting requirements, but which are also
heterogeneous and interoperable among countries, regions and offices. As we
expand our global presence, we believe that we will be better able to address
the demands of multinational customers, gain more access to multinational
manufacturers and leverage our expertise.

           Deepen Relationships with Industry Leaders. We intend to leverage our
position as a leading distributor of storage solutions to broaden our existing
strategic relationships with industry leaders and to create new strategic
relationships. We believe that distribution channels will continue to
consolidate and leading manufacturers will align with those distributors that
are best able to offer value-added services and access new customers. We believe
being aligned with leading manufacturers will allow us to identify innovative
products, exchange critical information, gain access to new technologies and
create cross-marketing opportunities. We have developed strategic relationships
with a number of vendors, including Brocade, EMC, Emulex, HP, IBM, Intel,
Legato, Maxtor, McData, Microsoft, Qlogic, Seagate, Veritas and Western Digital.

           Continue Cost Structure and Profitability Improvements. We intend to
continue to improve our cost structure by maximizing the efficiency of personnel
and resources throughout our global organization. During the past two years, we
have undertaken various performance improvement initiatives such as realigning
and streamlining operations. We have also made significant progress in reducing
non-personnel related expenditures. We will continue to review our business and
take advantage of opportunities to improve cost efficiencies. We also intend to
continue to optimize our profitability by managing our assets and working
capital through actions such as maximizing early payment discounts and other
profit enhancement opportunities offered by vendors.

           Pursue Selective Acquisitions. We intend to pursue opportunities to
acquire businesses that help us achieve our various strategic goals including
further developing our solutions offerings, expanding key vertical product
offerings and broadening our geographic footprint.

PRODUCTS AND SERVICES

           We market and distribute more than 130 brand name product lines, as
well as our own Rorke Data


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storage products and Markvision memory modules. We offer the following products
as discrete components or as part of our solutions offering.

Storage Products and Related Software

           Our storage products include network attached storage, storage area
network products, Fibre Channel networking products and systems, tape libraries
and disk drives, as well as storage-related software products. We partner with
the best-in-class storage providers in the industry to provide the most
comprehensive cost effective solutions to enterprise customers worldwide. We
offer a comprehensive set of products and services, supported through a network
of worldwide integration and solution centers with more than 400 dedicated
storage professionals available to serve our customer's enterprise needs. Our
customer base includes leading Var2000 and vertical solution providers
worldwide.

Semiconductor and Other Components

            We distribute a variety of semiconductor components, including
memory components and modules, microprocessors, microcontrollers, power
management components, application-specific integrated circuits (ASICs),
graphics and video devices, communications and power supplies.

Computer Products and Software

           Our computer products include a variety of standard and
custom-configured motherboards, flat panel displays and related components,
monitors, keyboards, chassis, scanners, personal computers and servers, board
level products and network interface controller (NIC) cards, as well as related
software. Among the computer products we offer are our own proprietary
Markvision memory modules that complement the other products and technologies we
provide.

Value-Added Services

           We offer our customers a variety of value-added services as described
below. Many of our value-added services are product focused, while others
provide our customers assistance with a variety of product management
activities.

           Storage System Consulting Services. We work with customers to
determine data storage needs to make decisions regarding their storage
strategies and to design storage systems to address these needs. Our consulting
services draw from our core competencies in enterprise storage integration
solutions. We perform tasks such as storage audit or feasibility studies,
supplement specialist elements of a pre-defined project or provide full project
management and implementation.

           NAS and SAN Solutions. We offer a complete range of professional
services including design and consultation, installation, training and on-site
service programs relating to NAS and SAN solutions. We have established a
dedicated enterprise storage systems team that can address the challenges
associated with enterprise storage systems. Our service programs also offer
customers Fibre Channel interoperability and fully integrated turnkey storage
solutions. For example, we integrate SANs with Fibre Channel-based technology
including switches, bridges, archive libraries and network software.

           Storage Subsystems. We provide standard and custom subsystem products
to our customers. We integrate standard products for our Rorke Data brand
storage products. We also configure custom products to meet the needs of
customers that cannot be served by industry-standard product offerings.

           Other Product Services. We provide value-added services to a full
range of semiconductor, storage


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and computer products, including semiconductor device programming, tape and
reeling, special labeling, disk drive image duplication, firmware modification,
software downloading and hardware modification.

           Flat Panel Integration. We offer a comprehensive portfolio of Flat
Panel Displays, technologies and integration services that include off-the-shelf
solutions for Kiosk, point-of-sale and other OEM applications. We also offer
fully customed designs to support applications such as full sunlight readability
and harsh environmental deployment.

           Board and Blade Level Building Blocks. We provide complete Board and
Blade offerings geared for applications to include computers, servers, medical
equipment, video/graphics, security, test and measurement and networking
products offered in a variety of industry standard form factors including ATX,
Micro-ATX, PCI and Compact PCI. We also provide complete integration services,
manufacturing assembly, interoperability testing and application support.

           Application Support Services. Our application support services
provide design support and product recommendations, training programs,
maintenance options and testing, technical advice and prompt incident detection
and resolution.

           Supply Chain Management. We provide a variety of materials-management
solutions, including e-procurement services, Internet-enabled, real-time pricing
and delivery quotations, electronic data interface programs, just-in-time
inventory programs, bonded inventories, on-site consignment inventory and
kitting.

           Retail Packaging and Software Duplication. We provide a value-added
service to storage manufacturers, retailers and software/game customers, which
combines the strengths of our hard drive value capabilities with custom
third-party packaging. Our retail packaging programs deliver end consumer-ready
storage products. These products require high quality software duplication,
testing and drive assembly, as well as high volume unit production to meet
demanding retail "street dates." The core materials planning and logistics
capabilities of our distribution operations enable us to deliver retail-ready
product to our customers' distribution centers or directly to their retail
outlets.

SALES AND MARKETING

           Our customer base primarily consists of OEMs, VARs, system
integrators, contract electronic manufacturers, storage solution customers and
retailers. For customers primarily seeking our solution offerings, our sales and
marketing efforts often involve proactive efforts of our sales people and field
application engineers. Sales and technical personnel focusing on these customers
tend to spend time at customers' facilities assessing the customers' needs,
developing and providing solutions as well as providing proof of concept
supported by our technical capabilities and experience. Our component offering
marketing efforts involve supply chain management programs, consignment and
bonded inventory programs and end-of-life programs. Sales of our component
offerings are principally driven by product breadth and depth, pricing and
on-time availability.

           We also believe that our relationships with manufacturers provide us
with significant opportunities to increase our sales and customer base. We work
closely with many manufacturers to develop strategies to penetrate both targeted
markets and customers. In many cases, our sales presentations to customers are a
joint effort with manufacturers' sales representatives.

           We believe our e-commerce program will enhance our sales and
marketing efforts by:

      -    providing our customers with detailed product information, including
           availability and pricing;

      -    providing customers additional channels to purchase our products;


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      -    reducing time and expenditures involved in customers' product
           procurement activities; and
      -    providing our customers with resource planning tools to more
           accurately manage their product requirements.

COMPETITION

           In the distribution of storage, semiconductor components and computer
products, we generally compete for customer relationships with numerous local,
regional and national and international authorized and unauthorized
distributors. We also compete for customer relationships with manufacturers,
including some of our manufacturers and customers. Consistent with our sales and
marketing efforts, we tend to view our competition, whether arising from the
direct or indirect distribution channel, on a customer-category basis. We
believe that our most significant competition for customers seeking both
products and value-added services arises from Arrow Electronics, Avnet, and
European value-added distributors including IN Technology, Magirus and ECT
Best'Ware. We believe that our most significant competition for customers
seeking products apart from value-added services arises from Ingram Micro, Tech
Data and Synnex.

           Another key competitive factor in the electronic component and
computer product distribution industry as a whole is the need to carry a
sufficient amount of inventory to meet rapid delivery requirements of customers.
However, to minimize its exposure related to valuation of inventory on hand, the
majority of the Company's product lines are purchased pursuant to non-exclusive
distributor agreements which provide certain protections to the Company for
product obsolescence and price erosion in the form of rights of return and price
protection. Furthermore, these agreements are generally cancelable upon 30 to
180 days notice and, in most cases, provide for inventory return privileges upon
cancellation. In addition, the Company enhances its competitive position by
offering a variety of value-added services which entail the performance of
services and/or processes tailored to individual customer specifications and
business needs such as point of use replenishment, testing, assembly, supply
chain management and materials management.

           We believe that competition for customers is based on product line
breadth, depth and availability, competitive pricing, customer service,
technical expertise, value-added services and e-commerce capabilities. We
believe that we compete favorably with respect to each of these factors. We
directly compete with numerous distributors, many of which possess superior
brand recognition and financial resources. In the area of storage products and
solutions, however, we believe that none of our competitors offers the full
range of storage products and solutions that we provide.

RECENT ACQUISITIONS

           In connection with our solution offerings, we have completed a number
of strategic acquisitions. Through these acquisitions, we gained expertise in
storage solutions and greater access to international markets.

           Our acquisition in October 2003 of EBM Mayorista (EBM), a company
headquartered in Merida, Mexico with branch locations in Cancun, Monterrey,
Oaxaca, Villahermosa, Tampico, Veracruz, and Tuxla, has enabled us to expand our
presence in Latin America and provided us the ability to gain additional market
share in the rapidly growing market in Mexico. EBM provides a diverse product
line of computer hardware and software to Mexican resellers, retail locations
and system integrators, including the Intel, Samsung, Epson and U.S. Robotics
lines.

           Our 2001 acquisition of Total Tec, a company headquartered in Edison,
NJ, and with sales offices in the eastern and southern United States, has
significantly expanded our ability to address challenging SAN initiatives. Total
Tec is one of Hewlett-Packard's ("HP") enterprise distributors and one of the
nation's premier enterprise (computing and storage) solutions providers focused
on implementing comprehensive IT solutions to Fortune


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1000 firms. Their methodology addresses key business data concerns including
availability, reliability, performance, scalability and manageability. During
the fourth quarter of 2001, we expanded our U.K. HP/Compaq relationship to
include the U.S. market for Proliant servers and StorageWorks enterprise storage
systems. Through this distribution agreement, Bell Microproducts offers leading
HP/Compaq enterprise products, services and solutions to its large customer base
of VARs, resellers, OEMs and system integrators in the U.S.

           Our 2001 acquisition of Touch The Progress Group BV, a company based
in the Netherlands and with offices in Germany, Belgium and Austria, has added
enterprise storage solutions including storage management software products,
integrated storage technology, infrastructure, and support services to our
strategic effort. The company offers an extensive portfolio of storage solutions
from some of the world's leading manufacturers. This portfolio allows the
company and its business partners to provide a total storage management solution
for multiple heterogeneous computing platforms, including IBM, HPQ, Veritas and
other leading manufacturers.

           Our 2001 acquisition of Forefront Graphics, a company headquartered
in Toronto, Canada, and with offices in Ottawa, Montreal, Calgary and Vancouver,
has added high performance computer graphics, digital audio and video, storage
and multimedia products targeted at both the computer reseller marketplace and
the video production reseller marketplace.

EMPLOYEES

           At December 31, 2003, we had a total of 1,294 employees, including
635 in sales and marketing functions, 492 in general administrative functions
and 167 in technical and value add integration functions. Of our total
employees, 627 are located at our facilities outside of the United States,
including 351 in the United Kingdom. None of our employees are represented by a
labor union. We have not experienced any work stoppages and consider our
relations with our employees to be good. Many of our current key personnel have
substantial experience in our industry and would be difficult to replace. The
labor market in which we operate is highly competitive and, as a result, we may
not be able to retain and recruit key personnel. If we fail to recruit, retain
or adequately train key personnel, we will experience difficulty in implementing
our strategy, which could negatively affect our business, financial condition
and stock price.

RISK FACTORS

           You should consider carefully the risks described below together with
all of the other information included in this Form 10-K. The risks and
uncertainties described below and elsewhere in this Form 10-K are not the only
ones facing us. If any of the following risks actually occur, our business,
financial condition or results of operations would likely suffer. In that case,
the trading price of our common stock could fall, and you may lose all or part
of your investment.

OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND MAY CAUSE OUR STOCK PRICE TO
FLUCTUATE.

           Our future revenues and operating results are likely to vary
significantly from quarter to quarter due to a number of factors, many of which
are outside our control. Accordingly, you should not rely on quarter-to-quarter
comparisons of our operating results as an indication of future performance. It
is possible that in some future periods our operating results will be below the
expectations of public market analysts and investors. In this event, the price
of our stock will likely decline. Factors that may cause our revenues, gross
margins and operating results to fluctuate include:

        -  the loss of key manufacturers or customers;

        -  heightened price competition;


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        -  problems incurred in managing inventories;

        -  a change in the product mix sold by us;

        -  customer demand (including the timing of purchases from significant
           customers);

        -  changing global economic conditions;

        -  our ability to manage credit risk and collect accounts receivable;

        -  our ability to manage foreign currency exposure;

        -  availability of product and adequate credit lines from
           manufacturers; and

        -  the timing of expenditures in anticipation of increased sales.

           Due primarily to manufacturer rebate programs and increased sales
volumes near the end of each quarter, a larger portion of our gross profit has
historically been reflected in the third month of each quarter than in each of
the first two months of such quarter. If we do not receive products from
manufacturers or complete sales in a timely manner at the end of a quarter, or
if rebate programs and marketing development funds are changed or discontinued,
our operating results in a particular quarter could suffer.

           As a result of intense price competition, we have narrow gross profit
margins. These narrow margins magnify the impact of variations in sales and
operating costs on our operating results. Because our sales in any given quarter
depend substantially on sales booked in the third month of the quarter, a
decrease in such sales is likely to adversely and disproportionately affect our
quarterly operating results. This is because our expense levels are partially
based on our expectations of future sales, and we may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
Due to our narrow margins and our limited ability to quickly adjust costs, any
shortfall in sales in relation to our quarterly expectations will likely have an
adverse impact on our quarterly operating results.

WE RELY ON A RELATIVELY SMALL NUMBER OF KEY MANUFACTURERS FOR PRODUCTS THAT MAKE
UP A SIGNIFICANT PORTION OF OUR NET SALES AND THE LOSS OF A RELATIONSHIP WITH A
KEY MANUFACTURER COULD HAVE AN ADVERSE EFFECT ON OUR NET SALES.

           We receive a significant portion of our net sales from products we
purchase from a relatively small number of key manufacturers. In each of 2002
and 2003, five key manufacturers provided products that represented 49% and 53%,
respectively, of our net sales. We believe that products from a relatively small
number of manufacturers will continue to account for a significant portion of
our net sales for the foreseeable future, and the portion of our net sales from
products purchased from such manufacturers could continue to increase in the
future. These key manufacturers have a variety of distributors to choose from
and therefore can make substantial demands on us. In addition, our standard
distribution agreement allows the manufacturer to terminate its relationship
with us on short notice. Our ability to maintain strong relationships with our
key manufacturers, both domestically and internationally, is essential to our
future performance. The loss of a relationship with a key manufacturer could
have an adverse effect on our net sales.

           In addition, the downturn in the economy in general, and in the
technology sector of the economy in particular, has led to increased
consolidation among our manufacturers and may result in some manufacturers
exiting the industry. Further, manufacturers have been consolidating the number
of distributors they use. These events could negatively impact our relationships
with our key manufacturers and may have an adverse effect on our net sales.

WE OPERATE IN AN INDUSTRY WITH CONTINUAL PRICING AND MARGIN PRESSURE.

           The nature of our industry and our business is highly
price-competitive. There are several distributors of products similar to ours in
each of the markets in which we operate. As a result, we face pricing and margin
pressure on a continual basis. Additionally, the mix of products we sell also
affects overall margins. If we


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increase revenue from products that are more widely distributed, these products
may carry lower gross margins that can reduce our overall gross profit
percentage. There can also be a negative impact on gross margins from factors
such as freight costs and foreign exchange exposure. These factors, alone or in
combination, can have a negative impact on our gross profit percentage.

THE FAILURE OF OUR KEY SUPPLIERS TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES
IN OUR INDUSTRY AND TO SUCCESSFULLY DEVELOP NEW PRODUCTS COULD CAUSE OUR SALES
TO DECLINE AND OUR REVENUES TO DECREASE.

           Our ability to generate increased revenues depends significantly upon
the ability and willingness of suppliers to develop new products on a timely
basis in response to rapid technological changes in our industry. Our suppliers
must commit significant resources each time they develop a product. If they do
not invest in the development of new products, then sales of our products to our
customers may decline and our revenues may decrease. The ability and willingness
of our suppliers to develop new products is based upon a number of factors
beyond our control.

THE DOWNTURN IN INFORMATION TECHNOLOGY SPENDING MAY CAUSE REDUCED DEMAND FOR OUR
PRODUCTS AND A DECLINE IN OUR NET SALES AND GROSS MARGINS DUE TO PRICE
COMPETITION AND DECREASED SALES VOLUMES.

           Since late 2000, large enterprises throughout the global economy have
significantly reduced their spending on information technology products, which
has had a continuing negative effect on the demand for our products. We cannot
predict the depth or duration of this downturn in spending, and if it grows more
severe or continues for a long period of time, our ability to increase or
maintain our operating results may be impaired. This downturn in spending may
result in a decline in our net sales and gross margins due to decreased sales
volumes and price competition.

OUR INVENTORY MAY DECLINE IN VALUE DUE TO INVENTORY SURPLUS, PRICE REDUCTIONS OR
TECHNICAL OBSOLESCENCE THAT COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

           The value of our inventory may decline as a result of surplus
inventory, price reductions or technological obsolescence. Our distribution
agreements typically provide us with only limited price protection and inventory
return rights. In addition, we purchase significant amounts of inventory under
contracts that do not provide any inventory return rights or price protection.
Without price protection or inventory return rights for our inventory purchases,
we bear the sole risk of obsolescence and price reductions. Even when we have
price protection and inventory return rights, there can be no guarantee we will
be able to return the products to the manufacturer or to collect refunds for
those products in a timely manner, if at all.

SUPPLY SHORTAGES COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

           We are dependent on the supply of products from our vendors. Our
industry is characterized by periods of product shortages due to vendors'
difficulty in projecting demand. When such shortages occur, we typically receive
an allocation of product from the vendor. There can be no assurance that vendors
will be able to maintain an adequate supply of products to fulfill all of our
customers' orders on a timely basis. If we are unable to enter into and maintain
satisfactory distribution arrangements with leading vendors and an adequate
supply of products, we may be late in shipping products, causing our customers
to purchase products from our competitors which could adversely affect our net
sales, operating results and customer relationships.

OUR FINANCIAL OBLIGATIONS MAY LIMIT OUR ABILITY TO OPERATE OUR BUSINESS.

           The agreements governing our revolving lines of credit and our 9%
senior subordinated notes contain various restrictive covenants that, among
other things, require us to comply with or maintain certain financial tests and
ratios that limit our ability to operate our business. If we do not comply with
the covenants contained in


                                       10
<PAGE>
the agreements governing our revolving lines of credit and our 9% senior
subordinated notes, our lenders may demand immediate repayment of amounts
outstanding. Our ability to comply with our debt obligations will depend upon
our future operating performance, which may be affected by prevailing economic
conditions and financial, business and other factors described herein and in our
other SEC filings, many of which are beyond our control. If we are unable to
meet our debt obligations, we may be forced to adopt one of more strategies such
as reducing or delaying capital expenditures or otherwise slowing our growth
strategies, selling assets, restructuring or refinancing our indebtedness or
seeking additional equity capital. We do not know whether any of these actions
could be effected on satisfactory terms, if at all. Any equity financing may be
on terms that are dilutive or potentially dilutive. If we are unable to
successfully manage our debt burden, our financial condition would suffer
considerably. Changes in interest rates may have a significant effect on our
operating results. Furthermore, we are dependent on credit from our
manufacturers to fund our inventory purchases. If our debt burden increases to
high levels, our manufacturers may restrict our credit. Our cash requirements
will depend on numerous factors, including the rate of growth of our sales, the
timing and levels of products purchased, payment terms and credit limits from
manufacturers, the timing and level of our accounts receivable collections and
our ability to manage our business profitably.

SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR CASH
FLOW.

           In March 2004, we issued our 3.75% convertible subordinated notes,
resulting in net proceeds to the Company of $106,300,000. We intend to use all
of the net proceeds of the offering to repay a portion of amounts outstanding
under our revolving lines of credit and our 9% senior subordinated notes. As a
result of the issuance of the notes, our leverage and debt service obligations
may increase. There is the possibility that we may be unable to generate cash
sufficient to pay the principal of, interest on and other amounts due in respect
of our indebtedness when due.

           Our substantial leverage could have significant negative
consequences, including:

           -    increasing our vulnerability to general adverse economic and
                industry conditions;

           -    increasing our exposure to fluctuating interest rates;

           -    restricting our credit with our manufacturers which would limit
                our ability to purchase inventory;

           -    limiting our ability to obtain additional financing;

           -    requiring the dedication of a portion of our expected cash
                flow from operations to service our indebtedness, thereby
                reducing the amount of our expected cash flow available for
                other purposes, including capital expenditures;

           -    limiting our  flexibility  in planning  for, or reacting to,
                changes in our business and the industry in which we compete;
                and

           -    placing us at a possible competitive disadvantage relative to
                less leveraged competitors and competitors that have better
                access to capital resources.

           We are not restricted under the indenture governing the notes from
incurring additional debt in the future. As a result of using the net proceeds
to pay down amounts outstanding on our revolving lines of credit, we may also
incur substantial additional debt under the facilities. If new debt is added to
our current levels, our leverage and debt service obligations would increase and
the related risks described above could intensify.

IF WE DO NOT REDUCE AND CONTROL OUR OPERATING EXPENSES, WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY IN OUR INDUSTRY.

           Our strategy involves, to a substantial degree, increasing revenues
while at the same time reducing and controlling operating expenses. In
furtherance of this strategy, we have engaged in ongoing, company-wide
efficiency activities intended to increase productivity and reduce costs. These
activities have included significant


                                       11
<PAGE>
personnel reductions, reduction or elimination of non-personnel expenses and
realigning and streamlining operations and consolidating business lines. We
cannot assure you that our efforts will result in the increased profitability,
cost savings or other benefits that we expect. Moreover, our cost reduction
efforts may adversely affect the effectiveness of our financial and operational
controls, our ability to distribute our products in required volumes to meet
customer demand and may result in disruptions that affect our products and
customer service.

OUR ABILITY TO OPERATE EFFECTIVELY COULD BE IMPAIRED IF WE WERE TO LOSE THE
SERVICES OF KEY PERSONNEL, OR IF WE ARE UNABLE TO RECRUIT QUALIFIED MANAGERS AND
KEY PERSONNEL IN THE FUTURE.

           Our success largely depends on the continued service of our
management team and key personnel. If one or more of these individuals,
particularly W. Donald Bell, our Chairman, Chief Executive Officer and
President, were to resign or otherwise terminate their employment with us, we
could experience a loss of sales and vendor relationships and diversion of
management resources. Competition for skilled employees is intense and there can
be no assurance that we will be able to recruit and retain such personnel. If we
are unable to retain our existing managers and employees or hire and integrate
new management and employees, we could suffer material adverse effects on our
business, operating results and financial condition.

OUR INTERNATIONAL OPERATIONS SUBJECT US TO RISKS WHICH MAY HURT OUR
PROFITABILITY.

           Our international revenues represented 59% of our revenues in 2003,
and 56% of our revenues in 2002. We believe that international sales will
represent a substantial and increasing portion of our net sales for the
foreseeable future. Our international operations are subject to a number of
risks, including:

      -    Fluctuations in currency exchange rates;

      -    political and economic instability;

      -    longer payment cycles and unpredictable sales cycles;

      -    difficulty in staffing and managing foreign operations;

      -    import and export license requirements, tariffs, taxes and other
           trade barriers; and

      -    the burden of  complying with a wide variety of foreign laws,
           treaties and technical standards and changes in those regulations.

           The majority of our revenues and expenditures in our foreign
subsidiaries are transacted in the local currency of the country where the
subsidiary operates. For each of our foreign subsidiaries, the local currency is
also the functional currency. Fluctuations in currency exchange rates could
cause our products to become relatively more expensive to customers in a
particular country, leading to a reduction in sales or profitability in that
country. To the extent our revenues and expenses are denominated in currencies
other than U.S. dollars, gains and losses on the conversion to U.S. dollars may
contribute to fluctuations in our operating results. In addition, we have
experienced foreign currency remeasurement gains and losses because a
significant amount of our foreign subsidiaries' remeasurable net assets and
liabilities are denominated in U.S. dollars rather than the subsidiaries'
functional currency. As we continue to expand globally and the amount of our
foreign subsidiaries' U.S. dollar or non-functional currency denominated,
remeasurable net asset or liability position increases, our potential for
fluctuations in foreign currency remeasurement gains and losses will increase.
We have in the past, and expect in the future, to enter into hedging
arrangements and enter into local currency borrowing facilities to reduce this
exposure, but these arrangements may not be adequate.

OUR INABILITY TO EFFECTIVELY MANAGE OUR ACCOUNTS RECEIVABLE COULD HAVE A
SIGNIFICANT NEGATIVE IMPACT ON OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS
AND LIQUIDITY.

           A significant portion of our working capital consists of accounts
receivable from customers. If customers responsible for a significant percentage
of our accounts receivable were to become insolvent or


                                       12
<PAGE>
otherwise unable to pay for products and services, or were to become
unwilling or unable to make payments in a timely manner, our operating results
and financial condition could be adversely affected. If the current economic
downturn becomes more pronounced or lasts longer than currently expected, it
could have an adverse effect on the servicing of these accounts receivable,
which could result in longer payment cycles, increased collection costs and
defaults in excess of management's expectations. A significant deterioration in
our ability to collect on accounts receivable could also impact the cost or
availability of financing. Further, our revolving lines of credit enable us to
borrow funds for operations based on our levels of accounts receivable and
inventory and the agreement governing our senior subordinated notes restricts
the amount of additional debt we can incur based on our levels of accounts
receivable and inventory. If our accounts receivable and inventories are not at
adequate levels, we may face liquidity problems in operating our business.

IF WE ARE UNABLE TO EFFECTIVELY COMPETE IN OUR INDUSTRY, OUR OPERATING RESULTS
MAY SUFFER.

           The markets in which we compete are intensely competitive. As a
result, we will face a variety of significant challenges, including rapid
technological advances, price erosion, changing customer preferences and
evolving industry standards. Our competitors continue to offer products with
improved price and performance characteristics, and we will have to do the same
to remain competitive. Increased competition could result in significant price
competition, reduced revenues, lower profit margins or loss of market share, any
of which would have a material adverse effect on our business. We cannot be
certain that we will be able to compete successfully in the future.

           We compete for customer relationships with numerous local, regional,
national and international distributors. We also compete for customer
relationships with manufacturers, including some of our manufacturers and
customers. We believe our most significant competition for customers seeking
both products and services arises from Arrow Electronics, Avnet and European
value-added distributors including IN Technology, Magirus and ECT Best'Ware. We
believe our most significant competition for customers seeking only products
arises from Ingram Micro, Tech Data and Synnex. We also compete with
regionalized distributors in North America, Europe and Latin America who use
their localized knowledge and expertise as a competitive advantage. Competition
for customers is based on product line breadth, depth and availability,
competitive pricing, customer service, technical expertise, value-added services
and e-commerce capabilities. While we believe we compete favorably with respect
to these factors, some of our competitors have superior brand recognition and
greater financial resources than we do. If we are unable to successfully
compete, our operating results may suffer.

           We also compete with other distributors for relationships with
manufacturers. In recent years, a growing number of manufacturers have begun
consolidating the number of distributors they use. This consolidation will
likely result in fewer manufacturers in our industry. As a result of this
consolidation we may lose existing relationships with manufacturers. In
addition, manufacturers have established and may continue to establish
cooperative relationships with other manufacturers and data storage solution
providers. These cooperative relationships may enable manufacturers to offer
comprehensive solutions that compete with those we offer and the manufacturers
may have greater resources to devote to internal sales and marketing efforts. If
we are unable to maintain our existing relationships with manufacturers and
establish new relationships, it could harm our competitive position and
adversely affect our operating results.

IF WE ARE UNABLE TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE, OUR RESULTS OF
OPERATIONS AND FINANCIAL CONDITION MAY SUFFER.

           Many of the products we sell are used in the manufacture or
configuration of a wide variety of electronic products. These products are
characterized by rapid technological change, short product life cycles and
intense competition and pricing pressures. Our continued success depends upon
our ability to continue to identify new vendors and product lines that achieve
market acceptance, emerging technologies, develop


                                       13
<PAGE>
technological expertise in these technologies and continually develop and
maintain relationships with industry leaders. If we are unsuccessful in our
efforts, our results of operations and financial condition may suffer.

FAILURE TO IDENTIFY ACQUISITION OPPORTUNITIES AND INTEGRATE ACQUIRED BUSINESSES
INTO OUR OPERATIONS SUCCESSFULLY COULD REDUCE OUR REVENUES AND PROFITS AND MAY
LIMIT OUR GROWTH.

           An important part of our growth has been the acquisition of
complementary businesses. We may choose to continue this strategy in the future.
Our identification of suitable acquisition candidates involves risks inherent in
assessing the value, strengths, weaknesses, overall risks and profitability of
acquisition candidates. We may be unable to identify suitable acquisition
candidates. If we do not make suitable acquisitions, we may find it more
difficult to realize our growth objectives.

           The process of integrating new businesses into our operations,
including our recently completed acquisitions, poses numerous risks, including:

      -    an inability to assimilate acquired operations, information systems,
           and internal control systems and products;

      -    diversion of management's attention;

      -    difficulties and uncertainties in transitioning the business
           relationships from the acquired entity to us; and

      -    the loss of key employees of acquired companies.

           In addition, future acquisitions by us may be dilutive to our
shareholders, cause us to incur additional indebtedness and large one-time
expenses or create intangible assets that could result in significant
amortization expense. If we spend significant funds or incur additional debt,
our ability to obtain necessary financing may decline and we may be more
vulnerable to economic downturns and competitive pressures. We cannot guarantee
that we will be able to successfully complete any acquisitions, that we will be
able to finance acquisitions or that we will realize any anticipated benefits
from acquisitions that we complete.

IF WE CANNOT EFFECTIVELY MANAGE OUR GROWTH, OUR BUSINESS MAY SUFFER.

           Our growth since our initial public offering in 1993 has placed, and
continues to place, a significant strain on our management, financial,
operational, technical, sales and administrative resources. We intend to
continue to grow by increasing our sales efforts and completing strategic
acquisitions. To effectively manage our growth, we must, among other things:

      -    engage, train and manage a larger sales force and additional service
           personnel;

      -    expand the geographic coverage of our sales force; o expand our
           information systems;

      -    identify and successfully integrate acquired businesses into our
           operations; and

      -    enforce appropriate financial and administrative control procedures.

           Any failure to effectively manage our growth may cause our business
to suffer and our stock price to decline.

ITEM 2. PROPERTIES

           In the Americas, we maintain 46 sales offices in a variety of
locations, including the U.S., Canada, Argentina, Brazil, Chile and Mexico. In
Europe, we maintain sales offices in Austria, Belgium, England, France, Germany,
Italy, the Netherlands and Sweden. In addition to our sales offices, we operate
six integration and service facilities and 11 warehouses. We currently operate
four significant management and distribution centers. Our


                                       14
<PAGE>
corporate headquarters is located in San Jose, California, where we
currently lease office space and distribution facilities with approximately
160,000 square feet of space. The leases expire in 2007. In Chessington,
England, we acquired a facility with approximately 102,000 square feet that
serves as our center for directing and managing our operations in the United
Kingdom and Europe. Our European distribution center is located in Birmingham,
England where we lease a warehouse facility with approximately 130,000 square
feet of space. This lease expires in 2019. In Miami, Florida, we currently lease
a facility with approximately 65,000 square feet that serves as our center for
directing and managing our business in Latin America. The lease expires in 2005,
with two 5-year options to extend. In Montgomery, Alabama, we currently lease a
facility with approximately 53,000 square feet that serves as our corporate
technology and data center and our primary customer call center. The lease on
this facility expires in October 2007. We believe that our existing facilities
are adequate for our current operational needs.

ITEM 3. LEGAL PROCEEDINGS

           The Company and/or its subsidiaries are parties to various other
legal proceedings arising from time to time in the normal course of business.
While litigation is subject to inherent uncertainties, management currently
believes that the ultimate outcome of these proceedings, individually and in the
aggregate, will not have a material adverse effect on the Company's financial
position, cash flow or overall results of operations.

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

           None.


                                       15
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY,  RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

           The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "BELM." The following table sets forth for the periods
indicated the high and low sale prices of the Common Stock as reported by
Nasdaq.

<TABLE>
<CAPTION>

                                                    HIGH        LOW
                                                   -------     ------
<S>                                                <C>         <C>
2002
    First quarter...............................   $ 15.79     $ 9.79
    Second quarter..............................     12.90       6.70
    Third quarter...............................      8.00       3.25
    Fourth quarter .............................      8.70       3.61
2003

    First quarter...............................   $  7.64     $ 5.03
    Second quarter..............................      5.75       3.56
    Third quarter...............................      7.85       4.16
    Fourth quarter .............................      9.88       6.70
2004

    First quarter (through March 5, 2004).......   $ 10.50     $ 8.07
</TABLE>


           On March 5, 2004, the last sale price of the Common Stock as reported
by Nasdaq was $8.24 per share.

           As of March 5, 2004, there were approximately 388 holders of record
of the Common Stock (not including shares held in street name).

           To date, the Company has paid no cash dividends to its shareholders.
The Company has no plans to pay cash dividends in the near future. The Company's
line of credit agreement prohibits the Company's payment of dividends or other
distributions on any of its shares except dividends payable in the Company's
capital stock.


                                       16
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

           The selected consolidated operations data for 2003, 2002 and 2001 and
consolidated balance sheet data as of December 31, 2003 and 2002 set forth below
have been derived from our consolidated financial statements and are qualified
by reference to the consolidated financial statements included herein audited by
PricewaterhouseCoopers LLP, independent accountants. The selected consolidated
operations data for 2000 and 1999 and the consolidated balance sheet data as of
December 31, 2001, 2000 and 1999 have been derived from our audited consolidated
financial statements not included herein. These historical results are not
necessarily indicative of the results of operations to be expected for any
future period.


<TABLE>
<CAPTION>
                                                                  (IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)


STATEMENT OF OPERATIONS DATA:                            2003(1)        2002         2001(2)         2000(3)        1999(4)
                                                      ------------  ------------  -------------   -------------   ------------
<S>                                                   <C>           <C>           <C>             <C>             <C>
Net sales                                             $  2,230,287  $  2,104,922  $   2,007,102   $   1,804,102   $  1,058,275
Cost of sales                                            2,062,194     1,926,366      1,854,294       1,638,802        967,491
                                                      ------------  ------------  -------------   -------------   ------------
Gross profit                                               168,093       178,556        152,808         165,300         90,784
Selling, general and administrative expenses               155,710       165,624        157,910         121,088         69,507
Restructuring and special charges                            1,383         5,688          8,894              --             --
                                                      ------------  ------------  -------------   -------------   ------------
Total operating expenses                                   157,093       171,312        166,804         121,088         69,507
Income (loss) from operations                               11,000         7,244        (13,996)         44,212         21,277
Interest expense and other income                           16,143        16,910         20,362          14,495          5,766
                                                      ------------  ------------  -------------   -------------   ------------
Income (loss) from operations before taxes                  (5,143)       (9,666)       (34,358)         29,717         15,511
Provision for (benefit from) income taxes                     (669)       (2,612)       (12,251)         12,480          6,581
                                                      ------------  ------------  -------------   -------------   ------------
Income (loss) from operations                               (4,474)       (7,054)       (22,107)         17,237          8,930
Income (loss) from discontinued operations, net of
     of income taxes                                            --            --             --              --         (2,946)
Gain on sale of contract manufacturing segment                  --            --             --              --          1,054
                                                      ------------  ------------  -------------   -------------   ------------
Net income (loss)                                     $     (4,474) $     (7,054) $     (22,107)  $      17,237   $      7,038
                                                      ============  ============  =============   =============   ============
Basic earnings (loss) per shares (5)
   Basic
    Continuing operations                             $      (0.20) $      (0.37) $       (1.34)  $        1.17   $       0.66
    Discontinued operations                                     --            --             --              --          (0.14)
                                                      ------------  ------------  -------------   -------------   ------------
Total                                                 $      (0.20) $      (0.37) $       (1.34)  $        1.17   $       0.52
                                                      ============  ============  =============   =============   ============
Diluted earnings (loss) per share (5)
   Diluted

    Continuing operations                             $      (0.20) $      (0.37) $       (1.34)  $        1.05   $       0.65
    Discontinued operations                                     --            --             --              --          (0.14)
                                                      ------------  ------------  -------------   -------------   ------------
Total                                                 $      (0.20) $      (0.37) $       (1.34)  $        1.05   $       0.51
                                                      ============  ============  =============   =============   ============
Shares used in per share calculation
    Basic                                                   22,324        19,201         16,495          14,673         13,563
                                                      ============  ============  =============   =============   ============
    Diluted                                                 22,324        19,201         16,495          16,415         13,685
                                                      ============  ============  =============   =============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                   AS OF DECEMBER 31,
                                                      ------------------------------------------------------------------------
BALANCE SHEET DATA:                                     2003(1)         2002           2001(2)       2000(3)        1999(4)
                                                      ------------  ------------  -------------   -----------     ------------
<S>                                                   <C>           <C>           <C>             <C>             <C>
Working capital                                       $    283,634  $    206,786  $     183,964   $     136,810   $   182,626
Total assets                                               712,999       614,191        643,687         661,207       360,351
Total long-term debt                                       207,827       179,237        176,441         106,871       110,638
Total shareholders' equity                                 193,410       145,849        125,769         129,532        96,273
</TABLE>

(1)   2003 Statement of Operations data and Balance Sheet data include the
      results of operations of EBM Mayorista S.A. de C.V. since acquisition
      on October 15, 2003. See Note 4 of Notes to Consolidated Financial
      Statements.

(2)   2001 Statement of Operations data and Balance Sheet data include the
      results of operations of Touch The Progress Group BV since acquisition
      on May 22, 2001, Forefront Graphics on May 24, 2001 and Total Tec Systems,
      Inc. on November 13, 2001. See Note 4 of Notes to Consolidated Financial
      Statements.


                                       17
<PAGE>
(3)   2000 Statement of Operations data and Balance Sheet data include the
      results of operations of Rorke Data, Inc. since acquisition on May 15,
      2000 and Ideal Hardware Limited on August 3, 2000. See Note 4 of Notes to
      Consolidated Financial Statements.

(4)   1999  Statement of Operations data and Balance Sheet data include the
      results of operations of Future Tech,  Inc. from the date of acquisition
      on July 21, 1999.

(5)   All per share amounts have been restated in accordance with Statement of
      Financial Accounting Standards No. 128 "Earnings Per Share". Earnings per
      share and shares used in per share calculations have been retroactively
      restated to reflect the 3-for-2 stock split the Company declared on July
      31, 2000.

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

           For an understanding of the significant factors that influenced the
Company's performance during the past three years, the following discussion
should be read in conjunction with the consolidated financial statements and the
other information appearing elsewhere in this report.

           Due to the severity and length of the downturn in the electronic
component and computer product industry and in the global economy as a whole,
the Company has recorded charges in recent years that are discussed more fully
in "Restructuring and Other Charges" in this MD&A. These charges have had a
significant impact on the Company's results of operations in each of the years
presented in this Report as discussed further below.

           In addition to disclosing financial results that are determined in
accordance with accounting principles generally accepted in the United States
("GAAP"), the Company also discloses pro forma or non-GAAP measures that may
exclude certain items. Management believes that providing this additional
information is useful to the reader to better assess and understand operating
performance, especially when comparing results with previous periods or
forecasting performance for future periods. Management believes the pro forma
measures also help indicate underlying trends in the business. Management also
uses pro forma information to establish operational goals and, in some cases,
for measuring performance for compensation purposes. However, analysis of
results and outlook on a pro forma or non-GAAP basis should be used as a
complement to, and in conjunction with, data presented in accordance with GAAP.

           When used in this report, the words "expects," "anticipates,"
"estimates," "intends" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A under the
Securities Act of 1933 and Section 21E under the Securities Exchange Act of
1934. Such statements include but are not limited to statements regarding the
ability to obtain favorable product allocations and the ability to increase
gross profit while controlling expenses. These statements are subject to risks
and uncertainties that could cause actual results to differ materially,
including those risks described under "Risk Factors" in Item 1 hereof.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

           The preparation of financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Our estimates, judgments and assumptions are continually
evaluated based on available information and experience; however actual amounts
could differ from those estimates.

           The Securities and Exchange Commission defines critical accounting
polices as those that are, in


                                       18
<PAGE>
management's view, most important to the portrayal of the Company's financial
condition and results of operations and those that require significant judgments
and estimates. Management believes the Company's most critical accounting
policies relate to:

Revenue recognition

           Bell's policy is to recognize revenue from sales to customers when
the rights and risks of ownership have passed to the customer, when persuasive
evidence of an arrangement exists, the price is fixed and determinable and
collection of the resulting receivable is reasonably assured. Under specific
conditions, we permit our customers to return or exchange products. The
provision for estimated returns is recorded concurrently with the recognition of
revenue based on historical sales returns and analysis of credit memorandum
data.

           We maintain an allowance for doubtful accounts for losses that we
estimate will arise from our customers' inability to make required payments. We
make our estimates of the uncollectibility of our accounts receivable by
analyzing historical bad debts, specific customer creditworthiness and current
economic trends. At December 31, 2003 the allowance for doubtful accounts was
$17.6 million and at December 31, 2002 it was $19.3 million. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. In 2003,
our bad debt expense was $7.6 million compared to $11.4 million in 2002. In
addition, included in 2002 restructuring and special charges were $1.7 million
of charges recorded in the second quarter that related to a rapid deterioration
in the financial condition of certain customers in Latin America resulting in
their inability to make payments. In the third quarter of 2001, the Company also
recorded other special charges of $4.1 million for additional accounts
receivable provisions. Events giving rise to this provision related to the
economic crisis in Argentina and the devaluation of the Argentinean peso, and a
default on guaranteed debt of one of the Company's large customers who filed for
bankruptcy.

Valuation of Inventory

           Inventories are recorded at the lower of cost (first in--first out)
or estimated market value. The Company's inventories include high-technology
components, embedded systems and computing technologies sold into rapidly
changing, cyclical and competitive markets whereby such inventories may be
subject to early technological obsolescence. We write down our inventory for
estimated obsolescence or unmarketable inventory equal to the difference between
the cost of inventory and the estimated market value based upon assumptions
about future demand, selling prices and market conditions. In the first quarter
of 2003, we recorded inventory charges of $1.5 million and during the second and
third quarters of 2001 we recorded $17.8 million of charges related to excess
inventory on hand. These additional write-downs resulted from market conditions,
changes to certain vendor relationships and the decision to discontinue certain
product lines. These charges were included in the Statement of Operations within
the caption "Cost of Sales." We evaluate inventories for excess, obsolescence or
other factors that may render inventories unmarketable at normal margins.
Write-downs are recorded so that inventories reflect the approximate net
realizable value and take into account the Company's contractual provisions with
its suppliers governing price protection, stock rotation and return privileges
relating to obsolescence. Because of the large number of transactions and the
complexity of managing the process around price protections and stock rotations,
estimates are made regarding adjustments to the carrying amount of inventories.
Additionally, assumptions about future demand, market conditions and decisions
to discontinue certain product lines can impact the decision to write down
inventories. If assumptions about future demand change or actual market
conditions are less favorable than those projected by management, additional
write-downs of inventories may be required. In any case, actual amounts could be
different from those estimated.

Special and Acquisition-Related Charges


                                       19
<PAGE>
           The Company has been subject to the financial impact of integrating
acquired businesses and charges related to business reorganizations. In
connection with such events, management is required to make estimates about the
financial impact of such matters that are inherently uncertain. Accrued
liabilities and reserves are established to cover the cost of severance,
facility consolidation and closure, lease termination fees, inventory
adjustments based upon acquisition-related termination of supplier agreements
and/or the re-evaluation of the acquired working capital assets (inventory and
accounts receivable), change-in-control expenses, and write-down of other
acquired assets including goodwill. Actual amounts incurred could be different
from those estimated.

Valuation of Accounts Payable

           Our accounts payable has been reduced by amounts claimed to vendors
for returns, price protection and other amounts related to incentive programs.
Amounts related to price protection and other incentive programs are recorded as
adjustments to product costs or selling, general and administrative expenses,
depending on the nature of the program. There is a time delay between the
submission of a claim by us and confirmation of agreement by our vendors.
Historically, our estimated claims have approximated amounts agreed to by our
vendors.

Accounting for Income Taxes

           Management judgment is required in determining the provision for
income taxes, deferred tax assets and liabilities and the valuation allowance
recorded against net deferred tax assets. The carrying value of the Company's
net foreign operating loss carry-forwards is dependent upon its ability to
generate sufficient future taxable income in certain tax jurisdictions. In
addition, the Company considers historic levels of income, expectations and risk
associated with estimates of future taxable income and ongoing prudent and
feasible tax planning strategies in assessing a tax valuation allowance. Should
the Company determine that it is not able to realize all or part of its deferred
tax assets in the future, a valuation allowance is recorded against the deferred
tax assets with a corresponding charge to income in the period such
determination is made.

Valuation of Goodwill and Intangible Assets

           At December 31, 2003, goodwill amounted to $60.2 million and
identifiable intangible assets amounted to $6.5 million.

           We regularly evaluate whether events and circumstances have occurred
that indicate a possible impairment of goodwill. In determining whether there is
an impairment of goodwill, we calculate the estimated fair value of our Company
based on the closing sales price of our common stock and projected discounted
cash flows as of the date we perform the impairment tests. We then compare the
resulting fair value to our respective net book value, including goodwill. If
the net book value of our Company exceeds its fair value, we measure the amount
of the impairment loss by comparing the implied fair value of our goodwill with
the carrying amount of that goodwill. To the extent that the carrying amount of
our goodwill exceeds its implied fair value, we recognize a goodwill impairment
loss. We perform this impairment test annually and whenever facts and
circumstances indicate that there is a possible impairment of goodwill. We
completed the required annual impairment test, which resulted in no impairment
for fiscal year 2003. We believe the methodology we use in testing impairment of
goodwill provides us with a reasonable basis in determining whether an
impairment charge should be taken.

RESULTS OF OPERATIONS

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

           Net sales were $2,230.3 million for the year ended December 31, 2003,
which represented an increase of $125.4 million, or 6% over 2002. Solutions
sales increased by $145.3 million, primarily due to increased


                                       20
<PAGE>
demand across all geographies, particularly in the European market. Sales of
components and peripherals decreased by $19.9 million primarily due to pricing
pressures in the industry and the Company's decision to discontinue certain
non-strategic product lines, as discussed below.

           The Company's gross profit for 2003 was $168.1 million, a decrease of
$10.5 million, or 6% from 2002. In 2003, both gross margins and gross profit
dollars were negatively impacted by worldwide competitive pricing pressures and
a shift in product mix resulting from rapid growth of certain products that
carry lower than average gross margins. The Company also recorded an inventory
charge of $1.5 million taken in the first quarter of 2003 related to the impact
of unfavorable market conditions and the Company's decision to reposition its
product offerings and discontinue certain non-strategic product lines, as
discussed below. Gross margin was 7.5% in 2003, compared to 8.5% in 2002.

           Selling, general and administrative expenses decreased to $155.7
million in 2003 from $165.6 million in 2002, a decrease of $9.9 million, or 6%.
As a percentage of sales, selling, general and administrative expenses decreased
to 7.0% compared to 7.9% in 2002. The decrease in expenses was attributable to
the profit improvement actions undertaken by the Company in the second half of
2002.

           Interest expense and other income decreased in 2003 to $16.1 million
from $16.9 million in 2002, a decrease of $800,000, or 5%. The decrease in
interest expense and other income was primarily due to overall decreased bank
borrowings during 2003 for worldwide working capital purposes and decreased
interest rates. The average interest rate in 2003 was 6.8% versus 7.0% in 2002.

           In 2003, the Company recorded a tax benefit at a rate of 13% on the
loss before taxes compared to the 2002 tax benefit rate of 27% on losses before
taxes. The lower tax benefit rate for 2003 was primarily related to deferred tax
valuation allowances established related to losses incurred in certain foreign
jurisdictions.

Restructuring Plan

           In the first quarter of 2003, the Company continued to implement
profit improvement and cost reduction measures, and recorded restructuring costs
of $1.4 million. These charges consisted of severance and benefits of $1.3
million related to worldwide involuntary terminations and estimated lease costs
of $56,300 pertaining to future lease obligations for non-cancelable lease
payments for excess facilities in the U.S. The Company terminated 127 employees
worldwide, across a wide range of functions including marketing, technical
support, finance, operations and sales, and expects annual savings of
approximately $8 million. Expected savings related to vacated facilities is not
material. Future savings expected from restructuring related cost reductions
will be reflected as a decrease in `Selling, General and Administrative
expenses' on the Statement of Operations. The Company also recorded an inventory
charge of approximately $1.5 million related to significant changes to certain
vendor relationships and the discontinuance of other non-strategic product
lines.

           In the second and third quarters of 2002, as part of the Company's
plan to reduce costs and improve operating efficiencies, the Company recorded
special charges of $5.7 million. These costs consisted primarily of estimated
lease costs of $2.3 million pertaining to future lease obligations for
non-cancelable lease payments for excess facilities in the U.S. and costs of
$583,000 related to the closure of the Rorke Data Europe facilities, whose
operations were consolidated into the Company's TTP division in Almere,
Netherlands. These special charges also included provisions for certain Latin
American receivables of $1.7 million, and severance and benefits of $1.1 million
related to worldwide involuntary terminations. The Company terminated 78
employees, predominately in sales and marketing functions and eliminated two
executive management positions in the U.S. Future expected costs reductions will
be reflected in the Statement of Operations line item `Selling, General and
Administrative expenses.'


                                       21
<PAGE>
           Outstanding liabilities related to these charges are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
                                         Balance at             Restructuring
                                        Beginning of             and Special             Cash          Balance at End
Year Ended December 31,                    Period                  Charges             Payments          of Period
                                      ----------------        ------------------     ------------     -----------------
<S>                               <C>                        <C>                    <C>              <C>
2001
Severance costs                            $    -                  $2,199               $2,143              $   56
Lease costs                                     -                     238                  139                  99
                                           ------                  ------               ------              ------
Total                                           -                   2,437                2,282                 155

2002
Severance costs                                56                   1,167                  678                 545
Lease costs                                    99                   2,515                  535               2,079
Other facility closure costs                    -                     306                  306                   -
                                           ------                  ------               ------              ------
Total                                         155                   3,988                1,519               2,624

2003
Severance costs                               545                   1,327                1,638                 234
Lease costs                                 2,079                      56                  808               1,327
                                           ------                  ------               ------              ------
Total                                      $2,624                  $1,383               $2,446              $1,561
                                           ======                  ======               ======              ======
</TABLE>

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

           Net sales were $2,104.9 million for the year ended December 31, 2002,
which represented an increase of $97.8 million, or 5% over 2001. Solutions sales
increased by $213.1 million primarily due to growth in the European market and
expansion of the customer base related to the acquisitions of Total Tec Systems,
Inc. ("Total Tec") in November 2001 and Touch The Progress Group BV ("TTPG") in
May 2001. Sales of components and peripherals decreased by $115.3 million
primarily due to the economic downturn in the Americas and overall decrease in
average selling prices as a result of excess supply.

           The Company's gross profit for 2002 was $178.6 million, an increase
of $25.7 million, or 17% from 2001. Gross profit in 2001 was negatively impacted
by inventory charges of $17.8 million taken in the second and third quarters of
2001 related to the impact of unfavorable market conditions and the Company's
decision to reposition its product offerings and discontinue certain
non-strategic product lines, as discussed below. Excluding the inventory charge,
gross profit increased to $178.6 million in 2002, compared to $170.6 million in
2001, an increase of $8.0 million, or 5%. The increase in gross profit was
primarily related to the acquisitions of Total Tec and TTPG, partially offset by
a decrease in the Americas. Excluding the inventory charge, the overall gross
margin remained flat at 8.5% compared to last year.

           Selling, general and administrative expenses increased to $165.6
million in 2002 from $157.9 million in 2001, an increase of $7.7 million, or 5%.
As a percentage of sales, selling, general and administrative expenses remained
flat at 7.9% compared to last year. The increase in expenses was attributable to
the acquisitions of Total Tec and TTPG and the overall European expansion.

           Interest expense and other income decreased in 2002 to $16.9 million
from $20.4 million in 2001, a decrease of $3.5 million, or 17%. The decrease in
interest expense and other income was primarily due to overall reduced interest
rates and decreased bank borrowings during 2002 for worldwide working capital
purposes. The average interest rate in 2002 was 7.0% versus 8.0% in 2001.

           In 2002 the Company recorded a tax benefit at a rate of 27.0% on the
loss before taxes compared to the 2001 tax benefit rate of 35.6% on losses
before taxes. The lower tax benefit rate for 2002 was primarily related to
deferred tax allowances established related to losses incurred in certain
foreign jurisdictions.

Restructuring Plan

           In the second and third quarters of 2002, as part of the Company's
plan to reduce costs and improve operating efficiencies, the Company recorded
special charges of $5.7 million. These costs consisted primarily of estimated
lease costs of $2.3 million pertaining to future lease obligations for
non-cancelable lease payments for excess facilities in the U.S. and costs of
$583,000 related to the closure of the Rorke Data Europe facilities, whose
operations were consolidated into the Company's TTP division in Almere,
Netherlands. These special charges also included provisions for certain Latin
American receivables of $1.7 million, and severance and


                                       22
<PAGE>
benefits of $1.1 million related to worldwide involuntary terminations.
The Company terminated 78 employees, predominately in sales and marketing
functions and eliminated two executive management positions in the U.S. Future
expected costs reductions will be reflected in the Statement of Operations line
item `Selling, General and Administrative expenses.'

           In the second and third quarters of 2001, the Company accrued
restructuring costs of $4.8 million. These costs consisted primarily of the
abandonment of certain inventory related computer software that had a carrying
value of $2.4 million, severance and benefits of $2.2 million related to
involuntary employee terminations and estimated lease costs of $238,000
pertaining to future lease obligations for non-cancelable lease payments for
excess facilities. The Company terminated 267 employees worldwide, predominantly
in overhead support functions. The Company expected annual employee expense
reductions of approximately $10 million, depreciation expense reduction of
$550,000, and cost reductions related to excess facilities of approximately
$800,000. Cost reductions have been realized as expected and have been reflected
in the Statement of Operations line item `Selling, General and Administrative
expenses.' Overall, these cost reductions have been offset by increases in
selling, general and administrative costs related to the acquisitions of Total
Tec and TTPG and other costs related to expansion of geographic sales coverage
in Europe, expansion of the Company's storage systems infrastructure and
expansion of the Company's Corporate Technology Center.

           Additionally in the third quarter of 2001, the Company recorded other
special charges of $4.1 million for additional accounts receivable provisions.
Events giving rise to this provision related to the economic crisis in Argentina
and the devaluation of the Argentinean peso, and a default on guaranteed debt of
one of the Company's large customers who filed for bankruptcy.

           In the second and third quarters of 2001, the Company also recorded a
provision for inventory of $17.8 million related to additional excess inventory.
The additional provision largely resulted from the decision to discontinue
certain product lines and the impact of current market conditions. The excess
inventory charge is included within the Statement of Operations under the
caption `Cost of Sales.'

LIQUIDITY AND CAPITAL RESOURCES

           In recent years, the Company has funded its working capital
requirements principally through borrowings under subordinated term loans and
bank lines of credit, as well as proceeds from warrant and stock option
exercises. Working capital requirements have included the financing of increases
in inventory and accounts receivable resulting from sales growth, and the
financing of certain acquisitions. In August 2003, the Company completed a
registered public offering of approximately 5.75 million shares of its common
stock, with proceeds to the Company net of commissions, discounts and expenses
of $34.9 million. In addition, in March 2002, the Company received $16.5 million
from a private equity financing.

         On March 5, 2004, the Company completed a private offering of $110
million aggregate principal amount of 3 3/4% convertible subordinated notes due
2024. The offering was made only to qualified institutional buyers in accordance
with Rule 144A under the Securities Act of 1933, as amended. The notes are
convertible into the Company's common stock under certain circumstances at a
conversion rate of 91.2596 shares per $1,000 principal amount of notes, subject
to adjustment, which is equivalent to a conversion price of approximately $10.96
per share. This represents a 32.5% premium over Bell Microproducts closing price
of its common stock on the Nasdaq National Market on March 1, 2004 of $8.27 per
share.

         The Company may redeem some or all of the notes under certain
circumstances on or after March 5, 2009 and prior to March 5, 2011, and at any
time thereafter without such circumstances, at 100% of the principal amount,
plus accrued but unpaid interest up to, but excluding, the redemption date. The
Company may be required to purchase some or all of the notes on March 5, 2011,
March 5, 2014 or March 5, 2019 or in the event of a change in control at 100% of
the principal amount, plus accrued but unpaid interest up to, but excluding, the
purchase date.

         Proceeds from the offering will be used to repay amounts outstanding
under its working capital facilities with Wachovia Bank, N.A. and Bank of
America, National Association and its senior subordinated notes held by The
Retirement Systems of Alabama.

         The company's future cash requirements will depend on numerous factors,
including potential acquisitions and the rate of growth of its sales and its
effectiveness at controlling and reducing its costs.

           The net amount of cash provided by financing activities was $43.9
million in 2003, which was primarily the result of proceeds from the issuance of
common stock. The net amount of cash used in operating activities in 2003 was
$41.9 million. Net cash used in investing activities in 2003 was $9.3 million,
which was primarily related to the acquisitions of EBM Mayorista and other
property and equipment.

           The Company's accounts receivable increased to $309.9 million at
December 31, 2003, from $277.3 million at December 31, 2002. Increases to
accounts receivable resulting from increased sales were offset by the Company's
reduction in its days sales outstanding to 44 at December 31, 2003, from 47 days
at December 31, 2002. The Company's inventories increased to $257.0 million at
December 31, 2003, from $182.8 million at December 31, 2002. This increase was
primarily due to the Company's need to support anticipated sales growth. The
Company's accounts payable increased to $250.5 million in 2003 from $211.9
million in 2002 as a result


                                       23
<PAGE>
of a change in the timing of inventory purchases and receipts.

           The net amount of cash provided by continuing operating activities
was $26.4 million in 2002. The net amount of cash used in investing activities
in 2002 was $9.3 million, which was primarily related to the acquisition of
property and equipment. Net cash used in financing activities in 2002 totaled
$7.5 million, which was primarily related to net repayments under the Company's
long and short term borrowing facilities.

           The Company's accounts receivable decreased to $277.3 million at
December 31, 2002, from $299.1 million at December 31, 2001. Increases to
accounts receivable resulting from increased sales were largely offset by the
Company's reduction in its days sales outstanding to 47 at December 31, 2002,
from 51 days at December 2001. The Company's inventories decreased to $182.8
million at December 31, 2002, from $195.8 million at December 31, 2001. This
decrease was primarily due to the Company's efforts to manage its inventory
through a period of economic downturn. The Company's accounts payable decreased
to $211.9 million in 2002 from $231.7 million in 2001. This decrease was
primarily due to decreased inventory purchases.

           On December 31, 2002, the Company entered into an amendment to its
syndicated Loan and Security Agreement with Wachovia Bank, N.A. ("Wachovia
facility"), (First Union Bank, as the original lender). The amendment reduces
the credit facility to $160 million from $175 million and extends the maturity
date to May 31, 2005. The Wachovia facility refinanced the Company's $50 million
credit facility with California Bank & Trust that matured May 31, 2001, and the
$80 million short-term loan with the RSA that matured June 30, 2001. The
syndicate includes Congress Financial Corporation (Western) and Bank of America
N.A. as co-agents and other financial institutions, as lenders. Borrowings under
the line of credit bear interest at Wachovia's prime rate plus a margin of 0.0%
to 0.5%, based on borrowing levels. At the Company's option, all or any portion
of the outstanding borrowings may be converted to a Eurodollar rate loan, which
bears interest at the adjusted Eurodollar rate plus a margin of 2.25% to 2.75%,
based on borrowing levels. The average interest rate on outstanding borrowings
under the revolving line of credit during the year ended December 31, 2003, was
3.9%, and the balance outstanding at December 31, 2003 was $68.0 million.
Obligations of the Company under the revolving line of credit are secured by
certain assets of the Company and its North and South American subsidiaries. The
revolving line of credit requires the Company to meet certain financial tests
and to comply with certain other covenants, including restrictions on incurrence
of debt and liens, restrictions on mergers, acquisitions, asset dispositions,
capital contributions, payment of dividends, repurchases of stock and
investments. On October 9, 2003, the Company entered into a Second Amendment and
Waiver, to effectively enable the Company to complete the acquisition of EMB
Mayorista, in Mexico. The Company was in compliance with its bank covenants at
December 31, 2003; however, there can be no assurance that the Company will be
in compliance with such covenants in the future. If the Company does not remain
in compliance with the covenants, and is unable to obtain a waiver of
noncompliance from its bank, the Company's financial condition, results of
operations and cash flows would be materially adversely affected.

           On December 2, 2002, as amended in November 2003, the Company entered
into a Syndicated Credit Agreement arranged by Bank of America, National
Association ("Bank of America facility"), as principal agent, to provide a
(pound)75 million revolving line of credit facility, or the U.S. dollar
equivalent of approximately $130 million at December 31, 2003, through December
2005. The Bank of America facility refinanced the Company's $60 million credit
facility with Royal Bank of Scotland. The syndicate includes Bank of America as
agent and security trustee and other banks and financial institutions, as
lenders. Borrowings under the line of credit bear interest at Bank of America's
base rate plus a margin of 2.375% to 2.50%, based on certain financial
measurements. At the Company's option, all or any portion of the outstanding
borrowings may be converted to a LIBOR Revolving Loan, which bears interest at
the adjusted LIBOR rate plus a margin of 2.375% to 2.50%, based on certain
financial measurements. The average interest rate on the outstanding borrowings
under the revolving line of credit during the year ended December 31, 2003 was
6.2%, and the balance outstanding at December 31, 2003 was $59.4 million.
Obligations of the Company under the revolving line of credit are secured by
certain assets of the Company's European subsidiaries. The revolving line of
credit requires the Company to meet certain financial tests and to comply with
certain other covenants, including restrictions on incurrence of debt and liens,
restrictions


                                       24
<PAGE>
on mergers, acquisitions, asset dispositions, capital contributions, payment of
dividends, repurchases of stock, repatriation of cash and investments. The
Company was in compliance with its bank covenants at December 31, 2003; however,
there can be no assurance that the Company will be in compliance with such
covenants in the future. If the Company does not remain in compliance with the
covenants, and is unable to obtain a waiver of noncompliance from its bank, the
Company's financial condition, results of operations and cash flows would be
materially adversely affected.


           On July 6, 2000, the Company entered into a Securities Purchase
Agreement with The Retirement Systems of Alabama and certain of its affiliated
funds (the "RSA facility"), under which the Company borrowed $180 million of
subordinated debt financing. This subordinated debt financing was comprised of
$80 million bearing interest at 9.125%, repaid in May 2001; and $100 million
bearing interest at 9.0%, payable in semi-annual principal installments of $3.5
million plus interest installments commencing December 31, 2000 and in
semi-annual principal installments of $8.5 million commencing December 31, 2007,
with a final maturity date of June 30, 2010. On August 1, 2003, the Company
entered into an interest rate swap agreement with Wachovia Bank effectively
securing a new interest rate on $40 million of the outstanding debt. The new
rate is based on the six month U.S. Libor rate plus a fixed margin of 4.99% and
continues until termination of the agreement on June 30, 2010. The RSA facility
is secured by a second lien on the Company's and its subsidiaries' North
American and South American assets. The Company must meet certain financial
tests on a quarterly basis, and comply with certain other covenants, including
restrictions of incurrence of debt and liens, restrictions on asset
dispositions, payment of dividends, and repurchase of stock. The Company is also
required to be in compliance with the covenants of certain other borrowing
agreements. The Company is in compliance with its subordinated debt financing
covenants; however, there can be no assurance that the Company will be in
compliance with such covenants in the future. If the Company does not remain in
compliance with the covenants in the Securities Purchase Agreement and is unable
to obtain a waiver of noncompliance from its subordinated lenders, the Company's
financial condition, results of operations and cash flows would be materially
adversely affected. The balance outstanding at December 31, 2003 on this
long-term debt was $79.0 million, $10.5 million is payable in 2004, $7.0 million
is payable in each of the years 2005 and 2006 and $54.5 million thereafter.

           The Company has an agreement with IFN Finance BV to provide up to
$7.5 million in short-term financing to the Company. The loan is secured by
certain European accounts receivable and inventories, bears interest at 5.5%,
and continues indefinitely until terminated by either party within 90 days
notice. Loan balances outstanding were $3.0 million at December 31, 2003.

           On October 15, 2003, the Company acquired EBM Mayorista ("EBM") for
approximately $5.9 million in cash. The acquisition was funded through
borrowings under the Company's revolving line of credit and newly issued shares
of common stock.

           On May 24, 2001, the Company acquired Forefront Graphics ("FFG") for
approximately $1.1 million in cash and 60,324 shares of the Company's common
stock. The acquisition was funded through borrowings under the Company's
revolving line of credit and newly issued shares of common stock.

           On May 22, 2001, the Company acquired Touch The Progress Group BV
("TTPG") for approximately $2.5 million in cash and 560,000 shares of the
Company's common stock. The acquisition was funded through borrowings under the
Company's revolving line of credit and newly issued shares of common stock.

           On May 9, 2003, the Company entered into a mortgage agreement with
Bank of Scotland for (pound)6 million, or the U.S. dollar equivalent of
approximately $10.7 million, as converted at December 31, 2003. The new mortgage
agreement fully re-paid the borrowings outstanding under the previous mortgage
agreement with Lombard NatWest Limited, and has a term of 10 years, bears
interest at Bank of Scotland's rate plus 1.35%, and is payable in quarterly
installments of approximately (pound)150,000, or $268,000 U.S. dollars, plus
interest. The principal amount due each year is approximately $1,072,000. The
balance of the mortgage as converted to U.S. dollars at December 31, 2003 was
$10.2 million. Terms of the mortgage require the Company to


                                       25
<PAGE>
meet certain financial ratios and to comply with certain other covenants on a
quarterly basis. The Company was in compliance with its covenants at December
31, 2003; however there can be no assurance that the Company will be in
compliance with its covenants in the future. If the Company does not remain in
compliance with the covenants and is unable to obtain a waiver of noncompliance
from its bank, the Company's financial condition, results of operations and
cash flows would be materially adversely affected.

           The following table describes the Company's commitments to settle
contractual obligations in cash as of December 31, 2003 (in thousands):

<TABLE>
<CAPTION>
                                                     Payments Due By Period
                                      ---------------------------------------------------
                                       Up to       2-3       4-5       After 5
Contractual Obligations               1 Year      Years     Years       Years      Total
-----------------------              --------   --------   ---------  ---------  --------
<S>                                  <C>        <C>        <C>        <C>        <C>
Notes Payable (1)                    $ 11,839   $ 16,143   $ 31,143   $ 30,054   $ 89,180
Capital leases                            240        303          7         --        550
                                     --------   --------   --------   --------   --------
Subtotal debt obligations              12,079     16,446     31,150     30,054     89,730
Operating leases                        7,252     11,340      5,887     13,415     37,894
                                     --------   --------   --------   --------   --------
Total contractual cash obligations   $ 19,331   $ 27,786   $ 37,037   $ 43,469   $127,624
                                     ========   ========   ========   ========   ========
</TABLE>

           (1) Notes payable primarily consist of the RSA facility and the
mortgage with Bank of Scotland.

           Other contractual obligations of the Company include a $160 million
revolving line of credit with Wachovia Bank, N.A., scheduled to mature May 31,
2005, a $130 million borrowing facility with Bank of America, scheduled to
mature December 2, 2005 and a $7.5 million borrowing facility with IFN Finance
BV, which continues until terminated by either party. Amounts outstanding at
December 31, 2003 under these facilities were $68.0 million, $59.4 million and
$3.0 million, respectively.

           The Company incurred net losses in 2003, 2002 and 2001. The 2003 loss
is related to declining product gross margins, certain restructuring initiatives
including the reduction of headcount and the discontinuation of certain product
lines. The 2002 loss is related to certain restructuring initiatives including
the reduction of headcount and the abandonment of facilities and the increase in
"Selling, General, and Administrative Expenses." The 2001 loss is related to
declining product gross margins, discontinuation of certain product lines,
abandonment of certain computer software, and additional bad debt provision
offset by revenue increases. These increases were primarily the result of the
Company's acquisition strategy in 2000 and 2001.

           The Company anticipates that its existing cash and its ability to
borrow under its line of credits will be sufficient to meet the Company's
anticipated cash needs for operation and capital requirements through December
31, 2004.

           The Company's expectations as to its cash flows, and as to future
cash balances, are subject to a number of assumptions, including assumptions
regarding anticipated revenues, customer purchasing and payment patterns, and
improvements in general economic conditions, many of which are beyond the
Company's control. If revenues do not match projections and if losses exceed the
Company's expectations, the Company will implement cost saving initiatives. If
the Company is unable to return to profitability, in order to continue
operations, it may need to obtain additional debt financing or sell additional
shares of its equity securities. There can be no assurance that the Company will
be able to obtain additional debt or equity financing on terms acceptable to the
Company or at all. The failure of the Company to obtain sufficient funds on
acceptable terms when needed could have a material adverse effect on the
Company's ability to achieve its intended business objectives.

RECENT ACCOUNTING PRONOUNCEMENTS


                                       26
<PAGE>

           On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," ("SFAS No. 144"), which amends
existing accounting guidance on asset impairment and provides a single
accounting model for long-lived assets to be disposed of. Among other
provisions, the standard changes the criteria for classifying an asset as
held-for-sale. The standard also broadens the scope of businesses to be disposed
of that qualify for reporting as discontinued operations, and changes the timing
of recognizing losses on such operations. The initial impact of adopting SFAS
No. 144 was not material to the Company's consolidated financial statements.

           On January 1, 2003, the Company adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," ("SFAS No. 146"), which
nullifies Emerging Issues Task Force ("EITF") 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS No. 146 requires
that a liability be recognized for restructuring costs only when the liability
is incurred, that is, when it meets the definition of a liability in the
Financial Accounting Standards Board's ("FASB's") conceptual framework. SFAS No.
146 also establishes fair value as the objective for initial measurement of
liabilities related to exit or disposal activities and is effective for exit or
disposal activities that are initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material impact on the Company's results of
operations, financial position or cash flows, although it has impacted the
timing of recognition of costs associated with restructuring activities.

           In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a reconciliation of changes in the entity's product warranty
liabilities. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of the statement did not have a material impact on the
Company's results of operations, financial position or cash flows for the year
ended December 31, 2003. The Company has included the disclosures required by
FIN 45 in the notes to these consolidated financial statements.

           In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. In December 2003, the
FASB released a revised version of FIN 46 (hereafter referred to as FIN 46R)
clarifying certain aspects of FIN 46 and providing certain entities with
exemptions from the requirements of FIN 46. The variable interest model of FIN
46R was only slightly modified from that contained in FIN 46. The variable
interest model looks to identify the primary beneficiary of a variable interest
entity. The primary beneficiary is the party that is exposed to the majority of
the risk or stands to benefit the most from the variable interest entity's
activities. A variable interest entity would be required to be consolidated if
certain conditions were met. The adoption of the statement did not have a
material impact on the Company's results of operations, financial position or
cash flows as of and for the year ended December 31, 2003.

           On January 1, 2003, the Company adopted SFAS No. 148, "Accounting for
Stock-Based Compensation


                                       27
<PAGE>
-- Transition and Disclosure -- an amendment of SFAS No. 123" ("SFAS No.
148"). This statement amends SFAS No. 123, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
adoption of SFAS No. 148 did not have any impact to the Company's consolidated
financial position, results of operations or cash flows as the adoption of this
standard involved disclosures only.

           In April 2003, the FASB issued SFAS No. 149 ("SFAS No. 149"),
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities,"
which amends SFAS No. 133 for certain decisions made by the FASB Derivatives
Implementation Group. In particular, SFAS No. 149 (1) clarifies under what
circumstances a contract with an initial net investment meets the characteristic
of a derivative, (2) clarifies when a derivative contains a financing component,
(3) amends the definition of an underlying derivative to conform it to language
used in FASB Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, and (4) amends certain other existing pronouncements. This Statement is
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. In addition, most
provisions of SFAS No. 149 are to be applied prospectively. The adoption of the
Statement did not have a material impact on the Company's results of operations,
financial position or cash flows as of and for the year ended December 31, 2003.


           In November 2002, the Emerging Issues Task Force, ("EITF") reached a
consensus on Issue 00-21, addressing how to account for arrangements that
involve the delivery or performance of multiple products, services, and/or
rights to use assets. Revenue arrangements with multiple deliverables are
divided into separate units of accounting if the deliverables in the arrangement
meet the following criteria: (1) the delivered item has value to the customer on
a standalone basis; (2) there is objective and reliable evidence of the fair
value of undelivered items; and (3) delivery of any undelivered item is
probable. Arrangement consideration should be allocated among the separate units
of accounting based on their relative fair values, with the amount allocated to
the delivered item being limited to the amount that is not contingent on the
delivery of additional items or meeting other specified performance conditions.
The final consensus will be applicable to agreements entered into in fiscal
periods beginning after June 15, 2003 with early adoption permitted. The
adoption of the Statement did not have a material impact on the Company's
results of operations, financial position or cash flows as of and for the year
ended December 31, 2003.

           In May 2003, the FASB issue SFAS No. 150 ("SFAS No. 150"),
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). SFAS No. 150 is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. It is to be implemented
by reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the Statement and
still existing at the beginning of the interim period of adoption. Restatement
is not permitted. The adoption of the Statement did not have a material impact
on the Company's results of operations, financial position or cash flows as of
and for the year ended December 31, 2003.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           The Company is subject to interest rate risk on its variable rate
credit facilities and could be subjected to increased interest payments if
market interest rates fluctuate. For the year ended December 31, 2003, average
borrowings outstanding on the variable rate credit facility with Wachovia Bank
were $67 million and average borrowings with Bank of America, N.A. was $61
million. Wachovia and Bank of America have interest rates that are based on
associated rates such as Eurodollar and base or prime rates that may fluctuate
over time


                                       28
<PAGE>
based on changes in the economic environment. Based on actual borrowings
throughout the year under these borrowing facilities, an increase of 1% in such
interest rate percentages would increase the annual interest expense by
approximately $1.3 million.

           A substantial part of the Company's revenue and capital expenditures
are transacted in U.S. dollars, but the functional currency for foreign
subsidiaries is not the U.S. dollar. As a result of the Company or its
subsidiaries entering into transactions denominated in currencies other than
their functional currency, the Company recognized a foreign currency gain of
$768,000 during the year ended December 31, 2003. The Company enters into
foreign forward exchange contracts to hedge certain balance sheet exposures
against future movements in foreign exchange rates. The gains and losses on the
forward exchange contracts are largely offset by gains or losses on the
underlying transactions and, consequently, a sudden or significant change in
foreign exchange rates should not have a material impact on future net income or
cash flows. To the extent the Company is unable to manage these risks, the
Company's results, financial position and cash flows could be materially
adversely affected.

           In August 2003, the Company entered into an interest rate swap
agreement in order to gain access to the lower borrowing rates normally
available on floating-rate debt, while avoiding prepayment and other costs that
would be associated with refinancing long-term fixed-rate debt. The swap
purchased has a notional amount of $40 million, expiring in June 2010, with a
six-month settlement period and provides for variable interest at LIBOR plus a
set rate spread. The notional amount does not quantify risk or represent assets
or liabilities, but rather, is used in the determination of cash settlement
under the swap agreement. As a result of purchasing this swap, the Company will
be exposed to credit losses from counter-party non-performance; however, the
Company does not anticipate any such losses from this agreement, which is with a
major financial institution. The agreement will also expose the Company to
interest rate risk should LIBOR rise during the term of the agreement. This swap
agreement is accounted for under Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). Under the provisions of SFAS 133, we initially recorded the interest rate
swap at fair value, and subsequently recorded any changes in fair value in
"Other Comprehensive Income." Fair value is determined based on quoted market
prices, which reflect the difference between estimated future variable-rate
payments and future fixed-rate receipts.


                                       29
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                     <TABLE>
                     <CAPTION>
                     Index to Consolidated Financial Statements                                            Form 10-K
                                                                                                          Page Number
                     <S>                                                                                  <C>
                     Report of Independent Auditors                                                            31

                     Consolidated Balance Sheets at December 31, 2003
                       and 2002                                                                                32

                     Consolidated Statements of Operations for the years
                       ended December 31, 2003, 2002 and 2001                                                  33

                     Consolidated Statements of Shareholders' Equity for the years
                       ended December 31, 2003, 2002 and 2001                                                  34

                     Consolidated Statements of Cash Flows for the years ended
                       December 31, 2003, 2002 and 2001                                                        35

                     Notes to Consolidated Financial Statements                                                36

                     Financial Statement Schedules:

                     Consolidated Financial Statement Schedule II
                       -    Valuation and Qualifying Accounts and Reserves                                     61

                     All other schedules are omitted because they are
                     not applicable or the required information is shown in the
                     financial statements or notes thereto.
                     </TABLE>


                                       30
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
of Bell Microproducts Inc. and Subsidiaries

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Bell
Microproducts Inc. and its subsidiaries at December 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 and Note 3 to the consolidated financial statements, as
of January 1, 2002, the Company ceased amortization of goodwill to conform with
the provisions of Statement of Financial Accounting Standards No. 142 "Goodwill
and Other Intangible Assets".

PricewaterhouseCoopers LLP
San Jose, California
February 17, 2004, except for Note 15, as to which the date is March 5, 2004


                                       31
<PAGE>
                             BELL MICROPRODUCTS INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                          -----------------------
                                                                              2003        2002
                                                                          ----------   ----------
<S>                                                                       <C>          <C>
ASSETS
Current assets:
      Cash                                                                $    4,904   $   12,025
      Accounts receivable, net                                               309,905      277,305
      Inventories                                                            256,992      182,775
      Prepaid expenses and other current assets                               23,595       23,786
                                                                          ----------   ----------
                Total current assets                                         595,396      495,891

Property and equipment, net                                                   43,545       50,761
Goodwill                                                                      60,236       53,803
Intangibles                                                                    6,544        6,006
Deferred debt issuance costs and other assets                                  7,278        7,730
                                                                          ----------   ----------
      Total assets                                                        $  712,999    $ 614,191
                                                                          ==========   ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                    $  250,494   $  211,881
      Borrowings under lines of credit                                         3,009        7,919
      Short-term note payable and current portion of long-term notes
         payable                                                              11,848       23,458
      Other accrued liabilities                                               46,411       45,847
                                                                          ----------   ----------
                Total current liabilities                                    311,762      289,105

Borrowings under lines of credit                                             127,416      100,555
Long-term notes payable                                                       77,608       75,500
Other long-term liabilities                                                    2,803        3,182
                                                                          ----------   ----------
      Total liabilities                                                      519,589      468,342
                                                                          ----------   ----------

Commitments and contingencies (Note 11)

Shareholders' equity:
      Preferred Stock, $0.01 par value, 10,000 shares authorized;
         none issued and outstanding                                              --           --
      Common Stock, $0.01 par value, 40,000 shares authorized; 26,907
         and 20,127 shares issued and outstanding                            157,251      115,888
      Retained earnings                                                       20,837       25,311
      Accumulated other comprehensive income                                  15,322        4,650
                                                                          ----------   ----------
                Total shareholders' equity                                   193,410      145,849
                                                                          ----------   ----------
      Total liabilities and shareholders' equity                          $  712,999   $  614,191
                                                                          ==========   ==========

</TABLE>

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


                                       32
<PAGE>
                            BELL MICROPRODUCTS INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                               Year Ended December 31,
                                                   -----------------------------------------
                                                        2003         2002            2001
                                                   -------------  ------------  ------------
<S>                                                <C>            <C>           <C>
Net sales                                          $   2,230,287  $  2,104,922  $  2,007,102
Cost of sales                                          2,062,194     1,926,366     1,854,294
                                                   -------------  ------------  ------------
Gross profit                                             168,093       178,556       152,808
Selling, general and administrative expenses             155,710       165,624       157,910
Restructuring and special charges                          1,383         5,688         8,894
                                                   -------------  ------------  ------------

Total operating expenses                                 157,093       171,312       166,804
Operating income (loss)                                   11,000         7,244       (13,996)
Interest expense and other income                         16,143        16,910        20,362
                                                   -------------  ------------  ------------
Loss from operations before income taxes                  (5,143)       (9,666)      (34,358)
Benefit from income taxes                                   (669)       (2,612)      (12,251)
                                                   -------------  ------------  ------------
Net loss                                           $      (4,474) $     (7,054) $    (22,107)
                                                   =============  ============  ============
Loss per share
        Basic                                      $       (0.20) $      (0.37) $      (1.34)
                                                   =============  ============  ============
        Diluted                                    $       (0.20) $      (0.37) $      (1.34)
                                                   =============  ============  ============

Shares used in per share calculation
        Basic                                             22,324        19,201        16,495
                                                   =============  ============  ============
        Diluted                                           22,324        19,201        16,495
                                                   =============  ============  ============
</TABLE>

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


                                       33
<PAGE>
                             BELL MICROPRODUCTS INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      Common Stock                                    Other
                                                ----------------------    Deferred    Retained    Comprehensive
                                                  Shares      Amount    Compensation  Earnings      Income        Total
                                                ---------    ---------   ---------    ---------    ---------    ---------
<S>                                             <C>          <C>        <C>           <C>          <C>          <C>
Balance at December 31, 2000                       15,793    $  75,154          --    $  54,472    $     (94)   $ 129,532

Foreign currency translation                           --           --          --           --       (1,055)      (1,055)
Net loss                                               --           --          --      (22,107)          --      (22,107)
                                                                                                                ---------
Total comprehensive loss                                                                                          (23,162)
Exercise of stock options, including related
   tax benefit of $1,270                              446        3,947          --           --           --        3,947
Issuance of Common Stock under Stock Purchase
   Plan                                               319        2,175          --           --           --        2,175

Issuance of Common Stock for
business acquisitions (Note 4)                      1,020       13,277          --           --           --       13,277
                                                ---------    ---------   ---------    ---------    ---------    ---------
Balance at December 31, 2001                       17,578       94,553          --       32,365       (1,149)     125,769

Foreign currency translation                           --           --          --           --        5,799        5,799
Net loss                                               --           --          --       (7,054)          --       (7,054)
                                                                                                                ---------
Total comprehensive loss                                                                                           (1,255)
Issuance of Common Stock in private placement
                                                    1,500       12,642          --           --           --       12,642
Issuance of stock warrants in private
        placement                                      --        3,858          --           --           --        3,858
Exercise of stock options, including related
   tax benefit of $ 581                               301        2,421          --           --           --        2,421
Issuance of Common Stock under Stock Purchase
   Plan                                               399        2,318          --           --           --        2,318
Issuance of Common Stock for
      business acquisitions (Note 4)                  349           --          --           --           --           --
Issuance of restricted stock                           --           --       1,330           --           --        1,330
Deferred compensation                                  --           --      (1,234)          --           --       (1,234)
                                                ---------    ---------   ---------    ---------    ---------    ---------
Balance at December 31, 2002                       20,127      115,792          96       25,311        4,650      145,849

Issuance of Common Stock in secondary public
   offering, net of issuance costs of $ 990
                                                    5,750       34,947                                             34,947
Foreign currency translation                           --           --          --           --       10,672       10,672
Net loss                                               --           --          --       (4,474)          --       (4,474)
                                                                                                                ---------
Total comprehensive income                                                                                          6,198
Exercise of stock options, including related
   tax benefit of $ 156                               604        3,720          --           --           --        3,720
Issuance of Common Stock under Stock Purchase
   Plan                                               426        1,545          --           --           --        1,545
Issuance of restricted stock                           --        4,037          --           --           --        4,037
Deferred compensation                                  --           --      (2,886)          --           --       (2,886)
                                                ---------    ---------   ---------    ---------    ---------    ---------
Balance at December 31, 2003                       26,907    $ 156,004   $   1,247    $  20,837    $  15,322    $ 193,410
                                                =========    =========   =========    =========    =========    =========

</TABLE>

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


                                       34
<PAGE>
                             BELL MICROPRODUCTS INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   (INCREASE (DECREASE) IN CASH, IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                     --------------------------------
                                                                            Year Ended December 31,
                                                                     --------------------------------
                                                                        2003       2002        2001
                                                                     --------    --------    --------
<S>                                                                  <C>         <C>         <C>
Cash flows from operating activities:

       Net loss                                                      $ (4,474)   $ (7,054)   $(22,107)
       Adjustments to reconcile net loss to net cash
           provided by (used in) operating activities:
       Depreciation and amortization                                   12,246      10,803      11,658
       Provision for doubtful accounts                                  7,569      11,357      11,569
       Loss on disposal of property, equipment and other                  197       1,337       2,503
       Deferred income taxes                                           (1,111)       (235)     (3,976)
       Tax benefit from stock options                                     156         581       1,270
       Changes in assets and liabilities:
              Accounts receivable                                     (16,415)     32,391       8,375
              Inventories                                             (56,218)     21,210      66,324
              Prepaid expenses                                          3,756         117     (11,298)
              Other assets                                                478         (99)      1,133
              Accounts payable                                         24,486     (34,617)    (17,234)
              Other accrued liabilities                               (12,605)     (9,418)     (7,614)
                                                                     --------    --------    --------
       Net cash (used in) provided by operating activities            (41,935)     26,373      40,603

Cash flows from investing activities:
       Acquisition of property, equipment and other                    (3,528)    (11,143)    (16,380)
       Proceeds from sale of property, equipment and other                 53       1,794          --
       Acquisitions of businesses (Note 4)                             (5,867)         --     (13,807)
                                                                     --------    --------    --------
Net cash used in investing activities                                  (9,342)     (9,349)    (30,187)
Cash flows from financing activities:
       Net borrowings (repayments) under line of credit agreements     14,896     (22,592)     61,404
       Repayments of long-term notes payable to RSA                    (7,000)     (7,000)     (7,000)
       Repayments of short-term notes payable to RSA                       --          --     (80,000)
       Borrowings of notes and leases payable                          10,715       9,545       3,358
       Repayment of notes and leases payable                          (14,773)     (8,081)     (2,214)
       Proceeds from issuance of Common Stock and warrants             40,056      20,658       4,852
                                                                     --------    --------    --------
Net cash provided by (used in) financing activities                    43,894      (7,470)    (19,600)
Cash acquired upon acquisitions of businesses                              --          --       3,014
Effect of exchange rate changes on cash                                   262       1,163          13
                                                                     --------    --------    --------
Net increase (decrease) in cash                                        (7,121)     10,717      (6,157)
Cash at beginning of year                                              12,025       1,308       7,465
                                                                     --------    --------    --------
Cash at end of year                                                  $  4,904    $ 12,025    $  1,308
                                                                     ========    ========    ========
Supplemental disclosures of cash flow information:
       Cash paid during the year for:
              Interest                                               $ 16,789    $ 17,664    $ 24,346
              Income taxes                                           $    715    $    499    $  2,447
Supplemental non-cash financing activities:

       Issuance of restricted stock                                  $  4,037    $  1,330    $     --
       Common Stock issued for acquisition (Note 4)                  $     --    $     --    $ 13,277

</TABLE>


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


                                       35
<PAGE>
                             BELL MICROPRODUCTS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY:

           The Company operates in one business segment as a distributor of
storage products and systems as well as semiconductor and computer products and
peripherals to original equipment manufacturers (OEMs), value-added resellers
(VARs) and dealers in the United States, Canada, Europe and Latin America. The
Company is one of the world's largest storage-centric value-added distributors
and a specialist in storage products and solutions. The Company's concentration
on data storage systems and products allows it to provide greater technical
expertise to its customers, form strategic relationships with key manufacturers
and provide complete storage solutions to its customers at many levels of
integration. The Company offers a wide range of storage products as well as
semiconductors, computer platforms and software and peripherals. The Company's
storage products include:

      -    high-end computer and storage subsystems;

      -    Fibre Channel connectivity products;

      -    complete storage systems such as storage area networks (SAN), network
           attached storage (NAS) and direct attached storage (DAS);

      -    storage management software;

      -    disk, tape and optical drives; and

      -    a broad selection of value-added services.

           In addition, the Company has developed a proprietary LDi software
licensing system, which facilitates the sale and administration of software
licenses. The Company believes its comprehensive product and value-added service
offerings have provided a competitive advantage in both domestic and
international markets.

            The Company incurred net losses in 2003, 2002 and 2001. The 2003
loss is related to declining product gross margins and certain restructuring
initiatives including the reduction of headcount and the discontinuation of
certain product lines. The 2002 loss is related to certain restructuring
initiatives including the reduction of headcount, the abandonment of facilities,
and the increase in "Selling, General, and Administrative Expenses." The 2001
loss is related to declining product gross margins, discontinuation of certain
product lines, abandonment of certain computer software, and additional bad debt
provision offset by revenue increases. These increases were primarily the result
of the Company's acquisition strategy in 2000 and 2001.

           As is more fully discussed in Note 6, the Company has a $160 million
line of credit facility with a group of lenders for operations in North and
South America. The Company had approximately $58 million in unused borrowing
capacity at December 31, 2003 related to this facility. This facility is limited
to use for operations within the U.S. and the funds can be used outside the U.S
if permission is received by the Company from the lenders. The Company also has
a total of $130 million in line of credit facilities with lenders in Europe. At
December 31, 2003, the Company had approximately $22 million in unused borrowing
capacity. This facility is limited to use for operations within Europe and the
United Kingdom. In March 2004, as discussed in Note 15, the Company completed a
private offering of $110 million aggregate principal amount of 3 3/4%
convertible subordinated notes due 2024.

           The Company anticipates that its existing cash and its ability to
borrow under its line of credits will be sufficient to meet the Company's
anticipated cash needs for operation and capital requirements through December
31, 2004.

           The Company's expectations as to its cash flows, and as to future
cash balances, are subject to a number of assumptions, including assumptions
regarding anticipated revenues, customer purchasing and payment patterns, and
improvements in general economic conditions, many of which are beyond the
Company's control. If revenues do not match projections and if losses exceed the
Company's expectations, the Company will implement cost saving initiatives. If
the Company is unable to return to profitability, in order to continue
operations, it may need to obtain additional debt financing


                                       36
<PAGE>
or sell additional shares of its equity securities. There can be no assurance
that the Company will be able to obtain additional debt or equity financing on
terms acceptable to the Company or at all. The failure of the Company to obtain
sufficient funds on acceptable terms when needed could have a material adverse
effect on the Company's ability to achieve its intended business objectives.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION AND BASIS OF PREPARATION

           The consolidated financial statements include the accounts of the
parent company and its wholly owned subsidiaries. All material intercompany
transactions and balances have been eliminated on consolidation.

           The preparation of financial statements in accordance with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect the amounts reported in the Company's consolidated
financial statements and accompanying notes. Management bases its estimates on
historical experience and various other assumptions believed to be reasonable.
Although these estimates are based on management's best knowledge of current
events and actions that may impact the Company in the future, actual results may
be different from the estimates. The Company's critical accounting policies are
those that affect its financial statements materially and involve difficult,
subjective or complex judgments by management.

REVENUE RECOGNITION

           Revenue is recognized when title transfers to the customer and when
the rights and risks of ownership have passed to the customer, when persuasive
evidence of an arrangement exists, the price is fixed and determinable and
collection of the resulting receivable is reasonably assured. Transactions with
sale terms of FOB shipping point are recognized when the products are shipped
and transactions with sale terms of FOB destination are recognized upon arrival.
Shipping and handling costs charged to customers are included in net revenue and
the associated expense is recorded in total costs for all periods presented.
Provisions for estimated returns and expected warranty costs are recorded at the
time of sale and are adjusted periodically to reflect changes in experience and
expected obligations. The Company's warranty reserve relates primarily to its
storage solutions and value added businesses. Reserves for warranty items are
included in other current liabilities. A reconciliation of the changes in the
product warranty liability during 2003 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                         2003              2002
                                                     -------------    --------------
<S>                                                  <C>              <C>
          Balance at January 1                         $      682       $      799
          Provision based on sales                            708              632
          Foreign currency translation                         21                7
          Warranty expenses incurred                         (773)            (756)
                                                     -------------    --------------
          Balance at December 31                       $      638       $      682
                                                     =============    ==============

</TABLE>

CONCENTRATION OF CREDIT AND OTHER RISKS

           Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for estimated collection
losses. No customer accounts for more than 10% of sales in any of the three
years ended December 31, 2003, 2002 and 2001, or accounts receivable at December
31, 2003 and 2002.

           Four vendors accounted for 45%, 43% and 51% of the Company's
inventory purchases during 2003, 2002 and 2001, respectively.

INVENTORIES

           Inventories are stated at the lower of cost or market, cost being
determined by the first-in, first-out (FIFO) method. Market is based on
estimated net realizable value. The Company assesses the valuation of its
inventory on a quarterly basis and periodically writes down the value for
estimated excess and obsolete inventory based on estimates about future demand,
actual usage and current market value.


                                       37
<PAGE>
PROPERTY AND EQUIPMENT

           Property and equipment are recorded at cost. Depreciation is computed
using the straight-line method based upon the estimated useful lives of computer
and other equipment, furniture and fixtures and warehouse equipment that range
from three to five years. Depreciation of buildings is based upon the estimated
useful lives of 50 years. Amortization of leasehold improvements is computed
using the straight-line method over the shorter of the estimated life of the
asset or the lease term.

GOODWILL

           In accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets," Bell is required to perform an annual impairment test for goodwill.
SFAS No. 142 requires Bell to compare the fair value of the Company to its
carrying amount on an annual basis to determine if there is potential
impairment. If the fair value of the Company is less than its carrying value, an
impairment loss is recorded to the extent that the fair value of the goodwill is
less than the carrying value. The fair value for goodwill is determined based on
discounted cash flows.

LONG-LIVED ASSETS

           Long-lived assets and certain identifiable intangible assets to be
held and used are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. Determination of recoverability is based on an estimate of
undiscounted future cash flows resulting from the use of the asset and its
eventual disposition. Measurement of any impairment loss for long-lived assets
and certain identifiable intangible assets that management expects to hold and
use is based on the fair value of the asset. Other intangible assets are
recorded at cost and amortized over periods ranging from 3 to 40 years.

INCOME TAXES

           The Company accounts for income taxes in accordance with the
liability method of accounting for income taxes. Under the liability method,
deferred assets and liabilities are recognized based upon anticipated future tax
consequences attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases. The provision
for income taxes is comprised of the current tax liability and the change in
deferred tax assets and liabilities. The Company establishes a valuation
allowance to the extent that it is more likely than not that deferred tax assets
will not be recoverable against future taxable income.

EARNINGS PER SHARE

           Basic EPS is computed by dividing net income available to common
shareholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period including stock
options, using the treasury stock method. Due to net losses incurred for the
periods presented, weighted average basic and diluted shares outstanding for the
respective periods are the same.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

           The financial statements of the Company's foreign subsidiaries are
measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange at the
balance sheet date. Income and expense items are translated at average quarterly
rates of exchange prevailing during the year. The resulting translation
adjustments are included in accumulated other comprehensive income as a separate
component of stockholders' equity. Gains and losses from foreign currency
transactions are included in the Statement of Operations.

COMPREHENSIVE INCOME

           Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For the Company, comprehensive income consists of its
reported net income or loss and the change in the foreign currency translation
adjustment during a period.


                                       38
<PAGE>
STOCK-BASED COMPENSATION

           The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees." The Company's policy is to grant
options with an exercise price equal to the quoted market price of the Company's
stock on the date of the grant. Accordingly, no compensation cost has been
recognized in the Company's Statements of Income. The Company provides
additional pro forma disclosures as required under Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation."

           The following table illustrates the effect on income from continuing
operations and earnings per share if Bell had applied the fair value recognition
provisions of SFAS No. 123 to stock-based compensation. The estimated fair value
of each Bell option is calculated using the Black-Scholes option-pricing model.

<TABLE>
<CAPTION>
                                                              (In millions, except per share amounts):
                                                                  2003        2002        2001
                                                                -------    --------    --------
<S>                                                             <C>        <C>         <C>
Net loss as reported:                                           $(4,474)   $ (7,054)   $(22,107)
Stock-based employee compensation expense
     determined under fair value based method, net of tax        (3,590)     (5,982)     (5,727)
                                                                -------    --------    --------
Pro forma net loss                                              $(8,064)   $(13,036)   $(27,834)
                                                                =======    ========    ========

Loss per share:
     As reported                                                $ (0.20)   $  (0.37)   $  (1.34)
     Pro forma                                                  $ (0.36)   $  (0.68)   $  (1.69)
</TABLE>

SEGMENT REPORTING

           Financial Accounting Standards Board Statement No.131, "Disclosure
about Segments of an Enterprise and Related Information" ("SFAS 131") requires
that companies report separately in the financial statements certain financial
and descriptive information about operating segments' profit or loss, certain
specific revenue and expense items and segment assets. Additionally, companies
are required to report information about the revenues derived from their
products and service groups, about geographic areas in which the Company earns
revenues and holds assets, and about major customers (see Note 14).

DERIVATIVE FINANCIAL INSTRUMENTS

           Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS 137 and SFAS 138. SFAS 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities, and requires that all derivatives, including foreign
currency exchange contracts, be recognized on the balance sheet at fair value.
Changes in the fair value of derivatives that do not qualify for hedge
treatment, as well as the ineffective portion of any hedges, must be recognized
currently in earnings. All of the Company's derivative financial instruments are
recorded at their fair value in other current assets or accounts payable and
accrued expenses. The transition adjustment upon adoption of SFAS 133 was not
material.

           The Company generates a substantial portion of its revenues in
international markets, which subjects its operations and cash flows to the
exposure of currency exchange fluctuations. The Company seeks to minimize the
risk associated with currency exchange fluctuations by entering into forward
exchange contracts to hedge certain foreign currency denominated assets or
liabilities. These derivatives do not qualify for SFAS 133 hedge accounting
treatment. Accordingly, changes in the fair value of these hedges are recorded
immediately in earnings on line item 'Interest Expense and Other Income' to
offset the changes in the fair value of the assets or liabilities being hedged.

RECENTLY ISSUED ACCOUNTING STANDARDS



                                       39
<PAGE>
           On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," ("SFAS No. 144"), which amends
existing accounting guidance on asset impairment and provides a single
accounting model for long-lived assets to be disposed of. Among other
provisions, the standard changes the criteria for classifying an asset as
held-for-sale. The standard also broadens the scope of businesses to be disposed
of that qualify for reporting as discontinued operations, and changes the timing
of recognizing losses on such operations. The initial impact of adopting SFAS
No. 144 was not material to the Company's consolidated financial statements.

           On January 1, 2003, the Company adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," ("SFAS No. 146"), which
nullifies Emerging Issues Task Force ("EITF") 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS No. 146 requires
that a liability be recognized for restructuring costs only when the liability
is incurred, that is, when it meets the definition of a liability in the
Financial Accounting Standards Board's ("FASB's") conceptual framework. SFAS No.
146 also establishes fair value as the objective for initial measurement of
liabilities related to exit or disposal activities and is effective for exit or
disposal activities that are initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material impact on the Company's results of
operations, financial position or cash flows, although it has impacted the
timing of recognition of costs associated with restructuring activities.

           In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a reconciliation of changes in the entity's product warranty
liabilities. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of the statement did not have a material impact on the
Company's results of operations, financial position or cash flows for the year
ended December 31, 2003. The Company has included the disclosures required by
FIN 45 in the notes to these consolidated financial statements.

           In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. In December 2003, the
FASB released a revised version of FIN 46 (hereafter referred to as FIN 46R)
clarifying certain aspects of FIN 46 and providing certain entities with
exemptions from the requirements of FIN 46. The variable interest model of FIN
46R was only slightly modified from that contained in FIN 46. The variable
interest model looks to identify the primary beneficiary of a variable interest
entity. The primary beneficiary is the party that is exposed to the majority of
the risk or stands to benefit the most from the variable interest entity's
activities. A variable interest entity would be required to be consolidated if
certain conditions were met. The adoption of the statement did not have a
material impact on the Company's results of operations, financial position or
cash flows as of and for the year ended December 31, 2003.

           On January 1, 2003, the Company adopted SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure -- an amendment of SFAS
No. 123" ("SFAS No. 148"). This statement amends SFAS No. 123, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
disclosures in both annual and interim financial statements about the


                                       40
<PAGE>
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The adoption of SFAS No. 148 did not have
any impact to the Company's consolidated financial position, results of
operations or cash flows as the adoption of this standard involved disclosures
only.

           In April 2003, the FASB issued SFAS No. 149 ("SFAS No. 149"),
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities,"
which amends SFAS No. 133 for certain decisions made by the FASB Derivatives
Implementation Group. In particular, SFAS No. 149 (1) clarifies under what
circumstances a contract with an initial net investment meets the characteristic
of a derivative, (2) clarifies when a derivative contains a financing component,
(3) amends the definition of an underlying derivative to conform it to language
used in FASB Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, and (4) amends certain other existing pronouncements. This Statement is
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. In addition, most
provisions of SFAS No. 149 are to be applied prospectively. The adoption of the
Statement did not have a material impact on the Company's results of operations,
financial position or cash flows as of and for the year ended December 31, 2003.


           In November 2002, the Emerging Issues Task Force, ("EITF") reached a
consensus on Issue 00-21, addressing how to account for arrangements that
involve the delivery or performance of multiple products, services, and/or
rights to use assets. Revenue arrangements with multiple deliverables are
divided into separate units of accounting if the deliverables in the arrangement
meet the following criteria: (1) the delivered item has value to the customer on
a standalone basis; (2) there is objective and reliable evidence of the fair
value of undelivered items; and (3) delivery of any undelivered item is
probable. Arrangement consideration should be allocated among the separate units
of accounting based on their relative fair values, with the amount allocated to
the delivered item being limited to the amount that is not contingent on the
delivery of additional items or meeting other specified performance conditions.
The final consensus will be applicable to agreements entered into in fiscal
periods beginning after June 15, 2003 with early adoption permitted. The
adoption of the statement did not have a material impact on the Company's
results of operations, financial position or cash flows as of and for the year
ended December 31, 2003.

           In May 2003, the FASB issue SFAS No. 150 ("SFAS No. 150"),
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). SFAS No. 150 is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. It is to be implemented
by reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the Statement and
still existing at the beginning of the interim period of adoption. Restatement
is not permitted. The adoption of the Statement did not have a material impact
on the Company's results of operations, financial position or cash flows as of
and for the year ended December 31, 2003.


NOTE 3 - CHANGE IN ACCOUNTING FOR GOODWILL AND CERTAIN OTHER INTANGIBLES:

           In accordance with SFAS No. 142, goodwill amortization was
discontinued as of January 1, 2002. SFAS No. 142 prescribes a two-phase process
for impairment testing of goodwill. The first phase screens for impairment;
while the second phase (if necessary), measures the impairment. The Company
performs this impairment test annually and whenever facts and circumstances
indicate that there is a possible impairment of goodwill. The Company completed
the required annual impairment test, which resulted in no impairment for fiscal
year 2003.

           In accordance with SFAS No. 142, the effect of this accounting change
is reflected prospectively. The Company has one reporting unit and supplemental
comparative disclosure as if goodwill had not been amortized in the prior year
period is as follows (in thousands, except per share amounts):


                                       41
<PAGE>
<TABLE>
<CAPTION>
                                      2003          2002          2001
                                   ----------    ----------    ----------
<S>                                <C>           <C>           <C>
Reported net loss                  $   (4,474)   $   (7,054)   $  (22,107)
Add back:  Goodwill amortization           --            --         1,741
                                   ----------    ----------    ----------
Adjusted net loss                  $   (4,474)   $   (7,054)   $  (20,366)
                                   ==========    ==========    ==========

Basic loss per share:
    Reported loss per share        $    (0.20)   $    (0.37)   $    (1.34)
    Goodwill amortization                  --            --          0.11
                                   ----------    ----------    ----------
    Adjusted net loss per share    $    (0.20)   $    (0.37)   $    (1.23)
                                   ==========    ==========    ==========
</TABLE>

           The Company has acquired certain intangible assets through
acquisitions which include non-compete agreements, a trademark, a trade name and
customer and supplier relationships. The carrying values and accumulated
amortization of these assets at December 31, 2003 and 2002 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                        As of December 31, 2003
                                      ------------------------------------------------------
                                          Estimated       Gross
                                       Useful Life for  Carrying   Accumulated         Net
Amortized Intangible Assets            Amortization     Amount    Amortization       Amount
--------------------------------      ----------------  --------   ------------      -------
<S>                                    <C>               <C>          <C>            <C>
Non-compete agreements                   3-6 years       $ 2,409      $(1,770)       $  639
Trademark                              20-40 years         4,504         (329)        4,175
Trade name                                20 years           400          (30)          370
Customer/supplier relationships         7-10 years         1,600         (240)        1,360
                                       -----------       -------      -------        ------
Total                                                    $ 8,913      $(2,369)       $6,544
                                                         =======      =======        ======
</TABLE>


<TABLE>
<CAPTION>
                                                        As of December 31, 2002
                                      ------------------------------------------------------
                                       Estimated         Gross
                                      Useful Life for  Carrying      Accumulated       Net
Amortized Intangible Assets           Amortization      Amount      Amortization      Amount
--------------------------------      ----------------  --------    ------------     -------
<S>                                      <C>            <C>            <C>            <C>
 Non-compete agreements                   3 years       $ 2,137        $(1,233)       $  904
Trademark                                40 years         3,965           (228)        3,737
Trade name                               20 years           300            (15)          285
Supplier relationships                   10 years         1,200           (120)        1,080
                                         --------       -------        -------        ------
Total                                                   $ 7,602        $(1,596)       $6,006
                                                        =======        =======        ======
</TABLE>

           The expected amortization of these balances over the next five fiscal
years are as follows (in thousands):

<TABLE>
<CAPTION>

           Aggregate Amortization Expense
           ----------------------------------
           <S>                                  <C>
           For year ended 12/31/03              $   764
           ----------------------------------
           Estimated Amortization Expense
           ----------------------------------
           For year ending 12/31/04             $    711
           For year ending 12/31/05             $    357
           For year ending 12/31/06             $    347
           For year ending 12/31/07             $    338
           For year ending 12/31/08             $    338
</TABLE>

NOTE 4 - ACQUISITIONS:

           All acquisitions below have been accounted for using the purchase
method. Accordingly, the results of operations of the acquired businesses are
included in the consolidated financial statements from the dates of acquisition.

EBM Mayorista, S.A. de C.V. Acquisition


                                       42
<PAGE>
           On October 15, 2003, the Company acquired certain assets and assumed
certain liabilities of EBM Mayorista, S.A. de C.V. ("EBM"), a privately held
company headquartered in Merida, Mexico, with branch locations in Cancun,
Monterrey, Oaxaca, Villahermosa, Tampico, Veracruz and Tuxtla. EBM distributes a
diverse product line of computer hardware and software to Mexican resellers,
retail locations and system integrators including the Intel, Samsung, Epson and
U.S Robotics lines.

           EBM was acquired for a total purchase price of approximately $5.9
million which included cash of approximately $5.1 million and acquisition costs.
The Company is obligated to pay 35% of EBM's earnings before taxes as a
contingent incentive payment based upon meeting minimum earnings targets during
each of the subsequent four anniversary years. The purchase price was allocated
to the acquired assets and liabilities assumed, based upon management's estimate
of their fair market values as of the acquisition date, as follows (in
thousands):

<TABLE>
<CAPTION>
           <S>                                       <C>
           Inventories                                   4,225
           Equipment and other assets                      404
           Goodwill                                      4,166
           Other intangibles                               850
           Accounts payable                             (3,778)
                                                     ---------
           Total consideration                       $   5,867
                                                     =========
</TABLE>

           Other intangibles include customer and supplier relationships, trade
name, and non-compete agreements, with estimated useful lives for amortization
of 7 years, 20 years and six years, respectively.

           As EBM does not constitute a significant subsidiary of the Company,
pro forma disclosure is not required herein.

Total Tec Systems, Inc. Acquisition

           On November 13, 2001, the Company acquired all the capital stock of
Total Tec Systems Inc. ("Total Tec"), a privately held company headquartered in
Edison, New Jersey, with offices in the eastern and southern United States.
Total Tec is an enterprise computing and storage solutions provider focused on
providing comprehensive IT solutions to address key business data concerns
including availability, reliability, performance, scalability and manageability.

           Total Tec was acquired for a total purchase price of approximately
$14.2 million which included cash of approximately $9 million, the issuance of
400,000 shares of the Company's Common Stock that include a certain share price
guarantee and acquisition costs. The share price guarantee provides for the
issuance of additional consideration if the market value of the Company's Common
Stock is less than $12.50 per share on the first anniversary of the closing date
of the acquisition. As a result of this guarantee, the Common Stock issued as
part of the acquisition has been valued at the $12.50 guaranteed amount. In
November 2002, the Company issued 272,947 shares of the Company's Common Stock
resulting from the share price guarantee. The purchase price was allocated to
the acquired assets and liabilities assumed, based upon management's estimate of
their fair market values as of the acquisition date, as follows (in thousands):

<TABLE>
<CAPTION>
           <S>                                                <C>
           Cash                                               $   3,014
           Accounts receivable                                   16,229
           Inventories                                            7,006
           Equipment and other assets                             2,841
           Goodwill                                               3,124
           Other intangibles                                      2,500
           Accounts payable                                      (7,100)
           Other accrued liabilities                             (3,792)
           Notes payable                                         (9,630)
                                                              ---------
           Total consideration                                $  14,192
                                                              =========
</TABLE>

           Other intangibles include trade name, supplier relationships and a
non-compete agreement, with estimated useful lives for amortization of 20 years,
ten years and three years, respectively.

           As Total Tec does not constitute a significant subsidiary of the
Company, pro forma disclosure is not required herein.

Touch The Progress Group BV Acquisition


                                       43
<PAGE>
           On May 22, 2001, the Company acquired all the capital stock of Touch
The Progress Group BV ("TTPG"), a privately held company headquartered in the
Netherlands, with offices in Belgium, Germany and Austria. TTPG designs,
manufactures, markets and supports high performance and tailor made storage
solutions critical to success in high availability, mid-range and high-end
enterprise computing environments.

           TTPG was acquired for a total purchase price of approximately $10.7
million which included cash of $2.5 million, the issuance of 560,000 shares of
the Company's Common Stock valued at $7.5 million that include a one-year share
price guarantee and acquisition costs. The Common Stock issued was valued in
accordance with EITF Issue No. 99-12, "Determination of the Measurement Date for
the Market Price of Acquirer Securities Issued in a Purchase Business
Combination," using the average of the closing prices of the Company's Common
Stock for the two days prior to the acquisition date and the closing price of
the Company's Common Stock on the date of acquisition. The share price guarantee
provides for the issuance of additional consideration if the market value of the
Company's Common Stock is less than $12.50 per share on the first anniversary of
the closing date of the acquisition. This was a below-market share price
guarantee and was accounted for in accordance with EITF Issue No 97-15,
"Accounting for Contingency Arrangements Based on Security Prices in a Purchase
Business Combination." In June 2002, the Company issued an additional 74,714
shares of the Company's Common Stock as a result of the share price guarantee.
The purchase price was allocated to the acquired assets and assumed liabilities
bases upon management's estimate of their fair market values as of the
acquisition date, as follows (in thousands):

<TABLE>
<CAPTION>
           <S>                              <C>
           Accounts receivable              $  6,182
           Inventories                         7,397
           Equipment and other assets            661
           Goodwill                            9,293
           Accounts payable                   (9,915)
           Other accrued liabilities          (1,928)
           Notes payable                        (998)
                                            --------
           Total consideration              $ 10,692
                                            ========
</TABLE>

Forefront Graphics Corporation Acquisition

           On May 24, 2001, the Company acquired all the capital stock of
Forefront Graphics ("FFG"), a privately held company headquartered in Toronto,
Canada with offices in Ottawa, Montreal, Calgary and Vancouver. FFG is a
distributor of high performance computer graphics, digital audio and video,
storage and multimedia products to both the computer reseller and the video
production reseller marketplaces.

           FFG was acquired for a total purchase price of approximately $2.2
million which included cash of $1.1 million, the issuance of 60,324 shares of
the Company's Common Stock valued at $800,000 and acquisition costs. The Common
Stock issued was valued in accordance with EITF Issue No. 99-12, "Determination
of the Measurement Date for the Market Price of Acquirer Securities Issued in a
Purchase Business Combination," using the average of the closing prices of the
Company's Common Stock for the two days prior to the acquisition date and the
closing price of the Company's Common Stock on the date of acquisition. The
Company is obligated to pay up to an additional $325,000 in cash within three
years of the closing date as a contingent incentive payment to be based upon
earnings achieved during certain periods, up to March 31, 2003. The purchase
price was allocated to the acquired assets and liabilities assumed, based upon
management's estimate of their fair market values as of the acquisition date, as
follows (in thousands):

<TABLE>
<CAPTION>
           <S>                              <C>
           Accounts receivable              $  1,069
           Inventories                         1,033
           Equipment and other assets             42
           Goodwill                            1,526
           Accounts payable                     (775)
           Other accrued liabilities            (401)
           Notes payable                        (294)
                                            --------
           Total consideration              $  2,200
                                            ========
</TABLE>


NOTE 5 - BALANCE SHEET COMPONENTS:


                                       44
<PAGE>
           <TABLE>
           <CAPTION>
                                                                              December 31,
                                                                         ------------------------
                                                                            2003          2002
                                                                         ----------    ----------
                                                                               (in thousands)
           <S>                                                           <C>           <C>
           Accounts receivable, net:

              Accounts receivable                                        $  335,584    $  300,645
              Less:  allowance for doubtful accounts and sales returns      (25,679)      (23,340)
                                                                         ----------    ----------
                                                                         $  309,905    $  277,305
                                                                         ==========    ==========

           Property and equipment:

              Computer and other equipment                               $   35,947    $   32,716
              Land and buildings                                             23,476        23,112
              Furniture and fixtures                                         10,005         9,901
              Warehouse equipment                                             7,664         8,307
              Leasehold improvements                                          3,021         2,623
                                                                         ----------    ----------
                                                                             80,113        76,659
              Less: accumulated depreciation                                (36,568)      (25,898)
                                                                         ----------    ----------
                                                                         $   43,545    $   50,761
                                                                         ==========    ==========

           Goodwill and other intangibles, net:

              Goodwill                                                   $   66,916    $   60,423
              Other intangibles                                               8,913         7,602
              Less:  accumulated amortization                                (9,049)       (8,216)
                                                                         ----------    ----------
                                                                         $   66,780    $   59,809
                                                                         ==========    ==========
</TABLE>

NOTE 6 - LINES OF CREDIT AND TERM LOAN:

LINES OF CREDIT

<TABLE>
<CAPTION>
                                                                December 31,
                                                           ---------------------
           <S>                                             <C>         <C>
                                                                2003        2002
                                                           ---------   ---------
           Wachovia Facility                               $  68,007   $  52,127
           Bank of America Facility                           59,409      48,428
           IFN Financing BV                                    3,009       6,992
           Other lines                                            --         927
                                                           ---------   ---------
                                                             130,425     108,474
           Less: amounts included in current liabilities       3,009       7,919
                                                           ---------   ---------
           Amounts included in non-current liabilities     $ 127,416   $ 100,555
                                                           =========   =========
</TABLE>

           On December 31, 2002, the Company entered into an amendment to its
syndicated Loan and Security Agreement with Wachovia Bank, N.A. ("Wachovia
facility"), (First Union Bank, as the original lender). The amendment reduces
the credit facility to $160 million from $175 million and extends the maturity
date to May 31, 2005. The Wachovia facility refinanced the Company's $50 million
credit facility with California Bank & Trust that matured May 31, 2001, and the
$80 million short-term loan with the RSA that matured June 30, 2001. The
syndicate includes Congress Financial Corporation (Western) and Bank of America
N.A. as co-agents and other financial institutions, as lenders. Borrowings under
the line of credit bear interest at Wachovia's prime rate plus a margin of 0.0%
to 0.5%, based on borrowing levels. At the Company's option, all or any portion
of the outstanding borrowings may be converted to a Eurodollar rate loan, which
bears interest at the adjusted Eurodollar rate plus a margin of 2.25% to 2.75%,
based on borrowing levels. The average interest rate on outstanding borrowings
under the revolving line of credit during the year ended December 31, 2003, was
3.9%, and the balance outstanding at December 31, 2003 was $68.0 million.
Obligations of the Company under the revolving line of credit are secured by
certain assets of the Company and its North and South American subsidiaries. The
revolving line of credit requires the Company to meet certain financial tests
and to comply with certain other covenants, including restrictions on incurrence
of debt and liens,


                                       45
<PAGE>
restrictions on mergers, acquisitions, asset dispositions, capital
contributions, payment of dividends, repurchases of stock and investments. On
October 9, 2003, the Company entered into a Second Amendment and Waiver, to
effectively enable the Company to complete the acquisition of EMB Mayorista, in
Mexico. The Company was in compliance with its bank covenants at December 31,
2003; however, there can be no assurance that the Company will be in compliance
with such covenants in the future. If the Company does not remain in compliance
with the covenants, and is unable to obtain a waiver of noncompliance from its
bank, the Company's financial condition, results of operations and cash flows
would be materially adversely affected.

           On December 2, 2002, as amended in November 2003, the Company entered
into a Syndicated Credit Agreement arranged by Bank of America, National
Association ("Bank of America facility"), as principal agent, to provide a
(pound)75 million revolving line of credit facility, or the U.S. dollar
equivalent of approximately $130 million at December 31, 2003 through December
2005. The Bank of America facility refinanced the Company's $60 million credit
facility with Royal Bank of Scotland. The syndicate includes Bank of America as
agent and security trustee and other banks and financial institutions, as
lenders. Borrowings under the line of credit bear interest at Bank of America's
base rate plus a margin of 2.375% to 2.50%, based on certain financial
measurements. At the Company's option, all or any portion of the outstanding
borrowings may be converted to a LIBOR Revolving Loan, which bears interest at
the adjusted LIBOR rate plus a margin of 2.375% to 2.50%, based on certain
financial measurements. The average interest rate on the outstanding borrowings
under the revolving line of credit during the year ended December 31, 2003 was
6.2%, and the balance outstanding at December 31, 2003 was $59.4 million.
Obligations of the Company under the revolving line of credit are secured by
certain assets of the Company's European subsidiaries. The revolving line of
credit requires the Company to meet certain financial tests and to comply with
certain other covenants, including restrictions on incurrence of debt and liens,
restrictions on mergers, acquisitions, asset dispositions, capital
contributions, payment of dividends, repurchases of stock, repatriation of cash
and investments. The Company was in compliance with its bank covenants at
December 31, 2003; however, there can be no assurance that the Company will be
in compliance with such covenants in the future. If the Company does not remain
in compliance with the covenants, and is unable to obtain a waiver of
noncompliance from its bank, the Company's financial condition, results of
operations and cash flows would be materially adversely affected.

           The Company has an agreement with IFN Finance BV to provide up to
$7.5 million in short-term financing to the Company. The loan is secured by
certain European accounts receivable and inventories, bears interest at 5.5%,
and continues indefinitely until terminated by either party within 90 days
notice. Loan balances outstanding were $3.0 million at December 31, 2003.

TERM LOANS

<TABLE>
<CAPTION>
                                                   December 31,
                                               -------------------
                                                 2003       2002
                                               --------   --------
           <S>                                 <C>        <C>
           Note payable to RSA                 $ 79,000   $ 86,000
           Lombard NatWest Limited Mortgage          --      9,816
           Bank of Scotland Mortgage             10,180         --
                                               --------   --------
                                                 89,180     95,816
           Less: amounts due in current year     11,572     20,316
                                               --------   --------
           Long-term debt due after one year   $ 77,608   $ 75,500
                                               ========   ========
</TABLE>


           On July 6, 2000, the Company entered into a Securities Purchase
Agreement with The Retirement Systems of Alabama and certain of its affiliated
funds (the "RSA facility"), under which the Company borrowed $180 million of
subordinated debt financing. This subordinated debt financing was comprised of
$80 million bearing interest at 9.125%, repaid in May 2001; and $100 million
bearing interest at 9.0%, payable in semi-annual principal installments of $3.5
million plus interest installments commencing December 31, 2000 and in
semi-annual principal installments of $8.5 million commencing December 31, 2007,
with a final maturity date of June 30, 2010. On August 1, 2003, the Company
entered into an interest rate swap agreement with Wachovia Bank effectively
securing a new interest rate on $40 million of the outstanding debt. The new
rate is based on the six month U.S. Libor rate plus a fixed margin of 4.99% and
continues until termination of the agreement on June 30, 2010. The RSA facility
is secured by a second lien on the Company's and its subsidiaries' North
American and South American assets. The Company must meet certain financial
tests on a quarterly basis, and comply with certain other covenants, including
restrictions of incurrence of debt and liens, restrictions on asset
dispositions, payment of dividends, and repurchase of stock. The Company is also
required to be in compliance with the


                                       46
<PAGE>
covenants of certain other borrowing agreements. The Company is in compliance
with its subordinated debt financing covenants; however, there can be no
assurance that the Company will be in compliance with such covenants in the
future. If the Company does not remain in compliance with the covenants in the
Securities Purchase Agreement and is unable to obtain a waiver of noncompliance
from its subordinated lenders, the Company's financial condition, results of
operations and cash flows would be materially adversely affected. The balance
outstanding at December 31, 2003 on this long-term debt was $79.0 million, $10.5
million is payable in 2004, $7.0 million is payable in each of the years 2005
and 2006 and $54.5 million thereafter.

           On May 9, 2003, the Company entered into a mortgage agreement with
Bank of Scotland for (pound)6 million, or the U.S. dollar equivalent of
approximately $10.7 million, as converted at December 31, 2003. The new mortgage
agreement fully re-paid the borrowings outstanding under the previous mortgage
agreement with Lombard NatWest Limited, and has a term of 10 years, bears
interest at Bank of Scotland's rate plus 1.35%, and is payable in quarterly
installments of approximately (pound)150,000, or $268,000 USD, plus interest.
The principal amount due each year is approximately $1,072. The balance of the
mortgage as converted to USD at December 31, 2003 was $10.2 million. Terms of
the mortgage require the Company to meet certain financial ratios and to comply
with certain other covenants on a quarterly basis. The Company was in compliance
with its covenants at December 31, 2003; however there can be no assurance that
the Company will be in compliance with its covenants in the future. If the
Company does not remain in compliance with the covenants and is unable to obtain
a waiver of noncompliance from its bank, the Company's financial condition,
results of operations and cash flows would be materially adversely affected.

NOTE 7 - COMMON STOCK:

           On August 27, 2003, the Company completed a secondary registered
public offering of 5,000,000 shares of Common Stock, at an offering price to the
public of $6.50 per share. In connection with the offering, the Company granted
to the underwriters an option to purchase up to 750,000 shares to cover over
allotments, and the option was exercised in full on September 18, 2003. The
Company received proceeds of $34.9 million, net of commissions, discounts and
expenses.

           In March 2002, the Company received proceeds of approximately $16.5
million from a private placement of 1,500,000 shares of Common Stock. The
Company also issued to the purchasers warrants to purchase an additional 750,000
shares of Common Stock at an exercise price of $11.00 per share. The Company
valued the warrants at $3,858,000 using the Black-Scholes option pricing model
applying an expected life of 18 months, a risk free interest rate of 6.59% and a
volatility of 69%. The warrants were recorded as a component of equity.

NOTE 8 - RESTRUCTURING COSTS, SPECIAL CHARGES AND OTHER PROVISIONS:

           In the first quarter of 2003, the Company continued to implement
profit improvement and cost reduction measures, and recorded restructuring costs
of $1.4 million. These charges consisted of severance and benefits of $1.3
million related to worldwide involuntary terminations and estimated lease costs
of $56,300 pertaining to future lease obligations for non-cancelable lease
payments for excess facilities in the U.S. The Company terminated 127 employees
worldwide, across a wide range of functions including marketing, technical
support, finance, operations and sales. Future savings expected from
restructuring related cost reductions will be reflected as a decrease in
`Selling, General and Administrative expenses' on the Statement of Operations.
The Company also recorded an inventory charge of approximately $1.5 million
related to significant changes to certain vendor relationships and the
discontinuance of other non-strategic product lines, recorded in 'Cost of
Sales'.

           In the second and third quarters of 2002, as part of the Company's
plan to reduce costs and improve operating efficiencies, the Company recorded
special charges of $5.7 million. These costs consisted primarily of estimated
lease costs of $2.3 million pertaining to future lease obligations for
non-cancelable lease payments for excess facilities in the U.S. and costs of
$583,000 related to the closure of the Rorke Data Europe facilities, whose
operations were consolidated into the Company's TTP division in Almere,
Netherlands. These special charges also included provisions for certain Latin
American receivables of $1.7 million, and severance and benefits of $1.1 million
related to worldwide involuntary terminations. The Company terminated 78
employees, predominately in sales and marketing functions and eliminated two
executive management positions in the U.S. Future expected costs reductions will
be reflected in the Statement of Operations line item `Selling, General and
Administrative expenses.'

           In the second and third quarters of 2001, the Company accrued
restructuring costs of $4.8 million. These costs


                                       47
<PAGE>
consisted primarily of the abandonment of certain inventory related computer
software that had a carrying value of $2.4 million, severance and benefits of
$2.2 million related to involuntary employee terminations and estimated lease
costs of $238,000 pertaining to future lease obligations for non-cancelable
lease payments for excess facilities. The Company terminated 267 employees
worldwide, predominantly in overhead support functions. The Company expected
annual employee expense reductions of approximately $10 million, depreciation
expense reduction of $550,000, and cost reductions related to excess facilities
of approximately $800,000. Cost reductions have been realized as expected and
have been reflected in the Statement of Operations line item `Selling, General
and Administrative expenses.' Overall, these cost reductions have been offset by
increases in selling, general and administrative costs related to the
acquisitions of Total Tec and TTPG and other costs related to expansion of
geographic sales coverage in Europe, expansion of the Company's storage systems
infrastructure and expansion of the Company's Corporate Technology Center.

           Additionally in the third quarter of 2001, the Company recorded other
special charges of $4.1 million for additional accounts receivable provisions.
Events giving rise to this provision related to the economic crisis in Argentina
and the devaluation of the Argentinean peso, and a default on guaranteed debt of
one of the Company's large customers who filed for bankruptcy.

           In the second and third quarters of 2001, the Company also recorded a
provision for inventory of $17.8 million related to additional excess inventory.
The additional provision largely resulted from the decision to discontinue
certain product lines and the impact of current market conditions. The excess
inventory charge is included within the Statement of Income under the caption
`Cost of Sales.'

           Outstanding liabilities related to these charges are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
                                         Balance at             Restructuring
                                        Beginning of             and Special             Cash          Balance at End
Year Ended December 31,                    Period                  Charges             Payments          of Period
                                      ----------------        ------------------     ------------     -----------------
<S>                               <C>                        <C>                    <C>              <C>
2001
Severance costs                            $    -                  $2,199               $2,143              $   56
Lease costs                                     -                     238                  139                  99
                                           ------                  ------               ------              ------
Total                                           -                   2,437                2,282                 155

2002
Severance costs                                56                   1,167                  678                 545
Lease costs                                    99                   2,515                  535               2,079
Other facility closure costs                    -                     306                  306                   -
                                           ------                  ------               ------              ------
Total                                         155                   3,988                1,519               2,624

2003
Severance costs                               545                   1,327                1,638                 234
Lease costs                                 2,079                      56                  808               1,327
                                           ------                  ------               ------              ------
Total                                      $2,624                  $1,383               $2,446              $1,561
                                           ======                  ======               ======              ======
</TABLE>

NOTE 9 - STOCK-BASED COMPENSATION PLANS:

STOCK OPTION PLANS

           In May of 1998, the Company adopted the 1998 Stock Plan (the "Plan")
which replaced the 1988 Amended and Restated Incentive Stock Plan (the "1988
Plan") and the 1993 Director Stock Option Plan (the "Director Plan").

           The Plan provides for the grant of stock options and stock purchase
rights to employees, directors and consultants of the Company at prices not less
than the fair value of the Company's Common Stock at the date of grant for
incentive stock options and prices not less than 85% of the fair value of the
Company's Common Stock for nonstatutory stock options and stock purchase rights.
Under the Plan, the Company has reserved for issuance a total of 4,839,327
shares of Common Stock plus 272,508 shares of Common Stock which were reserved
but unissued under the 1988 Plan and 52,500 shares of Common Stock which were
reserved but unissued under the Director Plan. The maximum aggregate number of
shares of Common Stock which may be optioned and sold under the Plan is
3,242,497 shares, plus an annual increase to be added on January 1 of each year,
equal to the lesser of (i) 600,000 shares, (ii) 4% of the outstanding shares on
such date, or (iii) a lesser amount determined by the Board of Directors,
subject to adjustment upon changes in capitalization of the Company. Since
inception, the Company has reserved 8,517,975 shares of Common Stock for
issuance under the aggregate of all stock option plans.

           All stock options become exercisable over a vesting period as
determined by the Board of Directors and expire over terms not exceeding ten
years from the date of grant. If an optionee ceases to be employed by the
Company, the optionee may, within one month (or such other period of time, as
determined by the Board of Directors, but not exceeding three months) exercise
options to the extent vested.

           As part of the Plan, the Board of Directors adopted a Management
Incentive Program (the "Program") for key employees. Under this Program, options
for 193,500 shares of Common Stock were granted in 2000 and no options were


                                       48
<PAGE>
granted in years 2001, 2002 or 2003. The Program provides for ten-year option
terms with vesting at the rate of one tenth per year, with potential for
accelerated vesting based upon attainment of certain performance objectives. The
options lapse ten years after the date of grant or such shorter period as may be
provided for in the stock option agreement.

           Options granted under the Director Plan prior to May 1998 and
outstanding at December 31, 2003 total 60,000. Under the Director Plan, 112,500
options were granted in 1993 at an exercise price of $5.33 per share, and 30,000
options were granted in 1996 at an exercise price of $4.67 per share. In 1997,
30,000 options were granted at an exercise price of $8.42 per share. In 1998,
22,500 options were granted at an exercise price of $5.00 per share. On August
5, 1999, the Board of Directors approved the vesting in full of all options
currently held by the Directors and modified the Plan to immediately vest all
future Board of Directors options at the time they are granted.

           In 2003 and prior years beginning in 2000, the number of shares of
Common Stock reserved under the Plan were not sufficient to accommodate the
Company's growth through acquisitions and key employee retention efforts. To
induce certain key employees to accept employment with the Company, the Company
issued a total of 450,000, 898,000 and 520,000 nonqualified stock options
outside the provisions of the Plan in 2003, 2002 and 2001 respectively, and
973,000 of these options were outstanding at December 31, 2003, net of
cancellations, and are included in the table below.

           The following table presents all stock option activity:

<TABLE>
<CAPTION>
                                                                             Options Outstanding
                                                                           ------------------------
                                                             Options                       Weighted
                                                          Available for                    Average
                                                               Grant         Shares     Exercise Price
                                                           -----------     -----------  --------------
<S>                                                        <C>             <C>          <C>
Balance at December 31, 2000                                  (119,696)      4,437,117     $  10.11

Increase in options available for grant                        600,000              --           --

Options canceled                                               478,547        (652,535)    $   9.92
Canceled options not available for grant                       (10,875)             --     $   4.59
Options granted                                               (631,000)      1,151,000     $  11.71
Options exercised                                                   --        (446,029)    $   5.98
                                                           -----------     -----------     --------
Balance at December 31, 2001                                   316,976       4,489,553     $  10.96

Increase in options available for grant                        600,000              --           --

Options canceled                                               178,684        (317,311)    $  13.36
Canceled options not available for grant                        (3,000)             --     $   7.42
Options granted                                               (598,250)      1,496,249     $   8.16
Options exercised                                                   --        (301,245)    $   6.12
                                                           -----------     -----------     --------
Balance at December 31, 2002                                   494,410       5,367,246     $  10.31

Increase in options available for grant                        600,000
Options tendered in exchange for restricted stock units      1,346,500      (2,234,250)    $  15.43
Restricted stock rights granted in option exchange            (744,802)        744,802     $   0.00
Options canceled                                               295,191        (297,191)    $   7.78
Canceled options not available for grant                            --         (88,764)    $   5.29
Options granted                                             (1,389,200)      1,839,200     $   6.33
Options exercised                                                             (604,310)    $   5.88
                                                           -----------     -----------     --------
Balance at December 31, 2003                                   513,335       4,815,497     $  10.31
                                                           ===========     ===========     ========
</TABLE>

           At December 31, 2003, 1,348,450 options were exercisable under these
Plans. Upon the adoption of the 1998 Stock Plan, canceled options under the 1988
Plan are not available for future grants.

           The following table summarizes information about stock options and
restricted stock outstanding for all plans at December 31, 2003:


                                       49
<PAGE>
<TABLE>
<CAPTION>
                                           OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
                       -----------------------------------------------------------    -------------------------------------
                          Number of
                           Options          Weighted Average
                       Outstanding As          Remaining                               Number of Shares
Range of Exercise      of December 31,      Contractual Life      Weighted Average    Exercisable As of    Weighted Average
Prices                      2003                In Years           Exercise Price     December 31, 2003    Exercise Price
--------------------   ---------------     -------------------    ----------------    -----------------    ----------------
<S>                    <C>                 <C>                    <C>                 <C>                  <C>
$  0.00  -  $  0.00          963,048              4.26               $   0.00                      0            $  0.00
$  3.90  -  $  4.40          700,250              3.77                   4.16                271,950               4.21
$  4.42  -  $  5.94          853,174              3.95                   5.28                255,735               4.90
$  6.11  -  $  7.23          913,949              4.77                   6.94                107,437               6.48
$  7.25  -  $  9.06          690,826              3.49                   8.31                282,568               8.10
$  9.37  -  $ 21.00          694,250              3.04                  10.26                429,760              10.27
$ 24.13  -  $ 24.13            1,000              1.80                  24.13                  1,000              24.13
                           4,816,497              3.94                   5.54              1,348,450               7.28
                       =============                                                  ==============
</TABLE>

EMPLOYEE STOCK PURCHASE PLAN

           The Employee Stock Purchase Plan ("ESPP"), as amended in 2003,
provides for automatic annual increases in the number of shares reserved for
issuance on January 1 of each year by a number of shares equal to the lesser of
(i) 225,000 shares, (ii) 1.5% of the outstanding shares on such date, or (iii) a
lesser amount determined by the Board of Directors, subject to adjustment upon
changes in capitalization of the Company. In 2003, the Company reserved for
issuance an additional 200,000 shares as a one-time supplement to the ESPP.

           The Company has reserved 2,228,498 shares of Common Stock for
issuance to all eligible employees under its ESPP. Sales made through this plan
will be at the lower of 85% of market price at the date of purchase or on the
first day of each six-month offering period in the prior two years. A total of
2,228,306 shares have been issued under this plan as of December 31, 2003.

FAIR VALUE DISCLOSURES

           The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its plans, all of which are fixed plans. To determine the additional pro
forma disclosures required by SFAS 123 for the stock option plans, the fair
value of each option grant used for calculating pro forma net income is
estimated on the date of grant using the Black-Scholes multiple option-pricing
model. The following weighted average assumptions were used for grants in 2003,
2002 and 2001 respectively, expected volatility of 76%, 76% and 73%; risk free
interest rate of 2.0%, 3.4% and 4.9% and expected lives of 3.45, 3.55 and 3.50
years. The Company has not paid dividends and assumed no dividend yield. The
weighted average fair value of those stock options granted in 2003, 2002 and
2001 was $3.46, $4.81 and $5.47 per option, respectively. The fair value of each
ESPP purchase right is estimated on the beginning of the offering period using
the Black-Scholes option-pricing model with substantially the same assumptions
as the option plans but expected lives of 0.5 years. The weighted average fair
value of those purchase rights granted in 2003, 2002 and 2001 was $3.62, $3.69
and $4.22 per right, respectively. Had compensation cost for the Company's two
stock-based compensation plans been determined based on the fair value at the
grant dates for awards in 2003, 2002 and 2001 under those plans consistent with
the provisions of SFAS 123, the Company's net income and earnings per share
would have been reduced as presented below (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                 2003          2002          2001
                              ----------    ----------    ----------
<S>                           <C>          <C>            <C>
           Net loss:
                As reported   $   (4,474)   $   (7,054)   $  (22,107)
                Pro forma     $   (8,064)   $  (13,036)   $  (27,834)
           Loss per share:
                As reported   $    (0.20)   $    (0.37)   $    (1.34)
                Pro forma     $    (0.36)   $    (0.68)   $    (1.69)
</TABLE>


                                       50
<PAGE>
           Because additional stock options and stock purchase rights are
expected to be granted each year, the above pro forma disclosures are not
considered by management to be representative of pro forma effects on reported
financial results for future years.

OPTION EXCHANGE

           On November 25, 2002, the Company made an exchange offer (the
"Exchange") to current officers and employees of the Company to exchange stock
options held by these employees for rights to receive shares of the Company's
Common Stock ("Restricted Units"). The offer period ended December 31, 2002 and
the Restricted Units were issued on January 3, 2003 (the "Exchange Date").
Employee stock options eligible for the Exchange had a per share exercise price
of $11.75 or greater, whether or not vested ("Eligible Options"). The offer
provided for an exchange ratio of three option shares surrendered for each
Restricted Unit to be received subject to vesting terms.

           In order to be eligible to participate in the Exchange ("Eligible
Participant"), the employee may not receive stock options or other equity awards
in the six months following the Exchange Date. In order to participate in the
Exchange, an Eligible Participant could tender all Eligible Options held, or any
selected Eligible Options granted by different stock option agreements. If an
Eligible Participant chose to participate, all options granted on or after May
26, 2002 were tendered regardless of the exercise price of such options. The
Units of restricted stock will vest in one-fourth increments on each of the
first, second, third and fourth annual anniversary dates of the Exchange Date.
If the employment of an employee who participated in the Exchange terminates
prior to the vesting, the employee will forfeit the unvested shares of
Restricted Units. As a result of the Exchange, the Company issued 744,802 rights
to receive Restricted Units in return for 2,234,250 stock options. The total
non-cash deferred compensation charge over the vesting period of four years is
approximately $4 million computed based on the share price at the date of
approval of $5.42 per share. The deferred compensation charge is unaffected by
future changes in the price of the common stock.

NOTE 10 - INCOME TAXES:

           The provision for (benefit from) income taxes consists of the
following (in thousands):


<TABLE>
<CAPTION>
                                      2003         2002         2001
                                   ---------    ---------    ---------
<S>                                <C>          <C>          <C>
           Current:

                     Federal       $    (637)   $  (2,335)   $  (7,214)
                     State              (122)          --           34
                     Foreign             552       (1,130)      (1,095)
                                   ---------    ---------    ---------
                                        (207)      (3,485)      (8,275)
           Deferred:

                     Federal          (1,793)       1,461       (2,046)
                     State             1,946         (167)      (1,971)
                     Foreign            (615)        (421)          41
                                   ---------    ---------    ---------
                                        (462)         873       (3,976)
                                   ---------    ---------    ---------
                                   $    (669)   $  (2,612)   $ (12,251)
                                   =========    =========    =========
</TABLE>

           Deferred tax assets (liabilities) comprise the following (in
thousands):

<TABLE>
<CAPTION>
                                                           2003         2002
                                                        ---------    ---------
           <S>                                          <C>          <C>
           Bad debt, sales and warranty reserves        $   4,597    $   4,286
           Accruals, inventory and other reserves           5,097        6,069
           Net operating losses                             5,699        2,214
           Foreign tax credits                              1,040           --
           Other                                              276          324
                                                        ---------    ---------
                Gross deferred tax assets                  16,709       12,893
                                                        ---------    ---------

           Unrealized foreign exchange gain                    --         (316)
           Depreciation and amortization                   (4,068)      (3,105)
                                                        ---------    ---------
                Gross deferred tax liabilities             (4,068)      (3,421)
                                                        ---------    ---------
           Valuation allowance                             (3,641)        (933)
                                                        ---------    ---------
                Net deferred tax assets                 $   9,000    $   8,539
                                                        =========    =========
</TABLE>


                                       51
<PAGE>
           Valuation allowances reduce the deferred tax assets to the amount
that, based upon all available evidence, is more likely than not to be realized.
The deferred tax assets valuation allowance at December 31, 2003 and 2002, is
attributed to certain foreign net operating loss carryovers that do not meet the
more likely than not standard of realizability.

           As of December 31, 2003, the Company had state net operating loss
carryforwards of approximately $31,372,000 available to offset future state
taxable income. The state net operating loss carryforwards will expire in
varying amounts beginning 2006 through 2023. As of December 31, 2003, the
Company had Foreign Tax Credit carryforwards of $1,040,000 available to offset
future federal income tax.

           The tax benefit associated with dispositions from employee stock
plans for 2003 is approximately $156,000, which was recorded as an addition to
paid-in capital and a reduction to taxes payable.

           A reconciliation of the Federal statutory tax rate to the effective
tax (benefit) follows:


<TABLE>
<CAPTION>
                                                                2003         2002          2001
                                                              --------     --------     --------
<S>                                                           <C>          <C>          <C>
           Federal statutory rate                                (35.0)%      (35.0)%      (35.0)%
           State income taxes, net of Federal tax
               benefit and credits                                 0.8%        (1.7)%       (3.8)%
           Foreign taxes, net of foreign tax credits              34.0%         6.0%        (0.1)%
           Extraterritorial income exclusion net of cushion      (13.0)%         --           --
           Other                                                   0.2%         3.7%         3.2%
                                                                           --------     --------
           Total                                                 (13.0)%      (27.0)%      (35.7)%
                                                              ========     ========     ========
</TABLE>

NOTE  11 - COMMITMENTS AND CONTINGENCIES:

           The Company leases its facilities under cancelable and non-cancelable
operating lease agreements. The leases expire at various times through 2019 and
contain renewal options. Certain of the leases require the Company to pay
property taxes, insurance, and maintenance costs.

           The Company leases certain equipment under capitalized leases with
such equipment amounting to $1,050,000 less accumulated depreciation of $538,000
at December 31, 2003. Amortization expense on assets subject to capitalized
leases was $918,000 for the year ended December 31, 2003. The capitalized lease
terms range from 33 months to 60 months.

           The following is a summary of commitments under non-cancelable
leases:

<TABLE>
<CAPTION>
                                                              CAPITALIZED    OPERATING
                 YEAR ENDING DECEMBER 31,                        LEASES        LEASES
           ---------------------------------------            ----------     ---------
                                                                    (in thousands)
                                                              ------------------------
           <S>                                                <C>            <C>
           2004                                               $    240       $   7,252
           2005                                                    187           6,072
           2006                                                    116           5,268
           2007                                                      7           4,033
           2008                                                     --           1,854
           2009 and beyond                                          --          13,415
                                                              --------       ---------
           Total minimum lease payments                            550       $  37,894
                                                                             =========
           Less:  imputed interest                                 (53)
                                                              --------
           Present value of minimum lease payments            $    497
                                                              ========
</TABLE>


                                       52
<PAGE>
           Total operating lease expense was $8,343,000, $8,671,000, and
$7,370,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

           The Company is subject to legal proceedings and claims that arise in
the normal course of business. Management believes that the ultimate resolution
of such matters will not have a material adverse effect on the Company's
financial position or results of operations.

NOTE 12 - TRANSACTIONS WITH RELATED PARTIES:

           Two directors of the Company are directors of one of the Company's
customers, Company A. Another director of the Company is a director of two of
the Company's customers/vendors, Companies B and C. A third director of the
Company is a director of one of the Company's customers, Company C. A fourth
director of the Company is the President of one of the Company's consulting
providers, Company D. A fifth Director of the Company is the President of one of
the Company's customers/vendors, Company E. The President of one of the
Company's subsidiaries is a co-owner of one of the Company's customers, Company
F. The Company also leased a facility from Company F. Sales to these parties and
purchases of inventory and other services from these parties for the three years
ended December 31, 2003 and accounts receivable at December 31, 2003 and 2002
are summarized below:

<TABLE>
<CAPTION>
                                                        (In thousands)
                                                    ------------------------
           SALES:                                   2003      2002     2001
                                                    -----    ------   ------
          <S>                                       <C>      <C>      <C>
                                     Company A      $ 647    $1,049   $1,718
                                     Company B        562        --       --
                                     Company C         --        25      431
                                     Company E         29        26       --
                                     Company F        918     3,431       --
           ACCOUNTS RECEIVABLE:
                                     Company A         11        32
                                     Company B         61        --
                                     Company C         --        --
                                     Company E         --         1
                                     Company F        336       524
           INVENTORY PURCHASED:
                                     Company B         --        --      111
                                     Company E         --        19       --
           CONSULTING                Company D         55        53       --
           RENT                      Company F         78        92       --

</TABLE>

           The Company believes that terms of these transactions were no less
favorable than reasonably could be expected to be obtained from unaffiliated
parties.

NOTE 13 - SALARY SAVINGS PLAN:

           The Company has a Section 401(k) Plan (the "Plan") which provides
participating employees an opportunity to accumulate funds for retirement and
hardship. Participants may contribute up to 15% of their eligible earnings to
the Plan. The Company may elect to make matching contributions equal to a
discretionary percentage of participants' contributions up to the statutory
maximum of participants' eligible earnings. The Company has not made any
contributions to the Plan.

NOTE 14 - GEOGRAPHIC INFORMATION:

           The Company operates in one industry segment and markets its products
worldwide through its own direct sales force. The Company attributes revenues
from customers in different geographic areas based on the location of the
customer. Sales in the U.S. were 41%, 44% and 45% of total sales for the years
ended December 31, 2003, 2002 and 2001, respectively.


                                       53
<PAGE>
           Geographic information consists of the following:


<TABLE>
<CAPTION>
                                         (in thousands)
                                  2003         2002         2001
                               ----------   ----------   ----------
<S>                            <C>          <C>          <C>
           Net sales:
               North America   $1,016,984   $1,023,308   $  998,347
               Latin America      175,462      189,586      239,537
               Europe           1,037,841      892,028      769,218
                               ----------   ----------   ----------
                   Total       $2,230,287   $2,104,922   $2,007,102
                               ==========   ==========   ==========
</TABLE>

           The following table presents long-lived assets located in the
Company's country of domicile and located in all foreign countries.

<TABLE>
<CAPTION>
                                             December 31,
                                         -------------------
           Long -lived assets:             2003       2002
                                         --------   --------
<S>                                      <C>        <C>
               United States             $ 48,041   $ 49,934
               United Kingdom              54,707     53,189
               Other foreign countries     14,052     15,177
                                         --------   --------
                   Total                 $116,800   $118,300
                                         ========   ========
</TABLE>

NOTE 15 - SUBSEQUENT EVENT:

           On March 5, 2004, the Company completed a private offering of $110
million aggregate principal amount of 3 3/4% convertible subordinated notes due
2024. The offering was made only to qualified institutional buyers in accordance
with Rule 144A under the Securities Act of 1933, as amended. The notes are
convertible into the Company's common stock under certain circumstances at a
conversion rate of 91.2596 shares per $1,000 principal amount of notes, subject
to adjustment, which is equivalent to a conversion price of approximately $10.96
per share. This represents a 32.5% premium over Bell Microproducts closing price
of its common stock on the Nasdaq National Market on March 1, 2004 of $8.27 per
share.

           The Company may redeem some or all of the notes under certain
circumstances on or after March 5, 2009 and prior to March 5, 2011, and at any
time thereafter without such circumstances, at 100% of the principal amount,
plus accrued but unpaid interest up to, but excluding, the redemption date. The
Company may be required to purchase some or all of the notes on March 5, 2011,
March 5, 2014 or March 5, 2019 or in the event of a change in control at 100% of
the principal amount, plus accrued but unpaid interest up to, but excluding, the
purchase date.

           Proceeds from the offering will be used to repay amounts outstanding
under its working capital facilities with Wachovia Bank, N.A. and Bank of
America, National Association and its senior subordinated notes held by The
Retirement Systems of Alabama.


                                       54
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                           Quarter Ended
                                     ---------------------------------------------------------------------------------------------
                                     Mar. 31,    June 30,    Sept. 30,    Dec. 31,    Mar. 31,    June 30,     Sept. 30,  Dec. 31,
                                       2002       2002         2002         2002        2003        2003         2003       2003
                                     --------   ---------    ---------    --------   ---------    ---------    --------   --------
<S>                                  <C>        <C>          <C>          <C>        <C>          <C>          <C>        <C>
Net sales........................... $522,928   $ 497,713    $ 551,895    $532,386   $ 532,653    $ 502,638    $555,476   $639,520
Cost of sales.......................  475,507     457,715      506,563     486,581     495,027      463,430     512,391    591,346
                                     --------   ---------    ---------    --------   ---------    ---------    --------   --------
Gross profit .......................   47,421      39,998       45,332      45,805      37,626       39,208      43,085     48,174
Operating expenses:.................
Selling, general and administrative
  expenses .........................   42,696      42,096       40,348      40,484      39,274       37,968      37,990     40,478
Restructuring costs and special
  charges ..........................       --       2,283        3,405          --       1,383           --          --         --
                                     --------   ---------    ---------    --------   ---------    ---------    --------   --------
Total operating expenses............   42,696      44,379       43,753      40,484      40,657       37,968      37,990     40,478

Operating income (loss) ............    4,725      (4,381)       1,579       5,321      (3,031)       1,240       5,095      7,696
Interest expense and other income ..    4,063       4,408        4,473       3,966       4,019        4,185       4,208      3,731
                                     --------   ---------    ---------    --------   ---------    ---------    --------   --------

Income (loss) from operations before
  income taxes .....................      662      (8,789)      (2,894)      1,355      (7,050)      (2,945)        887      3,965
Provision for (benefit from) income
  taxes ............................      278      (2,716)        (538)        364      (2,115)        (584)        513      1,517
Net income (loss) .................. $    384   $  (6,073)   $  (2,356)   $    991   $  (4,935)   $  (2,361)   $    374   $  2,448
                                     ========   =========    =========    ========   =========    =========    ========   ========
Earnings (loss) per share
  Basic ............................ $   0.02   $   (0.31)   $   (0.12)   $   0.05   $   (0.25)   $   (0.12)   $   0.02   $   0.09
  Diluted .......................... $   0.02   $   (0.31)   $   (0.12)   $   0.05   $   (0.25)   $   (0.12)   $   0.02   $   0.09
                                     ========   =========    =========    ========   =========    =========    ========   ========

Shares used in per share calculation
  Basic ............................   18,099      19,327       19,610      19,770      20,131       20,137      22,471     26,558
                                     ========   =========    =========    ========   =========    =========    ========   ========
  Diluted ..........................   19,160      19,327       19,610      20,048      20,131       20,137      23,098     27,692
                                     ========   =========    =========    ========   =========    =========    ========   ========
</TABLE>

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

           None.

ITEM  9A.  CONTROLS AND PROCEDURES

           As of the end of the period covered by this annual report, an
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls
and procedures. Based on that evaluation, the CEO and CFO have concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Subsequent to the date of their evaluation,
there were no changes in the Company's internal controls or in other factors
that could significantly affect the disclosure controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

           There were no changes in our internal control over financial
reporting that occurred during the period covered by this annual report that
have materially affected, or are reasonably likely to materially affect the
Company.


                                       55
<PAGE>
                                    PART III

           Pursuant to Paragraph G(3) of the General Instructions to Form 10-K,
portions of the information required by Part III of Form 10-K are incorporated
by reference from the Company's Proxy Statement to be filed with the Commission
in connection with the 2004 Annual Meeting of Shareholders (the "Proxy
Statement").

ITEM 10.  DIRECTORS AND EXECTUTIVE OFFICERS OF THE REGISTRANT

           (a)  Information concerning directors of the Company appears in
                the Company's Proxy Statement, under the captions "Corporate
                Governance" and "Election of Directors." This portion of the
                Proxy Statement is incorporated herein by reference.

           (b)  EXECUTIVE OFFICERS OF THE REGISTRANT

                The following table and descriptions identify and set forth
                information regarding the Company's seven executive officers:

                <TABLE>
                <CAPTION>
                      Name                Age           Position
                <S>                       <C>    <C>
                W. Donald Bell.........   66     President, Chief Executive Officer and
                                                 Chairman of the Board

                James E. Illson........   50     Chief Financial Officer and Executive Vice
                                                 President of Finance and Operations

                Richard J. Jacquet.....   64     Vice President of Human Resources
                Philip M. Roussey......   61     Executive Vice President, Enterprise Marketing
                Robert J. Sturgeon.....   50     Vice President of Information Technology
                Walter Tobin...........   56     Executive Vice President, OEM Division
                Timothy E. Tonges......   41     President, Bell Microproducts North America
</TABLE>

                W. Donald Bell has been President, Chief Executive Officer and
                Chairman of the Board of the Company since its inception in
                1987. Mr. Bell has over thirty years of experience in the
                electronics industry. Mr. Bell was formerly the President of
                Ducommun Inc. and its subsidiary, Kierulff Electronics Inc., as
                well as Electronic Arrays Inc. He has also held senior
                management positions at Texas Instruments Incorporated, American
                Microsystems and other electronics companies.

                James E. Illson has been our Chief Financial Officer and
                Executive Vice President of Finance and Operations since
                September 2002. From March 2000 to April 2002, Mr. Illson was
                Chief Executive officer and President of Wareforce Inc. a value
                added reseller. Mr. Illson was with Merisel Inc. from August
                1996 to January 2000, serving in the position of Chief Financial
                Officer until March 1998, when he became President/Chief
                Operating Officer. Mr. Illson holds a Bachelors degree in
                Business Administration and a Masters degree in Industrial
                Administration. Mr. Illson has over 20 years experience in
                financial and operational fields.

                                       56
<PAGE>
                Richard J. Jaquet has been our Vice President of Human Resources
                since May 2000. From 1988 to May 2000, Mr. Jacquet served as
                Vice President of Administration of Ampex Corporation, an
                electronics manufacturing company. Prior to 1988, Mr. Jacquet
                served in various senior human resource positions with Harris
                Corporation and FMC Corporation.

                Philip M. Roussey has been our Executive Vice President of our
                Enterprise Marketing since February 2002, prior to which he
                serve as our Executive Vice President of Computer Products
                Marketing from April 2000 until February 2002 and as our Senior
                Vice President of Marketing for Computer Products and Vice
                President of Marketing from the inception of our Company in 1987
                until April 2000. Prior to joining Bell Microproducts in 1987,
                Mr. Roussey served in management positions with Kierulff
                Electronics, most recently as Corporate Vice President of
                Marketing.

                Robert J. Sturgeon has been our Vice President of Information
                Technology since July 2000, prior to which, he served as our
                Vice President of Operations since joining the Company in 1992.
                From January 1991 to February 1992, Mr. Sturgeon was Director of
                Information Services for Disney Home Video. Prior to that time,
                Mr. Sturgeon served as Management Information Services ("MIS")
                Director for Paramount Pictures' Home Video Division from June
                1989 to January 1991 and as a Marketing Manager for MTI Systems,
                a division of Arrow Electronics Inc., from January 1988 to June
                1989. Other positions Mr. Sturgeon has held include Executive
                Director of MIS for Ducommun where he was responsible for ten
                divisions, including Kierulff Electronics.

                Walter Tobin has been Executive Vice President, OEM Division,
                since joining the Company in 2003. Mr. Tobin is responsible for
                all OEM Sales and Marketing in North America. Prior to joining
                the Company, Mr. Tobin was with Pioneer-Standard, a distributor
                and reseller, for over eleven years, serving in several
                positions as Senior Vice President of Marketing and Operations
                and Value Added Services. Prior to joining Pioneer-Standard, Mr.
                Tobin held the positions of Regional Vice President, Regional
                Director and Branch Manager with various companies, including
                Lex/Schweber, Arrow and Cramer Electronics. Mr. Tobin has thirty
                years of experience in the distribution industry.

                Timothy E. Tonges has been President of our North American
                Distribution Divisions since October 2003. From 1991 to 2003,
                Mr. Tonges held various positions, most recently Executive Vice
                President, with Pomeroy IT Solutions, Inc., an IT solutions
                provider, prior to which, he held various sales and marketing
                positions with Toshiba America.

           (c)  Information concerning Compliance with Section 16(a) of the
                Securities Exchange Act of 1934 appears in the Company's Proxy
                Statement, under the heading "Compliance with Section 16(a) of
                the Securities Exchange Act of 1934," and is incorporated herein
                by reference.

ITEM 11.  EXECUTIVE COMPENSATION

           Information concerning executive compensation appears in the
Company's Proxy Statement, under the caption "Executive Compensation," and is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

           Information concerning the security ownership of certain beneficial
owners and management appears


                                       57
<PAGE>
in the Company's Proxy Statement, under Item 1 "Election of Directors," and is
incorporated herein by reference.

           The following table provides information concerning the Company's
equity compensation plans as of December 31, 2003:

<TABLE>
<CAPTION>
                                                    Equity Compensation Plan Information
                                                ----------------------------------------------
                              Column (a)                       Column (b)                            Column (c)
                        -----------------------           --------------------           -----------------------------------
Plan Category           Number of securities to             Weighted-average               Number of securities remaining
                        be issued upon exercise             exercise price of               available for future issuance
                        of outstanding options,            outstanding options             under equity compensation plans
                          warrants and rights              warrants and rights            (excluding securities reflected in
                        -----------------------           --------------------           -----------------------------------
<S>                     <C>                               <C>                            <C>
Equity compensation
plans approved by              3,842,497                         $7.28 (1)                              513,527(2)
 security holders

Equity compensation
plans not approved              973,000                          $5.84                                       --
by security holders
 (3)

Total                          4,815,497                         $6.91                                  513,527

</TABLE>

     (1)   Weighted-average exercise price excludes 963,048 shares for
           restricted stock units with zero exercise price.

     (2)   Includes (a) shares under the Company's (2)1998 Stock Option
           Plan, which plan provides for the automatic increase of
           shares on January 1 of each year of a number of shares equal to
           the lesser of (i) 600,000 shares, (ii) 4% of the outstanding
           shares on such date, or (iii) a lesser amount determined by the
           Board, subject to adjustment upon changes in capitalization of
           the Company and (b) 191 shares remaining available under the
           Company's Employee Stock Purchase Plan, which plan provides for
           the automatic increase on January 1 of each year of a number of
           shares equal to the lesser of (i) 225,000 shares, (ii) 1.5% of
           the outstanding shares on such date, or (iii) a lesser amount
           determined by the Board, subject to adjustment upon changes in
           capitalization of the Company.

     (3)   Represents stock options that have been granted to employees
           outside of the Company's 1998 Stock Option Plan, which options
           are represented by agreements substantially the same as
           agreements with respect to options under the 1998 Stock Option
           Plan and generally provide for a vesting period as determined by
           the Board of Directors and expire over terms not exceeding ten
           years from the date of grant.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           Information concerning certain relationships and related transactions
appears in the Company's Proxy Statement, under the caption "Election of
Directors," and is incorporated herein by reference.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

           Information concerning principal accountant fees and services appears
in the Company's Proxy Statement under the caption "Ratification of Appointment
of Independent Accountants" and is incorporated herein by reference.

                                     PART IV


                                       58
<PAGE>
           ITEM 15.  EXHIBITS FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                     FORM 8-K

(a)        The following documents are filed as part of this Form 10-K:

           (1)  Consolidated Financial Statements

           The financial statements (including the notes thereto) listed in the
Index to Consolidated Financial Statement Schedule (set forth in Item 8 of Part
II of this Form 10-K) are filed as part of this Annual Report on Form 10-K.

           (2)  Consolidated Financial Statement Schedule
                II - Valuation and Qualifying Accounts and Reserves     page 61

           Schedules not listed above have been omitted because they are not
required or the information required to be set forth therein is included in the
Consolidated Financial Statements or Notes to Consolidated Financial Statements.

           (3)  Exhibits - See Exhibit Index following signature page

(b)        Reports on Form 8-K.

           During the fourth quarter of 2003, a Form 8-K dated October 29, 2003
           was furnished to the Securities and Exchange Commission announcing
           the third quarter earnings.

(c)        Exhibits. See Item 15(a) above.

(d)        Financial Statements Schedules. See Item 15(a) above.


                                       59
<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 Report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 15, 2004.

                                         BELL MICROPRODUCTS INC.


                                     By:/s/ James E. Illson
                                        ----------------------------------
                                        James E. Illson
                                        Chief Financial Officer and Executive
                                        Vice President of Finance and Operations

                                POWER OF ATTORNEY

           KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints W. Donald Bell and James E. Illson and
each of them, jointly and severally, his attorneys-in-fact, each with full power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.

           Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>

          SIGNATURE                                      TITLE                                          DATE
------------------------------   ---------------------------------------------------------------    ----------------
<S>                              <C>                                                                <C>
   /s/ W. Donald Bell            Chairman of the Board, President and Chief Executive                  March 15, 2004
------------------------------
(W. Donald Bell)                 Officer (Principal Executive Officer)

   /s/ James E. Illson           Chief Financial Officer and Executive Vice President of               March 15, 2004
 -----------------------------
(James E Illson)                 Finance and Operations (Principal Financial and Accounting
                                 Officer)

   /s/ Gordon A. Campbell        Director                                                              March 15, 2004
------------------------------
(Gordon A. Campbell)

   /s/ Eugene Chaiken            Director                                                              March 15, 2004
------------------------------
(Eugene Chaiken)

   /s/ David M. Ernsberger       Director                                                              March 15, 2004
------------------------------
(David M. Ernsberger)

   /s/ Edward L. Gelbach         Director                                                              March 15, 2004
------------------------------
(Edward L. Gelbach)

   /s/ James E. Ousley           Director                                                              March 15, 2004
------------------------------
(James E. Ousley)

   /s/ Glenn E. Penisten         Director                                                              March 15, 2004
------------------------------
(Glenn E. Penisten)

   /s/ Mark L. Sanders           Director                                                              March 15, 2004
------------------------------
(Mark L. Sanders)
</TABLE>


                                       60
<PAGE>
                                                                     SCHEDULE II

                             BELL MICROPRODUCTS INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                               Additions                  Balance
                                                       Balance at               Restructuring  Charged to                  at End
                                                       Beginning                 and Special   Costs and    Deductions-     of
Year Ended December 31,                                of Period      Other (1)    Charges      Expenses    Write-offs     Period
-----------------------                                ----------     ---------  -----------   ---------    ----------    --------
<S>                                                    <C>            <C>        <C>           <C>          <C>           <C>
2001
Allowance for doubtful accounts                           $12,831      $1,630      $ 4,038      $11,569      $(13,862)      $16,206
Allowance for excess and obsolete inventory                 6,399       1,415       15,781        7,146       (16,050)       14,691
Allowance for sales returns and warranty obligations        8,238          --           --       75,494       (75,388)        8,344
Allowance for tax valuations                                   --          --           --           --            --            --

2002
Allowance for doubtful accounts                            16,206          --        1,700       11,357        (9,923)       19,340
Allowance for excess and obsolete inventory                14,691          --           --        7,388       (13,462)        8,617
Allowance for sales returns and warranty obligations        8,344          --           --       86,335       (86,097)        8,582
Allowance for tax valuations                                   --          --           --          934            --           934

2003
Allowance for doubtful accounts                            19,340          --           --        7,569        (9,342)       17,567
Allowance for excess and obsolete inventory                 8,617       2,319           --        8,405        (9,815)        9,526
Allowance for sales returns and warranty obligations        8,582          --           --       57,340       (57,024)        8,898
Allowance for tax valuations                                  934          --           --        3,147          (439)        3,642
</TABLE>

(1)   Balance consists of allowance for doubtful accounts and inventory
      provisions related to the acquisitions of subsidiaries.


                                       61
<PAGE>
<TABLE>
<CAPTION>
                                INDEX TO EXHIBITS

           NUMBER   DESCRIPTION OF DOCUMENT

           <S>      <C>
           3.1      Amended and Restated Articles of Incorporation of
                    Registrant - incorporated by reference to exhibit filed with
                    the Registrant's Report on Form 10-Q for the quarter ended
                    September 30, 2000.

           3.2      Amended and Restated Bylaws of Registrant - incorporated
                    by reference to exhibit filed with the Registrant's
                    Registration Statement on Form S-1 (File No. 33-60954) filed
                    on April 14, 1993 and which became effective on June 14,
                    1993.

           4.1      Specimen Common Stock Certificate of the Registrant -
                    incorporated by reference to exhibit filed with the
                    Registrant's Registration Statement on Form S-1 (File No.
                    33-60954) filed on April 14, 1993 and which became effective
                    on June 14, 1993.

           4.2      Amended and Restated Registration Rights Agreement dated
                    June 11, 1992 between Registrant and certain investors named
                    therein, as amended - incorporated by reference to exhibit
                    filed with the Registrant's Report on Form 10-K for the
                    fiscal year ended December 31, 1993.

           10.1*    1998 Stock Plan - incorporated by reference to exhibit
                    filed with the Registrant's Report on Form S-8 (File No.
                    333-58053).

           10.2*    The form of Option Agreement used under the 1998 Stock
                    Plan - incorporated by reference to exhibit filed with the
                    Registrant's Report on Form S-8 (File No. 333-58053).

           10.3     Employee Stock Purchase Plan, as amended through May
                    21, 1998 - incorporated by reference to exhibit filed with
                    the Registrant's Report on Form S-8 (File No. 333-58053).

           10.4     The form of Option Agreement used under the Employee
                    Stock Purchase Plan - incorporated by reference to exhibit
                    filed with the Registrant's Registration Statement on Form
                    S-8 (File No. 33-83398).

           10.5     Registrant's 401(k) Plan - incorporated by reference to
                    exhibit filed with the Registrant's Registration Statement
                    on Form S-1 (File No. 33-60954).

           10.6     Lease dated March 17, 1992 for Registrant's facilities
                    at 1941 Ringwood Avenue; Suite 100, San Jose, California --
                    incorporated by reference to exhibit filed with the
                    Registrant's Registration Statement on Form S-1 (File No.
                    33-60954).

           10.7     Second Amendment to Third Amended and Restated Credit
                    Agreement dated as of July 21, 1999 - incorporated by
                    reference to exhibit filed with the Registrant's Report on
                    Form 10-Q for the quarter ended June 30, 1999.

           10.8     Third Amended and Restated Credit Agreement dated as of
                    November 12, 1998, conformed to include the First Amendment
                    thereto, effective May 14, 1999 - incorporated by reference
                    to exhibit filed with the Registrant's Report on Form 10-Q
                    for the quarter ended June 30, 1999.

           10.9     Form of Indemnification Agreement - incorporated by
                    reference to exhibit filed with the Registrant's
                    Registration Statement on Form S-1 (File No. 33-60954).

           10.10    IBM Authorized Distributor Agreement dated May 17,
                    1993 between IBM Corporation and Registrant - incorporated
                    by reference to exhibit filed with the Registrant's
                    Registration Statement on Form S-1 (File No. 33-60954).

           10.11    Lease dated February 17, 1999 for Registrant's
                    facilities at 4048 Castle Avenue, New
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                    Castle, Delaware - incorporated by reference to exhibit
                    filed with the Registrant's Report on Form 10-Q for the
                    quarter ended March 31, 1999.

           10.12    Third Amendment and Restated Credit Agreement dated as
                    of November 12, 1998 by and among the Registrant, the Banks
                    named therein and California Bank & Trust, as Agent for the
                    Banks - incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 8-K filed on November 30, 1998,
                    as amended on Form 8-K/A filed on December 11, 1998.

           10.13    Asset Purchase Agreement dated as of November 5, 1998
                    by and between the Company, Almo Corporation, Almo
                    Distributing Pennsylvania, Inc., Almo Distributing Maryland,
                    Inc., Almo Distributing Minnesota, Inc., Almo Distributing
                    Wisconsin, Inc. and Almo Distributing, Inc. - incorporated
                    by reference to exhibit filed with the Registrant's Report
                    on Form 8-K filed on November 30, 1998, as amended on Form
                    8-K/A filed on December 11, 1998.

           10.14    Fourth Amendment to Third Amended and Restated Credit
                    Agreement dated December 8, 1999 by and among the
                    Registrant, the Banks named therein and California Bank &
                    Trust, as agent for the Banks - incorporated by reference to
                    exhibit filed with the Registrant's Report on Form 10-K for
                    the fiscal year ended December 31, 1999.

           10.15    Fifth Amendment to Third Amended and Restated Credit
                    Agreement dated December 31, 1999 by and among the
                    Registrant, the Banks named therein and California Bank &
                    Trust, as agent for the Banks - incorporated by reference to
                    exhibit filed with the Registrant's Report on Form 10-K for
                    the fiscal year ended December 31, 1999.

           10.16    Lease dated August 1, 1999 for Registrant's facilities
                    at 1941 Ringwood Avenue, Suite 200, San Jose, California -
                    incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 10-K for the fiscal year ended
                    December 31, 1999.

           10.17    Asset Purchase Agreement between Bell Microproducts,
                    Inc. and Pemstar Inc. April 30, 1999 - incorporated by
                    reference to exhibit filed with the Registrant's Report on
                    Form 8-K filed on June 23, 1999.

           10.18    Amendment to Asset Purchase Agreement between Bell
                    Microproducts, Inc. and Pemstar Inc. June 4, 1999 -
                    incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 8-K filed on June 23, 1999.

           10.19    Asset Purchase Agreement between Bell Microproducts -
                    Future Tech, Inc., Future Tech International, Inc., Bell
                    Microproducts, and Leonard Keller, dated May 14, 1999, as
                    amended June 1, 1999 - incorporated by reference to exhibit
                    filed with the Registrant's Report on Form 8-K filed on
                    August 4, 1999.

           10.20*   Management Retention Agreements between the
                    Registrant and the following executive officers of the
                    Registrant: W. Donald Bell and Remo E. Canessa -
                    incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 10-Q for the quarter ended
                    September 30, 1999.

           10.21    Waiver and Third Amendment to Third Amended and
                    Restated Credit Agreement dated as of October 15, 1999 -
                    incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 10-Q for the quarter ended
                    September 30, 1999.

           10.22    Distribution Agreement dated as of January 11, 2000
                    between the Registrant and International Business Machines
                    Corporation - incorporated by reference to exhibit filed
                    with the Registrant's form 10-Q/A for the quarter ended
                    September 30, 1999.

           10.23*   Employment Agreement dated as of July 1, 1999 between
                    the Registrant and W. Donald Bell, the Registrant's Chief
                    Executive Officer - incorporated by reference to exhibit
                    filed with the Registrant's Report on Form 8-K filed on
                    January 13, 2000.

           10.24    Office and warehouse lease, dated March 21, 1991, as
                    amended by Amendment No. 1, Amendment No. 2, Amendment No.
                    3, Amendment No. 4 and Amendment No. 5 relating to Rorke
                    Data facilities in Eden Prairie, Minnesota--incorporated by
                    reference to exhibit filed with the Registrant's
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                    Report on Form 10-Q for the quarter ended June 30, 2000.

           10.25    Lease, dated June 16, 2000, relating to Bell
                    Microproducts - Future Tech facilities in Miami,
                    Florida--incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 10-Q for the quarter ended June
                    30, 2000.

           10.26*   Management Retention Agreement dated March 20, 2000,
                    between the Company and Lawrence Leong--incorporated by
                    reference to exhibit filed with the Registrant's Report on
                    Form 10-Q for the quarter ended June 30, 2000.

           10.27    Sixth Amendment to Third Amended and Restated Credit
                    Agreement dated May 15, 2000 by among the Registrant, the
                    Banks named therein and California Bank & Trust, as agent
                    for the Banks--incorporated by reference to exhibit filed
                    with the Registrant's Report on Form 10-Q for the quarter
                    ended June 30, 2000.

           10.28    Seventh Amendment to Third Amended and Restated Credit
                    Agreement dated June 22, 2000 by and among the Registrant,
                    the Banks named therein and California Bank & Trust, as
                    Agent for the Banks--incorporated by reference to exhibit
                    filed with the Registrant's Report on Form 10-Q for the
                    quarter ended June 30, 2000.

           10.29    Securities Purchase Agreement dated July 6, 2000
                    between the Registrant and The Retirement Systems of
                    Alabama--incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 10-Q for the quarter ended
                    September 30, 2000.

           10.30    Stock Purchase Agreement dated July 17, 2000 between
                    the Registrant and Interx Media PLC--incorporated by
                    reference to exhibit filed with the Registrant's Report on
                    Form 10-Q for the quarter ended September 30, 2000.

           10.31    Fourth Amended and Restated Credit Agreement dated as
                    of October 10, 2000, among Bell Microproducts, the listed
                    financial institutions and California Bank & Trust, as
                    agent--incorporated by reference to exhibit filed with the
                    Registrant's Report on Form 10-Q for the quarter ended
                    September 30, 2000.

           10.32*   Management Retention Agreements between the
                    Registrant and the following executive officers of the
                    Registrant: Philip M. Roussey, Brian J. Clark, Gary Gammon
                    and Robert J. Sturgeon--incorporated by reference to Exhibit
                    10.32 to the Registrant's Annual Report on Form 10K for the
                    year ended December 31, 2000.

           10.33*   Employment Agreement dated as of October 18, 2000,
                    between the Registrant and James E. Ousley--incorporated by
                    reference to Exhibit 10.33 to the Registrant's Annual Report
                    on Form 10K for the year ended December 31, 2000.

           10.34*   Management Retention Agreement dated May 7, 2001
                    between the Registrant and Benedictus Borsboom -
                    incorporated by reference to Exhibit 10.1 to the
                    Registrant's Quarterly Report on Form 10Q for the quarter
                    ended March 31, 2002

           10.35*   1998 Stock Plan, as amended and Restated through
                    February 20, 2002 - incorporated by reference to Exhibit
                    10.2 to the Registrant's Quarterly Report on Form 10Q for
                    the Quarter ended March 31, 2002.

           10.36*   Amendment to Employment Agreement dated as of July 1,
                    1999 between the Registrant and W. Donald
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                    Bell date as of April 30, 2002 - incorporated by reference
                    to Exhibit 10.1 to the Registrant's Quarterly Report on Form
                    10Q for the quarter ended September 30, 2002.

           10.37*   Executive Employment and Non-Compete Agreement dated
                    as of August 13, 2002 between the Registrant and James E.
                    Illson - incorporated by reference to Exhibit 10.2 to the
                    Registrant's Quarterly Report on Form 10-Q for the quarter
                    ended September 30, 2002.

           10.38*   Management Retention Agreements dated as of August 6,
                    2002 between the Registrant and the following executive
                    officers: W. Donald Bell, Ian French, Nick Ganio, Richard J.
                    Jacquet, Phillip M. Roussey and Robert J. Sturgeon -
                    incorporated by reference to Exhibit 10.3 to the
                    Registrant's Quarterly Report on Form 10-Q for the quarter
                    ended September 30, 2002.

           10.39    Syndicated Credit Agreement effective as of December
                    2, 2002 by and among Ideal Hardware Limited, Bell
                    Microproducts Europe Export Limited, BM Europe Partners
                    C.V., Bell Microproducts Europe BV, Bank of America, N.A.
                    and certain banks and financial institutions -incorporated
                    by reference to Exhibit 10.39 to the Registrant's Annual
                    Report on Form 10K for the year ended December 31, 2002.

           10.40    Syndicated Composite Guarantee and Debenture effective
                    as of December 2, 2002 by and among Ideal Hardware Limited,
                    certain other companies listed and Bank of America,
                    N.A.-incorporated by reference to Exhibit 10.40 to the
                    Registrant's Annual Report on Form 10K for the year ended
                    December 31, 2002.

           10.41    Priority Agreement effective as of December 2, 2002 by
                    and among Bell Microproducts Limited, National Westminster
                    Bank PLC and Bank of America, N.A. -incorporated by
                    reference to Exhibit 10.41 to the Registrant's Annual Report
                    on Form 10K for the year ended December 31, 2002.

           10.42    First Union National Bank Loan and Security Agreement
                    dated May 14, 2001 - incorporated by reference to Exhibit
                    10.1 to the Registrant's Quarterly Report on Form 10-Q for
                    the quarter ended June 30, 2001-incorporated by reference to
                    Exhibit 10.42 to the Registrant's Annual Report on Form 10K
                    for the year ended December 31, 2002.

           10.43    First Amendment to Loan and Security Agreement dated
                    as of December 31, 2002 by and among the Registrant, certain
                    subsidiaries of the Registrant, certain financial
                    institutions and Congress Financial Corporation-incorporated
                    by reference to Exhibit 10.43 to the Registrant's Annual
                    Report on Form 10K for the year ended December 31, 2002.

           10.44    Supplemental Agreement Re Syndicated Credit Agreement
                    dated November 6, 2003 by and among Ideal Hardware Limited,
                    Bell Microproducts Europe Export Limited, BM Europe Partners
                    C.V., Bell Microproducts Europe BV, Bank of America, N.A.
                    and certain banks and financial institutions.

           10.45    Second Amendment to Loan and Security Agreement and
                    Waiver dated October 9, 2003 with Congress Financial
                    Corporation

           10.46    Amendment to Employment Agreement dated October 19, 2000
                    between the Company and W. Donald Bell -- incorporated by
                    reference to Exhibit 10.1 to the Registrant's Quarterly
                    Report on Form 10-Q for the quarter ended March 31, 2001.

           21.1     Subsidiaries of the Registrant

           23.1     Consent of PricewaterhouseCoopers LLP, independent
                    accountants

           24.1     Power of Attorney (Contained on Signature page of this
                    Form 10-K).

           31.1     Certification of Chief Executive Officer Pursuant to Section
                    302 of Sarbanes-Oxley Act of 2002.

           31.2     Certification of Chief Financial Officer Pursuant to
                    Section 302 of Sarbanes-Oxley Act of 2002.

           32.1     Certification of Chief Executive Officer Pursuant to
                    Section 906 of Sarbanes-Oxley Act of 2002.

           32.2     Certification of Chief Financial Officer Pursuant to
                    Section 906 of Sarbanes-Oxley Act of 2002.
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_________________________________
           *    Management contract or compensatory plan, contract or
                arrangement required to be filed as an exhibit to this Form
                10-K.

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