##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)



|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
                    to

Commission file number 0-23827





PC CONNECTION, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 02-0513618                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|730 MILFORD ROAD, MERRIMACK, NEW HAMPSHIRE                     |  | 03054                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(603) 683-2000

(Registrants telephone number, including area code)





Former name, former address
and former fiscal year, if changed since last report: N/A

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  þ    NO   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).

YES   ̈    NO   ̈

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                              |  |                             
|--------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                    |  | Accelerated filer  þ        
|Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈
|(Do not check if a smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

YES   ̈    NO  þ

The number of shares outstanding of the issuers common stock as of May 1, 2009 was
26,977,264.









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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

PART I    FINANCIAL INFORMATION



|                             |  |                                                                                                        |  |     
|---------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | ----
|                             |  |                                                                                                        |  | Page
|                             |  |                                                                                                       
|ITEM 1.                      |  | Unaudited Condensed Consolidated Financial Statements:                                                 |  |     
|                             |  |                                                                                                       
|                             |  | Condensed Consolidated Balance SheetsMarch 31, 2009 and December 31, 2008                             |  | 1   
|                             |  |                                                                                                       
|                             |  | Condensed Consolidated Statements of OperationsThree months ended March 31, 2009 and 2008             |  | 2   
|                             |  |                                                                                                       
|                             |  | Condensed Consolidated Statement of Changes in Stockholders 
EquityThree months ended March 31, 2009 |  | 3   
|                             |  |                                                                                                       
|                             |  | Condensed Consolidated Statements of Cash FlowsThree months ended March 31, 2009 and 2008             |  | 4   
|                             |  |                                                                                                       
|                             |  | Notes to Unaudited Condensed Consolidated Financial Statements                                         |  | 5   
|                             |  |                                                                                                       
|ITEM 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations.                 |  | 12  
|                             |  |                                                                                                       
|ITEM 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                             |  | 22  
|                             |  |                                                                                                       
|ITEM 4.                      |  | Controls and Procedures                                                                                |  | 23  
|                            
|PART II    OTHER INFORMATION
|                             |  |                                                                                                       
|ITEM 1A.                     |  | Risk Factors                                                                                           |  | 24  
|                             |  |                                                                                                       
|ITEM 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 31  
|                             |  |                                                                                                       
|ITEM 6.                      |  | Exhibits                                                                                               |  | 32  
|                             | 
|SIGNATURES                   |  | 33                                                                                                    



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)



|                                                               |  |               |         |   |                  |   |         |  
|-------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                               |  | March 31,2009 |         |   | December 31,2008 |  
|                                                               |  | (unaudited)   |         |   |                  |  
|ASSETS                                                         |  |               |         |   |                  |   |         |  
|Current Assets:                                                |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                      |  | $             | 67,916  |   |                  | $ | 47,003  |  
|Accounts receivable, net                                       |  |               | 140,396 |   |                  |   | 185,885 |  
|Inventories                                                    |  |               | 56,830  |   |                  |   | 60,813  |  
|Deferred income taxes                                          |  |               | 4,096   |   |                  |   | 4,244   |  
|Income taxes receivable                                        |  |               | 4,530   |   |                  |   | 1,448   |  
|Prepaid expenses and other current assets                      |  |               | 3,698   |   |                  |   | 3,626   |  
|                                                               |  |               |         |   |                  |   |         |  
|Total current assets                                           |  |               | 277,466 |   |                  |   | 303,019 |  
|Property and equipment, net                                    |  |               | 25,124  |   |                  |   | 24,483  |  
|Goodwill                                                       |  |               | 48,060  |   |                  |   | 48,060  |  
|Other intangibles, net                                         |  |               | 1,952   |   |                  |   | 2,220   |  
|Other assets                                                   |  |               | 390     |   |                  |   | 385     |  
|                                                               |  |               |         |   |                  |   |         |  
|Total Assets                                                   |  | $             | 352,992 |   |                  | $ | 378,167 |  
|                                                               |  |               |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                           |  |               |         |   |                  |   |         |  
|Current Liabilities:                                           |  |               |         |   |                  |   |         |  
|Current maturities of capital lease obligation to affiliate    |  | $             | 718     |   |                  | $ | 699     |  
|Accounts payable                                               |  |               | 78,909  |   |                  |   | 101,783 |  
|Accrued expenses and other liabilities                         |  |               | 18,051  |   |                  |   | 19,993  |  
|Accrued payroll                                                |  |               | 6,789   |   |                  |   | 6,337   |  
|                                                               |  |               |         |   |                  |   |         |  
|Total current liabilities                                      |  |               | 104,467 |   |                  |   | 128,812 |  
|Capital lease obligation to affiliate, less current maturities |  |               | 3,423   |   |                  |   | 3,610   |  
|Deferred income taxes                                          |  |               | 7,130   |   |                  |   | 6,183   |  
|Other liabilities                                              |  |               | 4,073   |   |                  |   | 4,238   |  
|                                                               |  |               |         |   |                  |   |         |  
|Total Liabilities                                              |  |               | 119,093 |   |                  |   | 142,843 |  
|                                                               |  |               |         |   |                  |   |         |  
|Stockholders Equity:                                          |  |               |         |   |                  |   |         |  
|Common stock                                                   |  |               | 273     |   |                  |   | 273     |  
|Additional paid-in capital                                     |  |               | 96,297  |   |                  |   | 95,997  |  
|Retained earnings                                              |  |               | 140,717 |   |                  |   | 142,336 |  
|Treasury stock at cost                                         |  |               | (3,388  | ) |                  |   | (3,282  | )
|                                                               |  |               |         |   |                  |   |         |  
|Total Stockholders Equity                                     |  |               | 233,899 |   |                  |   | 235,324 |  
|                                                               |  |               |         |   |                  |   |         |  
|Total Liabilities and Stockholders Equity                     |  | $             | 352,992 |   |                  | $ | 378,167 |  
|                                                               |  |               |         |   |                  |   |         |  

See notes to unaudited condensed consolidated financial statements.



1



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(amounts in
thousands, except per share data)



|                                             |  |                             |         |   |      |   |         |  
|-------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                             |  | Three Months EndedMarch 31, |        
|                                             |  | 2009                        |         |   | 2008 |  
|Net sales                                    |  | $                           | 326,221 |   |      | $ | 423,724 |  
|Cost of sales                                |  |                             | 284,610 |   |      |   | 370,980 |  
|                                             |  |                             |         |   |      |   |         |  
|Gross profit                                 |  |                             | 41,611  |   |      |   | 52,744  |  
|Selling, general and administrative expenses |  |                             | 43,289  |   |      |   | 45,393  |  
|Special charges                              |  |                             | 891     |   |      |   |        |  
|                                             |  |                             |         |   |      |   |         |  
|Income (loss) from operations                |  |                             | (2,569  | ) |      |   | 7,351   |  
|Interest expense                             |  |                             | (134    | ) |      |   | (162    | )
|Other, net                                   |  |                             | 199     |   |      |   | 159     |  
|                                             |  |                             |         |   |      |   |         |  
|Income (loss) before taxes                   |  |                             | (2,504  | ) |      |   | 7,348   |  
|Income tax benefit (provision)               |  |                             | 885     |   |      |   | (2,574  | )
|                                             |  |                             |         |   |      |   |         |  
|Net income (loss)                            |  | $                           | (1,619  | ) |      | $ | 4,774   |  
|                                             |  |                             |         |   |      |   |         |  
|Earnings (loss) per common share:            |  |                             |         |   |      |   |         |  
|Basic                                        |  | $                           | (.06    | ) |      | $ | .18     |  
|                                             |  |                             |         |   |      |   |         |  
|Diluted                                      |  | $                           | (.06    | ) |      | $ | .18     |  
|                                             |  |                             |         |   |      |   |         |  
|Weighted average common shares outstanding:  |  |                             |         |   |      |   |         |  
|Basic                                        |  |                             | 26,819  |   |      |   | 26,860  |  
|                                             |  |                             |         |   |      |   |         |  
|Diluted                                      |  |                             | 26,819  |   |      |   | 26,974  |  
|                                             |  |                             |         |   |      |   |         |  



See notes to unaudited
condensed consolidated financial statements.



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

Three Months Ended March 31, 2009

(Unaudited)

(amounts in thousands)



|                                        |        |              |        |                           |     |                  |        |        |                |        |         |   |       |      |   |  |   |        |   |  |   |         |  
|--------------------------------------- | ------ | ------------ | ------ | ------------------------- | --- | ---------------- | ------ | ------ | -------------- | ------ | ------- | - | ----- | ---- | - |  | - | ------ | - |  | - | ------- | -
|                                        |        | Common Stock |        | AdditionalPaid-In Capital |     | RetainedEarnings |        |        | Treasury Stock |        |         |   |      
|                                        | Shares |              | Amount |                           |     |                  | Shares |        |                | Amount |         |   | Total |     
|BalanceJanuary 1, 2009                 |        | 27,326       |        | $                         | 273 |                  | $      | 95,997 |                | $      | 142,336 |   |       | (492 | ) |  | $ | (3,282 | ) |  | $ | 235,324 |  
|Stock compensation expense              |        |             |        |                           |    |                  |        | 300    |                |        |        |   |       |     |   |  |   |       |   |  |   | 300     |  
|Repurchase of common stock for Treasury |        |             |        |                           |    |                  |        |       |                |        |        |   |       | (36  | ) |  |   | (106   | ) |  |   | (106    | )
|Net loss                                |        |             |        |                           |    |                  |        |       |                |        | (1,619  | ) |       |     |   |  |   |       |   |  |   | (1,619  | )
|                                        |        |              |        |                           |     |                  |        |        |                |        |         |   |       |      |   |  |   |        |   |  |   |         |  
|BalanceMarch 31, 2009                  |        | 27,326       |        | $                         | 273 |                  | $      | 96,297 |                | $      | 140,717 |   |       | (528 | ) |  | $ | (3,388 | ) |  | $ | 233,899 |  
|                                        |        |              |        |                           |     |                  |        |        |                |        |         |   |       |      |   |  |   |        |   |  |   |         |  







See notes to unaudited condensed consolidated financial statements.



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in
thousands)



|                                                                                         |  |                             |         |   |      |   |         |  
|---------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                         |  | Three Months EndedMarch 31, |        
|                                                                                         |  | 2009                        |         |   | 2008 |  
|Cash Flows from Operating Activities:                                                    |  |                             |         |   |      |   |         |  
|Net income (loss)                                                                        |  | $                           | (1,619  | ) |      | $ | 4,774   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                                            |  |                             | 1,810   |   |      |   | 1,670   |  
|Provision for doubtful accounts                                                          |  |                             | 857     |   |      |   | 399     |  
|Deferred income taxes                                                                    |  |                             | 1,095   |   |      |   | 1,425   |  
|Stock compensation expense                                                               |  |                             | 300     |   |      |   | 207     |  
|Income tax benefit from exercise of stock options                                        |  |                             |        |   |      |   | 4       |  
|Excess tax benefit from exercise of stock options                                        |  |                             |        |   |      |   | (1      | )
|Changes in assets and liabilities:                                                       |  |                             |         |   |      |   |         |  
|Accounts receivable                                                                      |  |                             | 44,632  |   |      |   | 23,344  |  
|Inventories                                                                              |  |                             | 3,983   |   |      |   | 10,420  |  
|Prepaid expenses and other current assets                                                |  |                             | (3,154  | ) |      |   | (1,078  | )
|Other non-current assets                                                                 |  |                             | (5      | ) |      |   | 10      |  
|Accounts payable                                                                         |  |                             | (23,169 | ) |      |   | (25,180 | )
|Accrued expenses and other liabilities                                                   |  |                             | (1,655  | ) |      |   | (5,284  | )
|                                                                                         |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                                |  |                             | 23,075  |   |      |   | 10,710  |  
|                                                                                         |  |                             |         |   |      |   |         |  
|Cash Flows from Investing Activities:                                                    |  |                             |         |   |      |   |         |  
|Purchases of property and equipment                                                      |  |                             | (1,888  | ) |      |   | (2,926  | )
|                                                                                         |  |                             |         |   |      |   |         |  
|Net cash used for investing activities                                                   |  |                             | (1,888  | ) |      |   | (2,926  | )
|                                                                                         |  |                             |         |   |      |   |         |  
|Cash Flows from Financing Activities:                                                    |  |                             |         |   |      |   |         |  
|Proceeds from short-term borrowings                                                      |  |                             | 67      |   |      |   | 28,815  |  
|Repayment of short-term borrowings                                                       |  |                             | (67     | ) |      |   | (28,815 | )
|Repayment of capital lease obligation                                                    |  |                             | (168    | ) |      |   | (124    | )
|Purchase of treasury shares                                                              |  |                             | (106    | ) |      |   | (939    | )
|Exercise of stock options                                                                |  |                             |        |   |      |   | 25      |  
|Excess tax benefit from exercise of stock options                                        |  |                             |        |   |      |   | 1       |  
|                                                                                         |  |                             |         |   |      |   |         |  
|Net cash used for financing activities                                                   |  |                             | (274    | ) |      |   | (1,037  | )
|                                                                                         |  |                             |         |   |      |   |         |  
|Increase in cash and cash equivalents                                                    |  |                             | 20,913  |   |      |   | 6,747   |  
|Cash and cash equivalents, beginning of period                                           |  |                             | 47,003  |   |      |   | 13,741  |  
|                                                                                         |  |                             |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                                 |  | $                           | 67,916  |   |      | $ | 20,488  |  
|                                                                                         |  |                             |         |   |      |   |         |  

See notes to unaudited condensed consolidated financial statements.



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Note 1Basis of Presentation

The accompanying condensed consolidated financial statements of PC Connection, Inc. and
its subsidiaries (the Company, we, us, or our) have been prepared in accordance with accounting principles generally accepted in the United States of America. Such principles were applied on a basis
consistent with the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission. The accompanying condensed consolidated financial statements should be
read in conjunction with the financial statements contained in our Annual Report on Form 10-K.

In the opinion of management, the
accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the
Companys financial condition as of the date of the interim balance sheet. The operating results for the three months ended March 31, 2009 may not be indicative of the results expected for any succeeding quarter or the entire year ending
December 31, 2009.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions. These estimates and assumptions affect the amounts reported in the accompanying condensed consolidated financial statements. Actual results could differ from those estimates.

Note 2Earnings Per Share

Basic earnings (loss)
per common share is computed using the weighted average number of shares outstanding. Diluted earnings (loss) per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to options
outstanding to purchase common stock and nonvested stock, if dilutive.

The following table sets forth the computation of basic and diluted
earnings (loss) per share:



|                                           |  |                    |        |   |      |   |       
|------------------------------------------ |  | ------------------ | ------ | - | ---- | - | ------
|                                           |  | Three Months Ended
|March 31,                                  |  | 2009               |        |   | 2008
|Numerator:                                 |  |                    |        |   |      |   |       
|Net income (loss)                          |  | $                  | (1,619 | ) |      | $ | 4,774 
|                                           |  |                    |        |   |      |   |       
|Denominator:                               |  |                    |        |   |      |   |       
|Denominator for basic earnings per share   |  |                    | 26,819 |   |      |   | 26,860
|Dilutive effect of employee equity awards  |  |                    |       |   |      |   | 114   
|                                           |  |                    |        |   |      |   |       
|Denominator for diluted earnings per share |  |                    | 26,819 |   |      |   | 26,974
|                                           |  |                    |        |   |      |   |       
|Earnings (loss) per share:                 |  |                    |        |   |      |   |       
|Basic                                      |  | $                  | (.06   | ) |      | $ | .18   
|                                           |  |                    |        |   |      |   |       
|Diluted                                    |  | $                  | (.06   | ) |      | $ | .18   
|                                           |  |                    |        |   |      |   |       



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(amounts in thousands, except per share data)



For the three months ended March 31, 2009 and 2008, the following weighted average outstanding
stock options and other common stock equivalents were excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive:



|                     |  |                    |  |     
|-------------------- |  | ------------------ |  | ----
|                     |  | Three Months Ended
|March 31,            |  | 2009               |  | 2008
|Anti-dilutive shares |  | 1,168              |  | 577 
|                     |  |                    |  |     

Note 3Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurements (SFAS 157) which became effective January 1, 2008, except as amended by FASB Staff Position (FSP) 157-1, 157-2, and 157-3. SFAS 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value measurements. FSP 157-1 excludes SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing
transactions, while FSP 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis,
until fiscal years beginning after November 15, 2008. FSP 157-3 clarifies the application of SFAS 157 in a market that is not active and provides an example of how to determine the fair value of a financial asset in an inactive
market. We adopted the provisions of SFAS 157 effective January 1, 2008, as amended, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. The adoption of this statement
did not have a significant impact on our financial statements for fair value measurements made during the year ended December 31, 2008. The provisions of the statement related to non-recurring nonfinancial assets and nonfinancial liabilities
were adopted effective January 1, 2009 and did not have a significant impact on our financial statements.

Note 4Goodwill and Other
Intangible Assets

We account for goodwill and intangible assets in accordance with SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS 142). Under SFAS 142, goodwill and certain intangible assets with indefinite lives are not amortized but are subject to an annual impairment test, and more frequently, if events or circumstances occur that
would indicate a potential decline in our fair value. We perform the assessment annually as of January 1, and on an interim basis if potential impairment indicators arise, and determine the fair value of the reporting units using established
income and market valuation approaches.

We performed an interim impairment review effective December 31, 2008 and determined that the
goodwill carried by our SMB and Public Sector segments was fully impaired, and as a result, we recognized an impairment loss of $8,807, or $5,383 net of taxes, in our operating results for the year ended December 31, 2008. The fair value of the
Large Account reporting unit exceeded its carrying value, and accordingly there was no need to perform the second step of the impairment test required under SFAS 142 for this reporting unit at December 31, 2008. Given the results of the
December 31, 2008 review, we concluded there was no impairment on January 1, 2009.

We determined the fair values of our
reporting units by preparing a discounted cash flow analysis using updated forward looking projections of each units future operating results. The significant assumptions used in



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(amounts in thousands, except per share data)



our discounted cash flow analysis include: net income, the discount rate used to present value future cash flows, working capital requirements, and terminal
growth rates. Net income assumptions include sales growth, gross margin, and selling, general and administrative (SG&A) growth assumptions, which are generally based on historical trends. The discount rate used is a market
participant weighted average cost of capital (WAAC) and was 13.5% at December 31, 2008. Working capital requirements were estimated at 7.5% of revenues. We performed a sensitivity analysis on the significant assumptions used
in our December 31, 2008 discounted cash flow analysis and have determined that a reasonable, negative change in our assumptions, as follows, would not impact our conclusion: reduce net income by 10%, increase the WAAC by 100 basis points, or reduce
terminal sales growth rate by 20%.



|           |  |                |       
|---------- |  | -------------- | ------
|           |  | March 31, 2009
|Goodwill   |  | $              | 48,060
|Trademarks |  |                | 1,190 

Intangible assets subject to amortization at March 31, 2009 consisted of customer lists of
$703 and a licensing agreement of $59 (net of accumulated amortization of $4,517 and $415, respectively). Intangible assets subject to amortization at December 31, 2008 consisted of customer lists of $941 and a licensing agreement of $89 (net
of accumulated amortization of $4,278 and $386, respectively). For each of the three-month periods ended March 31, 2009 and 2008, we recorded amortization expenses of $268.

The estimated amortization expense for each of the three succeeding years and thereafter is as follows:



|                                 |  |   |     |    
|-------------------------------- |  | - | --- | ---
|For the Year Ending December 31, |  |   |    
|2009                             |  | $ | 674 | (*)
|2010                             |  |   | 88  |    
|2011 and thereafter              |  |   |    |    



(*) Represents estimated amortization expense for the nine months ending December 31, 2009.

Note 5Segment
and Related Disclosures

SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, requires
that public companies report profits and losses and certain other information on their reportable operating segments in their annual and interim financial statements. Our Chief Operating Decision Maker (CODM) evaluates
operations and allocates resources based on a measure of operating income. The internal organization used by our CODM to assess performance and allocate resources determines the basis for our reportable operating segments. Our CODM is our Chief
Executive Officer.

Our operations are organized under three reportable operating segmentsthe SMB segment, which serves
small- and medium-sized businesses, as well as consumers; the Large Account segment, which serves medium-to-large corporations; and the Public Sector segment, which serves federal, state, and local government and educational
institutionstogether with our Headquarters/Other group that provide services in areas such as finance, human resources, information technology, legal, product management, communications, and marketing. Most of the operating costs associated
with the Headquarters/Other group functions are charged to the reportable operating segments based on their estimated usage of the underlying functions. We report these charges to the operating segments as Allocations. Certain of the
headquarters costs relating to executive oversight functions that are not allocated to the operating segments are included under the heading of Headquarters/Other in the tables below.



7



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(amounts in thousands, except per share data)



Net sales represent net sales to external customers and exclude inter-segment product revenues, as
they are not reviewed by our CODM. In addition, our CODM reviews income tax expense on a consolidated basis, and accordingly, we do not report income tax expense by operating segment. Segment information applicable to our reportable operating
segments for the three months ended March 31, 2009 and 2008 is shown below:



|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|------------------------------------------ |  | --------------------------------- | ------- | - | -------------------- | - | ------- | -------------------- |  | - | ------------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                           |  | Three Months Ended March 31, 2009 |        
|                                           |  | SMBSegment                        |         |   | Large AccountSegment |   |         | Public SectorSegment |  |   | Headquarters/Other |   |  | Consolidated |        
|Net sales                                  |  | $                                 | 172,368 |   |                      | $ | 90,723  |                      |  | $ | 63,130             |   |  |              |         |   |  | $ | 326,221 |  
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Operating income (loss) before allocations |  | $                                 | 10,987  |   |                      | $ | 3,269   |                      |  | $ | 1,980              |   |  | $            | (18,805 | ) |  | $ | (2, 569 | )
|Allocations                                |  |                                   | (11,395 | ) |                      |   | (836    | )                    |  |   | (3,756             | ) |  |              | 15,987  |   |  |   |        |  
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Operating income (loss)                    |  | $                                 | (408    | ) |                      | $ | 2,433   |                      |  | $ | (1,776             | ) |  | $            | (2,818  | ) |  | $ | (2, 569 | )
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Net interest expense and other, net        |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   | 65      |  
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Loss before taxes                          |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  | $ | (2, 504 | )
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Selected Operating Expense:                |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Depreciation and amortization              |  | $                                 | 67      |   |                      | $ | 330     |                      |  | $ | 30                 |   |  | $            | 1,383   |   |  | $ | 1,810   |  
|Special charges                            |  |                                   | 91      |   |                      |   | 107     |                      |  |   | 179                |   |  |              | 514     |   |  |   | 891     |  
|Balance Sheet Data:                        |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Total assets                               |  | $                                 | 148,908 |   |                      | $ | 147,914 |                      |  | $ | 38,247             |   |  | $            | 17,923  |   |  | $ | 352,992 |  
|Goodwill                                   |  |                                   |        |   |                      |   | 48,060  |                      |  |   |                   |   |  |              |        |   |  |   | 48,060  |  
|                                           | 
|                                           |  | Three Months Ended March 31, 2008 |        
|                                           |  | SMBSegment                        |         |   | Large AccountSegment |   |         | Public SectorSegment |  |   | Headquarters/Other |   |  | Consolidated |        
|Net sales                                  |  | $                                 | 240,149 |   |                      | $ | 117,208 |                      |  | $ | 66,367             |   |  |              |         |   |  | $ | 423,724 |  
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Operating income (loss) before allocations |  | $                                 | 18,004  |   |                      | $ | 6,131   |                      |  | $ | 2,226              |   |  | $            | (19,010 | ) |  | $ | 7, 351  |  
|Allocations                                |  |                                   | (10,925 | ) |                      |   | (724    | )                    |  |   | (3,103             | ) |  |              | 14,752  |   |  |   |        |  
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Operating income (loss)                    |  | $                                 | 7,079   |   |                      | $ | 5,407   |                      |  | $ | (877               | ) |  | $            | (4,258  | ) |  | $ | 7, 351  |  
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Net interest expense and other, net        |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   | (03     | )
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Income before taxes                        |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  | $ | 7,348   |  
|                                           |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Selected Operating Expense:                |  |                                   |         |   |                      |   |         |                      |  |   |                    |   |  |              |         |   |  |   |         |  
|Depreciation and amortization              |  | $                                 | 68      |   |                      | $ | 321     |                      |  | $ | 28                 |   |  | $            | 1,253   |   |  | $ | 1,670   |  

Our operating segments assets presented above are primarily accounts receivables,
intercompany receivables, and goodwill. Assets for the Headquarters/Other group are managed by corporate headquarters, including cash, inventory, and property and equipment. Total assets for the Headquarters/Other group at March 31, 2009 are
presented net of intercompany balance elimination of $131,486. Our capital expenditures largely consist of information technology (IT) hardware and software purchased to maintain or upgrade our management information systems. These
systems serve all of our subsidiaries, to varying degrees, and as a result, our CODM does not evaluate capital expenditures on a segment basis.



8



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(amounts in thousands, except per share data)



Senior management also monitors revenue by product mix (Notebooks and PDAs; Desktops and Servers;
Storage Devices; Software; Net/Com Products; Printers and Printer Supplies; Video, Imaging, and Sound; Memory and System Enhancements; and Accessories/Other).

Net sales by business segment and product mix are presented below:



|                                              |  |                    |         |      |   |        
|--------------------------------------------- |  | ------------------ | ------- | ---- | - | -------
|                                              |  | Three Months Ended
|March 31,                                     |  | 2009               |         | 2008
|Segment (excludes transfers between segments) |  |                    |         |      |   |        
|SMB                                           |  | $                  | 172,368 |      | $ | 240,149
|Large Account                                 |  |                    | 90,723  |      |   | 117,208
|Public Sector                                 |  |                    | 63,130  |      |   | 66,367 
|                                              |  |                    |         |      |   |        
|Total                                         |  | $                  | 326,221 |      | $ | 423,724
|                                              |  |                    |         |      |   |        
|Product Mix                                   |  |                    |         |      |   |        
|Notebooks and PDAs                            |  | $                  | 47,625  |      | $ | 64,101 
|Software                                      |  |                    | 44,684  |      |   | 56,146 
|Video, Imaging and Sound                      |  |                    | 44,321  |      |   | 62,291 
|Desktops/Servers                              |  |                    | 39,604  |      |   | 58,409 
|Net/Com Products                              |  |                    | 33,115  |      |   | 35,794 
|Printers and Printer Supplies                 |  |                    | 30,258  |      |   | 40,839 
|Storage Devices                               |  |                    | 29,107  |      |   | 42,562 
|Memory and System Enhancements                |  |                    | 11,310  |      |   | 15,094 
|Accessories/Other                             |  |                    | 46,197  |      |   | 48,488 
|                                              |  |                    |         |      |   |        
|Total                                         |  | $                  | 326,221 |      | $ | 423,724
|                                              |  |                    |         |      |   |        

Substantially all of our net sales for the three months ended March 31, 2009 and 2008 were
made to customers located in the United States. Shipments to customers located in foreign countries aggregated less than 1% in each of those respective periods. All of our assets at March 31, 2009 and December 31, 2008 were located in the
United States. Our primary target customers are small- and medium-sized businesses with 20 to 1,000 employees, federal, state, and local government agencies, educational institutions, and medium-to-large corporate accounts. Except for the federal
government, no single customer accounted for more than 3% of total net sales in the three months ended March 31, 2009 and 2008. Net sales to the federal government accounted for $20,879, or 6.4% of total net sales for the three months ended
March 31, 2009, and $23,085, or 5.4% of total net sales for the three months ended March 31, 2008.

Note 6Special Charges

In the three months ended March 31, 2009, we recorded a charge of $891 related to workforce reduction and management restructuring
costs, classified as workforce reductions in the table below. We did not record any special charges in the three months ended March 31, 2008.



9



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(amounts in thousands, except per share data)



A roll forward of special charges for the three months ended March 31, 2009 is shown below.



|                              |  |                     |       |  
|----------------------------- |  | ------------------- | ----- | -
|                              |  | WorkforceReductions |      
|Balance December 31, 2008     |  | $                   | 1,264 |  
|Charges                       |  |                     | 891   |  
|Cash payments                 |  |                     | (645  | )
|                              |  |                     |       |  
|Liabilities at March 31, 2009 |  | $                   | 1,510 |  
|                              |  |                     |       |  

Liabilities at March 31, 2009 consist of $1,155 of accrued payroll, $123 of accrued expenses
and other liabilities, and $232 of non-current other liabilities on the consolidated balance sheet and are expected to be paid through January 2011. Liabilities at December 31, 2008 consist of $955 of accrued payroll and $309 of non-current
other liabilities on the consolidated balance sheet.

Note 7Commitments and Contingencies

We are subject to various legal proceedings and claims which have arisen during the ordinary course of business. In the opinion of management, the
outcome of such matters is not expected to have a material effect on our financial position, results of operations, and cash flows.

We are
subject to audits by states on sales and income taxes, unclaimed property, and other assessments. A comprehensive multi-state unclaimed property audit is currently in progress. While management believes that known and estimated liabilities have been
adequately provided for, it is too early to determine the ultimate outcome of such audits. Such outcome could have a material negative impact on our financial position, results of operations, and cash flows.

Note 8Bank Borrowing and Trade Credit Arrangements

We have a $50,000 credit facility collateralized by substantially all of our business assets. This facility can be increased, at our option, to $80,000 for approved acquisitions or other uses authorized by the bank at substantially the same
terms. Amounts outstanding under this facility bear interest at the prime rate (3.25% at March 31, 2009). The facility also gives us the option of obtaining Eurodollar Rate Loans in multiples of $1,000 for various short-term durations. The
credit facility includes various customary financial ratios and operating covenants, including minimum net worth and maximum funded debt ratio requirements, and restrictions on the payment of dividends to shareholders, repurchase of our common
stock, and default acceleration provisions, none of which we believe significantly restricts our operations. Funded debt ratio is the ratio of average outstanding advances under the credit facility for the quarter to EBITDA (Earnings Before Interest
Expense, Taxes, Depreciation, and Amortization) for the trailing twelve months. The maximum allowable funded debt ratio under the agreement is 2.0 to 1.0; our actual funded debt ratio at March 31, 2009 was less than 0.1 to 1.0. Future decreases
in our consolidated EBITDA, however, could limit our potential borrowings under the credit facility.

No borrowings were outstanding under
this credit facility at March 31, 2009 and December 31, 2008, and accordingly the entire $50,000 facility was available for borrowing at both dates. The credit facility matures on October 15, 2012, at which time amounts outstanding
become due.



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 1Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(amounts in thousands, except per share data)



At March 31, 2009, we had security agreements with two financial institutions to facilitate the
purchase of inventory from various suppliers under certain terms and conditions. The agreements allow a collateralized first position in certain branded products inventory financed by the financial institutions up to an aggregated amount of $45,000.
The cost of such financing under these agreements is borne by the suppliers by discounting their invoices to the financial institutions as an incentive for us to purchase their products. We do not pay any interest or discount fees on such inventory
financing. At March 31, 2009 and December 31, 2008, accounts payable included $11,718 and $13,499, respectively, owed to these financial institutions.

Note 9Treasury Stock Purchases

On March 28, 2001, our Board of Directors authorized the spending of up to
$15,000 to repurchase our common stock. Share purchases will be made in the open market from time to time depending on market conditions. Our current bank line of credit, however, limits repurchases made after June 2005 to $10,000 without bank
approval of higher amounts.

In the first quarter of 2009, we repurchased an aggregate of 35 shares for $106. As of March 31, 2009, we
have repurchased an aggregate of 594 shares for $3,840. The maximum approximate dollar value of shares that may yet be purchased under the program without further bank approval is $8,445. We have issued nonvested shares from treasury stock and have
reflected upon vesting the net remaining balance of treasury stock on the consolidated balance sheet.

Note 10Fair Value

SFAS 157 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. A
financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 establishes three levels of inputs that may be used to measure
fair value:

Level 1Quoted prices in active markets for identical assets or liabilities.

Level 2Include other inputs that are directly or indirectly observable in the marketplace.

Level 3Unobservable inputs which are supported by little or no market activity.

In accordance with SFAS 157, we measure our cash equivalents at fair value and are classified within Level 1 or Level 2 of the fair value hierarchy. The
classification has been determined based on the manner in which we value our cash equivalents, primarily using quoted market prices or alternative pricing sources. Assets measured at fair value on a recurring basis consisted of the following types
of instruments and were reported as cash equivalents as of March 31, 2009:



|                                    |  |                                                                 |        |                                            |   |                                         |  |               |   |  |   |       
|----------------------------------- |  | --------------------------------------------------------------- | ------ | ------------------------------------------ | - | --------------------------------------- |  | ------------- | - |  | - | ------
|                                    |  | Fair Value Measurements at Reporting Date Using                 |        |                                           
|                                    |  | Quoted Prices inActive Marketsfor IdenticalInstruments(Level 1) |        | SignificantOtherObservableInputs (Level 2) |   | SignificantUnobservableInputs (Level 3) |  | Total Balance
|Assets                              |  |                                                                 |        |                                            |   |                                         |  |               |   |  |   |       
|Cash Equivalents:                   |  |                                                                 |        |                                            |   |                                         |  |               |   |  |   |       
|Bank time deposits                  |  | $                                                               |       |                                            | $ | 7,356                                   |  | $             |  |  | $ | 7,356 
|Money market fund deposits          |  |                                                                 | 60,560 |                                            |   |                                        |  |               |  |  |   | 60,560
|                                    |  |                                                                 |        |                                            |   |                                         |  |               |   |  |   |       
|Total assets measured at fair value |  |                                                                 | 60,560 |                                            | $ | 7,356                                   |  |               |  |  | $ | 67,916
|                                    |  |                                                                 |        |                                            |   |                                         |  |               |   |  |   |       



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 2MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF
OPERATIONS

Our managements discussion and analysis of our financial condition and results of operations include the
identification of certain trends and other statements that may predict or anticipate future business or financial results that are subject to important factors that could cause our actual results to differ materially from those indicated. See
Item 1A Risk Factors of this Quarterly Report on Form 10-Q.

OVERVIEW

We are a leading direct marketer of a wide range of information technology, or IT, products and servicesincluding computer systems, software and
peripheral equipment, networking communications, and other products and accessories that we purchase from manufacturers, distributors, and other suppliers. We also offer a growing range of installation, configuration, repair, and other services
performed by our personnel and third-party providers. We operate through three primary business segments: (a) consumers and small- to medium-sized businesses, or SMBs, through our PC Connection Sales subsidiaries, (b) large enterprise
customers, or Large Account, through our MoreDirect subsidiary, and (c) federal, state, and local government and educational institutions, or Public Sector, through our GovConnection subsidiary.

We generate sales through (i) outbound telemarketing and field sales contacts by account managers focused on the business, education, and government
markets, (ii) our websites, and (iii) inbound calls from customers responding to our catalogs and other advertising media.

As a
value added reseller in the IT supply chain, we do not manufacture IT hardware or software. We are dependent on our suppliers that consist of manufacturers and distributors that historically have sold only to resellers rather than directly to end
users. Certain manufacturers have on many occasions attempted to sell directly to our customers, thereby eliminating our role. Consolidation in this industry is more evident than ever, as further streamlining of our supply chain occurs. If more of
our suppliers were to succeed in selling to our customers directly, including the electronic distribution of software products, our financial condition, results of operations, and cash flows could be negatively affected.

Market conditions and technology advances significantly affect the demand for our products and services. Virtual delivery of software products and
advanced Internet technology providing customers enhanced functionality have substantially increased customer expectations, requiring us to invest more heavily in our own IT development to meet these new demands. As buying trends change and
electronic commerce continues to grow, customers become more sophisticated and have more choices than ever before. Customers are also better able to make price comparisons through the Internet, thereby increasing price competition. These conditions
have had, and could continue to have, a negative effect on our financial condition, results of operations, and cash flows.

The primary
challenges we face in effectively managing our business are (1) maintaining , if not increasing, our revenues in the face of a global recession, while at the same time, maintaining, if not improving, our gross profit margins in all three
business segments, (2) recruiting, retaining, and improving the productivity of our sales personnel, and (3) effectively controlling our selling, general and administrative, or SG&A, expenses over an expected lower sales base. With
continuing declines in spending projected in the overall IT industry, any significant sales growth for us must come through increased market share. Competition is expected to be even more intense in the future, which could put more pressure on
margins. Given the deterioration in the demand environment, management implemented cost reductions late in the first quarter of 2009 to reduce expenses, which we believe will result in annualized savings of up to $14 million.



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##### Table of Contents

We believe that more of our customers are seeking total IT solutions, rather than simply specific IT
products. Through the formation of our services subsidiary, ProConnection, Inc., we are able to provide customers complete IT solutions, from identifying their needs, to designing, developing, and managing the integration of products and services to
implement their IT projects. Such service offerings carry much higher margins than traditional product sales. Additionally, the technical certifications of our service engineers permit us to offer higher-end, more complex products that also carry
higher gross margins. We expect these service offerings and technical certifications to continue to play a role in sales generation and gross margins in this competitive environment.

We seek to recruit, retain, and increase the productivity of our sales personnel through training, mentoring, financial incentives based on performance,
and updating and streamlining our information systems to make our operations more efficient. We are currently undertaking a major modification and upgrade of our sales order and customer management system that are expected to improve sales
productivity beginning late in 2009. In addition, as stated above, we continue to actively monitor and manage our expense structure in order to obtain better leverage of our operating costs and to adjust our expense structure to changing revenue
levels.

RESULTS OF OPERATIONS

The
following table sets forth information derived from our statements of operations expressed as a percentage of net sales for the periods indicated:



|                                             |  |                    |       |   |      |   |       |  
|-------------------------------------------- |  | ------------------ | ----- | - | ---- | - | ----- | -
|                                             |  | Three Months Ended |      
|March 31,                                    |  | 2009               |       |   | 2008 |  
|Net sales (in millions)                      |  | $                  | 326.2 |   |      | $ | 423.7 |  
|                                             |  |                    |       |   |      |   |       |  
|Net sales                                    |  |                    | 100.0 | % |      |   | 100.0 | %
|Gross margin                                 |  |                    | 12.8  |   |      |   | 12.4  |  
|Selling, general and administrative expenses |  |                    | 13.3  |   |      |   | 10.7  |  
|Special charges                              |  |                    | 0.3   |   |      |   |      |  
|Income (loss) from operations                |  |                    | (0.8  | ) |      |   | 1.7   |  

Net sales in the first quarter of 2009 decreased by $97.5 million, or 23%, compared to the first
quarter of 2008. We experienced revenue declines in all three segments and in all product lines due to decreased demand for our products. Income (loss) from operations decreased year over year in the first quarter of 2009 primarily due to the
significant decline in sales.



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##### Table of Contents

Net Sales Distribution

The following table sets forth our percentage of net sales by business segment and product mix:



|                               |  |                    |   |  |      |  
|------------------------------ |  | ------------------ | - |  | ---- | -
|                               |  | Three Months Ended |  
|March 31,                      |  | 2009               |   |  | 2008 |  
|Business Segment               |  |                    |   |  |      |  
|SMB                            |  | 53                 | % |  | 57   | %
|Large Account                  |  | 28                 |   |  | 28   |  
|Public Sector                  |  | 19                 |   |  | 15   |  
|                               |  |                    |   |  |      |  
|Total                          |  | 100                | % |  | 100  | %
|                               |  |                    |   |  |      |  
|Product Mix                    |  |                    |   |  |      |  
|Notebooks and PDAs             |  | 15                 | % |  | 15   | %
|Software                       |  | 14                 |   |  | 13   |  
|Videos, Imaging and Sound      |  | 14                 |   |  | 15   |  
|Desktops/Servers               |  | 12                 |   |  | 14   |  
|Net/Com Products               |  | 10                 |   |  | 8    |  
|Printers and Printer Supplies  |  | 9                  |   |  | 10   |  
|Storage Devices                |  | 9                  |   |  | 10   |  
|Memory and System Enhancements |  | 3                  |   |  | 4    |  
|Accessories/Other              |  | 14                 |   |  | 11   |  
|                               |  |                    |   |  |      |  
|Total                          |  | 100                | % |  | 100  | %
|                               |  |                    |   |  |      |  

Gross Profit Margins

The following table summarizes our overall gross profit margins, as a percentage of net sales, over the periods indicated:



|                 |  |                    |   |  |      |  
|---------------- |  | ------------------ | - |  | ---- | -
|                 |  | Three Months Ended |  
|March 31,        |  | 2009               |   |  | 2008 |  
|Business Segment |  |                    |   |  |      |  
|SMB              |  | 14.4               | % |  | 13.9 | %
|Large Account    |  | 10.7               |   |  | 10.8 |  
|Public Sector    |  | 11.1               |   |  | 10.2 |  
|Total            |  | 12.8               | % |  | 12.4 | %

Consolidated gross profit dollars decreased for the first quarter of 2009 by $11.1 million
compared to first quarter of 2008, due to lower net sales. Gross profit margin increased year over year by 31 basis-points as lower invoice margins were offset by increased vendor consideration, improved freight margins, and higher levels of agency
fee revenues, which are recorded on a net basis.



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##### Table of Contents

Cost of Sales and Certain Other Costs

Cost of sales includes the invoice cost of the product, direct costs of packaging, inbound and outbound freight, and provisions for inventory
obsolescence, adjusted for discounts, rebates, and other vendor allowances. Direct operating expenses relating to our purchasing function and receiving, inspection, internal transfer, warehousing, packing and shipping, and other expenses of our
distribution center are included in SG&A expenses. Accordingly, our gross margins may not be comparable to those of other entities who include all of the costs related to their distribution network in cost of goods sold. Such costs, as a
percentage of net sales for the periods reported, are as follows:



|                               |  |                    |   |  |      |  
|------------------------------ |  | ------------------ | - |  | ---- | -
|                               |  | Three Months Ended |  
|March 31,                      |  | 2009               |   |  | 2008 |  
|Purchasing/Distribution Center |  | 0.97               | % |  | 0.72 | %

Operating Expenses

The following table breaks out our more significant operating expenses for the periods indicated (in millions of dollars):



|                              |  |                    |      |   |      |   |      |  
|----------------------------- |  | ------------------ | ---- | - | ---- | - | ---- | -
|                              |  | Three Months Ended |     
|March 31,                     |  | 2009               |      |   | 2008 |  
|Personnel costs               |  | $                  | 28.3 |   |      | $ | 31.1 |  
|Advertising, net              |  |                    | 4.1  |   |      |   | 4.1  |  
|Facilities operations         |  |                    | 2.5  |   |      |   | 2.6  |  
|Credit card fees              |  |                    | 1.6  |   |      |   | 1.9  |  
|Depreciation and amortization |  |                    | 1.8  |   |      |   | 1.7  |  
|Professional fees             |  |                    | 2.2  |   |      |   | 1.9  |  
|Bad debts                     |  |                    | 0.7  |   |      |   | 0.3  |  
|Other, net                    |  |                    | 2.1  |   |      |   | 1.8  |  
|                              |  |                    |      |   |      |   |      |  
|Total                         |  | $                  | 43.3 |   |      | $ | 45.4 |  
|                              |  |                    |      |   |      |   |      |  
|Percentage of net sales       |  |                    | 13.3 | % |      |   | 10.7 | %
|                              |  |                    |      |   |      |   |      |  

Personnel costs represent the majority of our operating expenses, with sales personnel
representing the largest portion of these costs. Personnel costs decreased year over year due to lower variable compensation associated with reduced gross profits, as well as headcount reductions implemented in the third quarter of 2008.



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Year-Over-Year Comparisons

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Changes in net sales and gross profit by business segment are shown in the following table (dollars in millions):



|              |  |                              |       |               |       |   |        |         |               |  |       |   |  |       |   
|------------- |  | ---------------------------- | ----- | ------------- | ----- | - | ------ | ------- | ------------- |  | ----- | - |  | ----- | --
|              |  | Three Months Ended March 31, |      
|              |  | 2009                         |       |               | 2008  |   |        | %Change |              
|              |  | Amount                       |       | % of NetSales |       |   | Amount |         | % of NetSales |  |      
|Sales:        |  |                              |       |               |       |   |        |         |               |  |       |   |  |       |   
|SMB           |  | $                            | 172.4 |               | 52.9  | % |        | $       | 240.1         |  | 56.6  | % |  | (28.2 | )%
|Large Account |  |                              | 90.7  |               | 27.8  |   |        |         | 117.2         |  | 27.7  |   |  | (22.6 | ) 
|Public Sector |  |                              | 63.1  |               | 19.3  |   |        |         | 66.4          |  | 15.7  |   |  | (5.0  | ) 
|              |  |                              |       |               |       |   |        |         |               |  |       |   |  |       |   
|Total         |  | $                            | 326.2 |               | 100.0 | % |        | $       | 423.7         |  | 100.0 | % |  | (23.0 | )%
|              |  |                              |       |               |       |   |        |         |               |  |       |   |  |       |   
|Gross Profit: |  |                              |       |               |       |   |        |         |               |  |       |   |  |       |   
|SMB           |  | $                            | 24.9  |               | 14.4  | % |        | $       | 33.3          |  | 13.9  | % |  | (25.2 | )%
|Large Account |  |                              | 9.7   |               | 10.7  |   |        |         | 12.6          |  | 10.8  |   |  | (23.0 | ) 
|Public Sector |  |                              | 7.0   |               | 11.1  |   |        |         | 6.8           |  | 10.2  |   |  | 2.9   |   
|              |  |                              |       |               |       |   |        |         |               |  |       |   |  |       |   
|Total         |  | $                            | 41.6  |               | 12.8  | % |        | $       | 52.7          |  | 12.4  | % |  | (21.1 | )%
|              |  |                              |       |               |       |   |        |         |               |  |       |   |  |       |   

Net sales for the first quarter of 2009 decreased compared to the first quarter of 2008 due
to lower sales in all three business segments, as explained below:



| |  |  | Net sales for the SMB segment decreased across most product and customer sectors. Both corporate and consumer sales declined in the first quarter of 2009 year over
year, reflecting the increasingly sluggish demand. Average annualized sales productivity decreased 21% year over year in the first quarter of 2009 compared to the prior year quarter. Sales representatives for our SMB segment totaled 398 at
March 31, 2009, a decrease from 469 at March 31, 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net sales for the Large Account segment decreased year over year by 23% as average annualized sales productivity in the first quarter of 2009 decreased by 16% year
over year. Large enterprise customers continue to defer purchases and redeploy excess equipment resulting from corporate layoffs. Sales representatives for our Large Account segment totaled 87 at March 31, 2009, a decrease from 100 at
March 31, 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net sales for the Public Sector segment in the first quarter of 2009 decreased due to lower contract sales and certain large orders that were deferred by the
customer to the second quarter of 2009. Average annualized sales productivity in the first quarter of 2009 decreased by 27% year over year primarily due to new hires late in the fourth quarter of 2008. Sales representatives for our Public Sector
segment totaled 144 at March 31, 2009, an increase from 120 at March 31, 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross profit for the
first quarter of 2009 decreased compared to the first quarter of 2008 in dollars, as explained below:



| |  |  | Gross profit for the SMB segment decreased year over year in dollars due to lower sales in the first quarter of 2009 but increased as a percentage of net sales.
Despite experiencing lower adjusted invoice margins in 2009, SMBs overall gross profit margins increased by 57 basis-points largely due to increased vendor consideration in the first quarter of 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Gross profit for the Large Account segment in the first quarter of 2009 decreased due to the revenue decline as gross profit margins were largely unchanged year
over year. Increased freight contribution and higher agency fee revenues, that are recorded on a net basis, offset lower invoice product margins associated with increased pricing pressures in the first quarter of 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Gross profit for the Public Sector segment in the first quarter of 2009 increased in dollars as a result of increased gross profit margins as a percentage of net
sales compared to the prior year quarter. Gross profit margins increased by 88 basis-points due to increased freight contribution and higher agency fee revenues which are recorded on a net basis.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Selling, general and administrative expenses in the first quarter of 2009 decreased in dollars but increased as a percentage of sales compared to
the first quarter of 2008 on a consolidated basis.

SG&A expenses attributable to our operating segments and the Headquarters/Other
group are summarized below (dollars in millions):



|                   |  |                              |      |               |      |   |        |         |               |  |      |   |  |      |   
|------------------ |  | ---------------------------- | ---- | ------------- | ---- | - | ------ | ------- | ------------- |  | ---- | - |  | ---- | --
|                   |  | Three Months Ended March 31, |     
|                   |  | 2009                         |      |               | 2008 |   |        | %Change |              
|                   |  | Amount                       |      | % of NetSales |      |   | Amount |         | % of NetSales |  |     
|SMB                |  | $                            | 25.2 |               | 14.6 | % |        | $       | 26.2          |  | 10.9 | % |  | (3.8 | )%
|Large Account      |  |                              | 7.2  |               | 7.9  |   |        |         | 7.2           |  | 6.1  |   |  |     |   
|Public Sector      |  |                              | 8.6  |               | 13.6 |   |        |         | 7.7           |  | 11.6 |   |  | 11.7 |   
|Headquarters/Other |  |                              | 2.3  |               |      |   |        |         | 4.3           |  |      |   |  |      |   
|                   |  |                              |      |               |      |   |        |         |               |  |      |   |  |      |   
|Total              |  | $                            | 43.3 |               | 13.3 | % |        | $       | 45.4          |  | 10.7 | % |  | (4.6 | )%
|                   |  |                              |      |               |      |   |        |         |               |  |      |   |  |      |   



| |  |  | SG&A expenses for the SMB segment decreased year over year in dollars but increased as a percentage of net sales in the first quarter of 2009. Lower variable
compensation associated with reduced gross profits in the first quarter of 2009 was partly offset by higher bad debt expense and increased usage of centralized headquarter services. The operating costs of corporate headquarters and other support
functions are charged to the reportable operating segments based on their estimated usage of the underlying functions. We expect personnel expense to decline in future periods as a result of headcount reductions made late in the first quarter of
2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SG&A expenses for the Large Account segment increased year over year as a percentage of net sales but was unchanged in dollars. Lower variable compensation
associated with reduced gross profits in the first quarter of 2009 was offset by higher bad debt expense and increased usage of centralized headquarter services. We expect personnel expense to decrease in future periods as a result of headcount
reductions made late in the first quarter of 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SG&A expenses for the Public Sector segment increased year over year in both dollars and as a percentage of net sales in the first quarter of 2009. The
year-over-year increases were attributable to headcount additions at a new sales facility in South Dakota late in the fourth quarter of 2008. Increased expense coupled with lower net sales resulted in the year-over-year increase in SG&A expenses
as a percentage of net sales.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SG&A expenses for the Headquarters/Other group decreased in dollars year over year due to lower personnel expense and increased usage by the operating segments.
Personnel expense was lower in 2009 as a result of headcount reductions and reduced incentive compensation expense. The Headquarters/Other group provides services to the three reportable operating segments in areas such as finance, human
resources, IT, product management, and marketing. Most of the operating costs associated with such corporate headquarters functions are charged to the operating segments based on their estimated usage of the underlying functions. Certain
headquarters costs relating to executive oversight functions are not allocated to the operating segments and are included in this groups expenses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Special charges in the first quarter of 2009 totaled $0.9 million and were related to workforce reduction and management restructuring costs. We did not record any special charges in the three
months ended March 31, 2008.



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Loss from operations for the first quarter of 2009 was $2.6 million, compared to operating income
of $7.4 million for the first quarter of 2008. Loss from operations as a percentage of net sales was 0.8% for the first quarter of 2009 compared to income from operations of 1.7% as a percentage of net sales for the first quarter of 2008.

Interest expensefor the first quarter of 2009 was relatively unchanged from the first quarter of 2008, and was attributed in both
periods to the capital lease obligation described below under Liquidity and Capital Reserve.

Our effective tax benefit rate
was 35.3% for the first quarter of 2009, a slight increase from the effective tax rate of 35.0% for the first quarter of 2008.

Net
loss for the first quarter of 2009 was $1.6 million compared to net income of $4.8 million for the first quarter of 2008, primarily because of our 2009 operating loss.

Liquidity and Capital Resources

Our primary sources of liquidity have historically been internally
generated funds from operations and borrowings under our bank line of credit. We have used those funds to meet our capital requirements, which consist primarily of working capital for operational needs and capital expenditures for computer equipment
and software used in our business.

We believe that funds generated from operations, together with available credit under our bank line of
credit and inventory trade credit agreements, will be sufficient to finance our working capital, capital expenditure, and other requirements for at least the next twelve months. We expect to meet our cash requirements for the next twelve months
through a combination of cash on hand, cash generated from operations and, if necessary, borrowings on our bank line of credit, as follows:



| |  |  | Cash on Hand. At March 31, 2009, we had approximately $67.9 million in unrestricted accounts.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Cash Generated from Operations. We expect to generate cash flows from operations in excess of operating cash needs by generating earnings (net of non
cash charges) and balancing net changes in inventories and receivables with compensating changes in payables to generate a positive cash flow. Historically, we have consistently generated positive cash flows from operations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Credit Facilities. As of March 31, 2009, our entire $50.0 million bank line of credit was available for borrowing. This line of credit can be increased,
at our option, to $80.0 million for approved acquisitions or other uses authorized by the bank. Borrowings are, however, limited by certain minimum collateral and earnings requirements, as described more fully below.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to continue funding our operations, both internally and externally, is dependent upon our ability to generate sufficient cash flow from
operations or to obtain additional funds through equity or debt financing, or from other sources of financing, as may be required. While at this time we do not anticipate needing any additional sources of financing to fund our operations, if demand
for information technology products declines, our cash flows from operations may be substantially affected. See also related risks listed below under Item 1A, Risk Factors.



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##### Table of Contents

Summary of Sources and Uses of Cash

The following table summarizes our sources and uses of cash over the periods indicated (in millions):



|                                          |  |                    |      |   |      |   |      |  
|----------------------------------------- |  | ------------------ | ---- | - | ---- | - | ---- | -
|                                          |  | Three Months Ended |     
|March 31,                                 |  | 2009               |      |   | 2008 |  
|Net cash provided by operating activities |  | $                  | 23.1 |   |      | $ | 10.7 |  
|Net cash used for investing activities    |  |                    | (1.9 | ) |      |   | (2.9 | )
|Net cash used for financing activities    |  |                    | (0.3 | ) |      |   | (1.1 | )
|                                          |  |                    |      |   |      |   |      |  
|Increase in cash and cash equivalents     |  | $                  | 20.9 |   |      | $ | 6.7  |  
|                                          |  |                    |      |   |      |   |      |  

Cash provided by operating activities increased by $12.4 million in the first quarter of
2009 compared to the first quarter of 2008. Cash flow provided by operations for the first quarter of 2009 resulted primarily from a decrease in accounts receivable, offset in part by a decrease in accounts payable. Inventory decreased by $4.0
million from the prior year-end balance largely due to reduced stocking requirements associated with lower sales levels. Inventory turns decreased slightly to 20 turns for the first quarter of 2009 compared to 21 turns for the prior year quarter.
Accounts receivable decreased from December 31, 2008 levels, despite an increase in days sales outstanding, or DSOs, due to the decline in sales in the first quarter of 2009. DSOs were 46 days for the first quarter of 2009, compared to 44 days
for the first quarter of 2008. We attribute the increase in DSOs to certain large enterprise customers that delayed payments in the first quarter of 2009.

At March 31, 2009, we had $78.9 million in outstanding accounts payable. Such accounts are generally paid within 30 days of incurrence, or earlier when favorable cash discounts are offered. This balance will be
financed by cash flows from operations or short-term borrowings under the line of credit. This balance includes $11.7 million payable to two financial institutions under inventory trade credit agreements we use to finance our purchase of certain
inventory, secured by the inventory so financed. We believe we will be able to meet our obligations under our accounts payable with cash flows from operations and our existing line of credit.

Cash used for investing activities decreased by $1.0 million in the three months ended March 31, 2009 compared to the prior year period.
These activities include our capital expenditures, primarily for purchases of computer equipment and software and capitalization of internally-developed software. We completed an extensive desktop upgrade in the first quarter of 2008 that accounted
for much of the prior years increased cash usage. We expect total capital expenditures in 2009 to be between $10.0 million and $12.0 million.

Cash used for financing activities decreased year over year by $0.8 million in the first quarter of 2009 due to reduced purchases of treasury shares. Our treasury stock purchases totaled $0.1 million in the
first quarter of 2009 compared to $0.9 million in the prior year period.

Debt Instruments, Contractual Agreements, and Related Covenants

Below is a summary of certain provisions of our credit facilities and other contractual obligations. It is qualified in its entirety by the
terms of the actual agreements, which are on file with the Securities and Exchange Commission. For more information about the restrictive covenants in our debt instruments and inventory financing agreements, see Factors Affecting Sources of
Liquidity. For more information about our obligations, commitments, and contingencies, see our condensed consolidated financial statements and the accompanying notes included in this quarterly report.

Bank Line of Credit. Our bank line of credit provides us with a borrowing capacity of up to $50.0 million at the prime rate (3.25% at
March 31, 2009). In addition, we have the option to increase the facility by an additional $30.0 million, based on sufficient levels of trade receivables to meet borrowing base requirements, and depending on meeting minimum EBITDA (earnings
before interest, taxes, depreciation, and amortization) and equity requirements, described below under Factors Affecting Sources of Liquidity. The facility also gives us



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the option of obtaining Eurodollar Rate Loans in multiples of $1.0 million for various short-term durations. Substantially all of our assets are
collateralized as security for this facility, and all of our subsidiaries are guarantors under the line of credit. At March 31, 2009, the entire $50 million facility was available for borrowing.

This facility, which matures in October 2012, operates under an automatic cash management program whereby disbursements in excess of available cash are
added as borrowings at the time disbursement checks clear the bank, and available cash receipts are first applied against any outstanding borrowings and then invested in short-term qualified cash investments. Accordingly, borrowings under the line
are classified as current.

Inventory Trade Credit Agreements. We have additional security agreements with two financial
institutions to facilitate the purchase of inventory from various suppliers under certain terms and conditions. These agreements allow a collateralized first position in certain branded products inventory financed by these financial institutions.
Although the agreements provide for up to 100% financing on the purchase price, up to an aggregate of $45.0 million, any outstanding financing must be fully secured by available inventory. We do not pay any interest or discount fees on such
inventory financing; such costs are borne by the suppliers as an incentive for us to purchase their products. Amounts outstanding under such facilities, equal to $11.7 million as of March 31, 2009, are recorded in accounts payable, and the
inventory financed is classified as inventory on the consolidated balance sheet.

Capital Leases. We have a fifteen-year lease
for our corporate headquarters with an affiliated company related through common ownership. In addition to the rent payable under the facility lease, we are required to pay real estate taxes, insurance, and common area maintenance charges.

Operating Leases. We also lease facilities from our principal stockholders and facilities and equipment from third parties
under non-cancelable operating leases. See Contractual Obligations in our Annual Report on Form 10-K for the year ended December 31, 2008 for commitments under these leases.

Sports Marketing Commitments. We have entered into multi-year sponsorship agreements with the Boston Red Sox and the New England Patriots that
extend to 2010 and 2013, respectively. These agreements, which grant us various marketing rights and seating arrangements, require annual payments aggregating from $0.3 million to $0.4 million per year.

Off-Balance Sheet Arrangements.We do not have any other off-balance sheet arrangements that have or are reasonably likely to have, a current or
future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Contractual Obligations. The disclosures relating to our contractual obligations in our Annual Report on Form 10-K for
the year ended December 31, 2008 have not materially changed since we filed that report.

Factors Affecting Sources of Liquidity

Internally Generated Funds. The key factors affecting our internally generated funds are our ability to minimize costs and fully
achieve our operating efficiencies, timely collection of our customer receivables, and management of our inventory levels.

Bank Line of
Credit.Our credit facility contains certain financial ratios and operational covenants and other restrictions (including restrictions on additional debt, guarantees, stock repurchases, dividends and other distributions, investments, and liens)
with which we and all of our subsidiaries must comply. Any failure to comply with these covenants would not only prevent us from borrowing additional funds under this line of credit, but would also constitute a default. This credit facility contains
two financial tests:



| |  |  | The funded debt ratio (defined as the average outstanding advances under the line for the quarter, divided by the consolidated EBITDA for the trailing four
quarters) must not be more than 2.0 to 1.0.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | Our actual funded debt ratio at March 31, 2009 was 0.01 to 1.0, as average borrowings were minimal against our credit facility during the first quarter
of 2009.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Minimum Consolidated Net Worth must be at least $150.0 million, plus 50% of consolidated net income for each quarter, beginning with the quarter ended
March 31, 2007 (loss quarters not counted). Such amount was calculated at March 31, 2009 as $172.8 million. Our actual consolidated stockholders equity at March 31, 2009 was $233.9 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The borrowing base under this facility is set at 80% of qualified commercial receivables, plus 50% of qualified government receivables. As of
March 31, 2009, the entire $50.0 million facility was available for borrowings.

Inventory Trade Credit
Agreements. These agreements contain similar financial ratios and operational covenants and restrictions as those contained in our bank line of credit described above. Such agreements also contain cross-default provisions whereby a default
under the bank agreement would also constitute a default under these agreements. Financing under these agreements is limited to the purchase of specific branded products from authorized suppliers, and amounts outstanding must be fully collateralized
by inventories of those products on hand.

Capital Markets.Our ability to raise additional funds in the capital market depends
upon, among other things, general economic conditions, the condition of the information technology industry, our financial performance and stock price, and the state of the capital markets.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In
September 2006, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 157, Fair Value Measurements (SFAS 157) which became effective January 1, 2008,
except as amended by FASB Staff Position, or FSP, 157-1, 157-2, and 157-3. SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FSP 157-1 excludes
SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until fiscal years beginning after November 15, 2008. FSP 157-3 clarifies the application of
SFAS 157 in a market that is not active and provides an example of how to determine the fair value of a financial asset in an inactive market. We adopted the provisions of SFAS 157 effective January 1, 2008, as amended, with the
exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. The adoption of this statement did not have a significant impact on our financial statements for fair value measurements made during the
year ended December 31, 2008. The provisions of the statement related to non-recurring nonfinancial assets and nonfinancial liabilities were adopted effective January 1, 2009 and did not have a significant impact on our financial
statements.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies have not materially changed from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2008. These policies include revenue recognition, accounts
receivable, vendor allowances, inventories, contingencies, value of goodwill and long-lived assets, including intangibles, employee compensation and benefits, share-based compensation, and income taxes.

INFLATION

We have historically offset any inflation
in operating costs by a combination of increased productivity and price increases, where appropriate. We do not expect inflation to have a significant impact on our business in the foreseeable future.



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PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We invest cash
balances in excess of operating requirements in short-term securities, generally with maturities of 90 days or less. In addition, our unsecured credit agreement provides for borrowings, which bear interest at variable rates based on the prime rate
and Euro dollar rates. We had no borrowings outstanding pursuant to our credit agreement as of March 31, 2009. We believe the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of
operations, and cash flows should not be material. Our credit agreement exposes earnings to changes in short-term interest rates since interest rates on the underlying obligations are variable. However, as noted above, no borrowings were outstanding
pursuant to the credit agreement at March 31, 2009, and average borrowings in the first quarter of 2009 were minimal. Accordingly, the change in earnings resulting from a hypothetical 10% increase or decrease in interest rates would not be
material.



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##### Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART IFINANCIAL INFORMATION

Item 4CONTROLS AND PROCEDURES

Our management, with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2009. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial
officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as
described above. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2009, our disclosure controls and procedures were effective at the
reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) occurred during the fiscal quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION

Item 1A. Risk Factors

Statements contained or incorporated by reference in this Quarterly Report on Form 10-Q that are not based on historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts,
and projections and the beliefs and assumptions of management including, without limitation, our expectations with regard to the industrys rapid technological change and exposure to inventory obsolescence, availability and allocations of
goods, reliance on vendor support and relationships, competitive risks, pricing risks, and the overall level of economic activity and the level of business investment in information technology products. Forward-looking statements may be identified
by the use of forward-looking terminology such as may, could, will, expect, estimate, anticipate, continue, or similar terms, variations of such terms or the
negative of those terms.

We cannot assure investors that our assumptions and expectations will prove to have been correct.
Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Such factors that could cause or contribute to such differences include those factors discussed below. We undertake
no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. If any of the following risks actually occur, our business, financial condition, or results of
operations would likely suffer.

We have experienced variability in sales, and there is no assurance that we will be able to maintain profitable
operations.

Several factors have caused our sales and results of operations to fluctuate and we expect these fluctuations to continue
on a quarterly basis. Causes of these fluctuations include:



| |  |  | changes in the overall level of economic activity;
| | - |  | --------------------------------------------------



| |  |  | the condition of the personal computer industry in general;
| | - |  | -----------------------------------------------------------



| |  |  | changes in the level of business investment in IT products;
| | - |  | -----------------------------------------------------------



| |  |  | shifts in customer demand for hardware and software products;
| | - |  | -------------------------------------------------------------



| |  |  | variations in levels of competition;
| | - |  | ------------------------------------



| |  |  | industry shipments of new products or upgrades;
| | - |  | -----------------------------------------------



| |  |  | the timing of new merchandise and catalog offerings;
| | - |  | ----------------------------------------------------



| |  |  | fluctuations in response rates;
| | - |  | -------------------------------



| |  |  | fluctuations in postage, paper, shipping, and printing costs and in merchandise returns;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | adverse weather conditions that affect response, distribution, or shipping;
| | - |  | ---------------------------------------------------------------------------



| |  |  | changes in our product offerings; and
| | - |  | -------------------------------------



| |  |  | changes in vendor distribution of products.
| | - |  | -------------------------------------------

Our results also may vary based on our ability to manage personnel levels in response to fluctuations in revenue, as well as our success in integrating acquisitions into our business, and their relative costs.

We base our operating expenditures on sales forecasts. If our revenues do not meet anticipated levels in the future, we may not be able to reduce our
staffing levels and operating expenses in a timely manner to avoid significant losses from operations.



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Should our financial performance not meet expectations, we may be required to record an additional significant charge
to earnings for impairment of goodwill and other intangibles.

In accordance with SFAS 142, we test goodwill for impairment on an annual
basis, and more frequently if potential impairment indicators arise. We determined that the fair values of our SMB and Public Sector segments goodwill were lower than the carrying values as of December 31, 2008, and accordingly the
carrying values of those segments goodwill were written off, resulting in a significant non-cash charge to earnings. Although we determined that the fair value of our Large Account segments goodwill exceeded its carrying value, should
this segments financial performance not meet expectations, we would likely adjust downward expected future operating results. Such adjustment may result in a determination that our carrying values for goodwill and other intangibles for that
segment exceed fair values. This determination may in turn require that we record an additional significant non-cash charge to earnings to reduce the $50.0 million aggregate carrying amount of goodwill and other intangibles in the Large Account
operating segment, resulting in a negative effect on our results of operations.

The current volatility in economic conditions and the financial markets
may adversely affect our access to capital and credit markets.

The current volatility and disruption to the capital and credit markets
has reached nearly unprecedented levels and has significantly adversely impacted economic conditions, resulting in additional significant recessionary pressures and further declines in consumer confidence and economic growth.

These conditions have also resulted in a substantial tightening of the credit markets, including lending by financial institutions, which are a source of
capital for our borrowing and liquidity. This tightening of the credit markets has increased the cost of capital and reduced the availability of credit. It is difficult to predict how long the current economic and capital and credit market
conditions will continue, the extent to which they will continue to deteriorate, and to which our business may be adversely affected. However, if the current volatility in the capital and credit markets should worsen, we are likely to experience an
adverse impact, which may be material, on our business, the cost of and access to capital and credit markets, and our results of operations.

We may
experience a reduction in the incentive programs offered to us by our vendors.

Some product manufacturers and distributors provide us
with incentives such as supplier reimbursements, payment discounts, price protection, rebates, and other similar arrangements. The increasingly competitive computer hardware market has already resulted in the following:



| |  |  | reduction or elimination of some of these incentive programs;
| | - |  | -------------------------------------------------------------



| |  |  | more restrictive price protection and other terms; and
| | - |  | ------------------------------------------------------



| |  |  | reduced advertising allowances and incentives, in some cases.
| | - |  | -------------------------------------------------------------

Many product suppliers provide us with advertising allowances, and in exchange, we feature their products in our catalogs and other marketing vehicles. These vendor allowances, to the extent that they represent
specific reimbursements of incremental and identifiable costs, are offset against SG&A expenses. Advertising allowances that cannot be associated with a specific program funded by an individual vendor or that exceed the fair value of advertising
expense associated with that program are classified as offsets to cost of sales or inventory. In the past, we have experienced a decrease in the level of vendor consideration available to us from certain manufacturers. The level of such
consideration we receive from some manufacturers may decline in the future. Such a decline could decrease our gross margin and have a material adverse effect on our earnings and cash flows.



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We face many competitive risks.

The direct marketing industry and the computer products retail business, in particular, are highly competitive. We compete with consumer electronics and computer retail stores, including superstores. We also compete
with other direct marketers of hardware and software and computer related products, including CDW Corporation, Insight Enterprises, Inc., and Dell Inc., who are much larger than we are. Certain hardware and software vendors, such as Hewlett-Packard
Company, or HP, Lenovo, and Apple, who provide products to us, are also selling their products directly to end users through their own catalogs, stores, and via the Internet. We compete not only for customers, but also for advertising support from
personal computer product manufacturers. Some of our competitors have larger catalog circulations and customer bases and greater financial, marketing, and other resources. In addition, some of our competitors offer a wider range of products and
services than we do and may be able to respond more quickly to new or changing opportunities, technologies, and customer requirements. Many current and potential competitors also have greater name recognition, engage in more extensive promotional
activities, and adopt pricing policies that are more aggressive than ours. We expect competition to increase as retailers and direct marketers who have not traditionally sold computers and related products enter the industry.

In addition, product resellers and direct marketers are combining operations or acquiring or merging with other resellers and direct marketers to
increase efficiency. Moreover, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to enhance their products and services. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and acquire significant market share.

We cannot provide assurance that we can
continue to compete effectively against our current or future competitors. If we encounter new competition or fail to compete effectively against our competitors, our business may be harmed.

We face and will continue to face significant price competition.

Generally, pricing is very aggressive in the personal computer industry, particularly in this current economic environment, and we expect pricing pressures to escalate if economic conditions worsen. An increase in
price competition could result in a reduction of our profit margins. There can be no assurance that we will be able to offset the effects of price reductions with an increase in the number of customers, higher sales, cost reductions, or otherwise.
Also, our sales of personal computer hardware products are generally producing lower profit margins than those associated with software products. Such pricing pressures could result in an erosion of our market share, reduced sales, and reduced
operating margins, any of which could have a material adverse effect on our business.

The failure to comply with our public sector contracts could
result in, among other things, fines or liabilities.

Revenues from the public sector are derived from sales to federal, state, and
local government departments and agencies, as well as to educational institutions, through various contracts and open market sales. Government contracting is a highly regulated area. Noncompliance with government procurement regulations or contract
provisions could result in civil, criminal, and administrative liability, including substantial monetary fines or damages, termination of government contracts, and suspension, debarment, or ineligibility from doing business with the government. Our
current arrangements with these government agencies allow them to cancel orders with little or no notice and do not require them to purchase products from us in the future. The effect of any of these possible actions by any government department or
agency could adversely affect our financial position, results of operations, and cash flows.



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We are exposed to inventory obsolescence due to the rapid technological changes occurring in the personal computer
industry.

The market for personal computer products is characterized by rapid technological change and the frequent introduction of new
products and product enhancements. Our success depends in large part on our ability to identify and market products that meet the needs of customers in that marketplace. In order to satisfy customer demand and to obtain favorable purchasing
discounts, we have and may continue to carry increased inventory levels of certain products. By so doing, we are subject to the increased risk of inventory obsolescence. Also, in order to implement our business strategy, we intend to continue, among
other things, placing larger than typical inventory stocking orders of selected products and increasing our participation in first-to-market purchase opportunities. We may also, from time to time, make large inventory purchases of certain
end-of-life products and market products on a private-label basis, which would increase the risk of inventory obsolescence. In addition, we sometimes acquire special purchase products without return privileges. There can be no assurance that we will
be able to avoid losses related to obsolete inventory. In addition, manufacturers are limiting return rights and are taking steps to reduce their inventory exposure by supporting configure-to-order programs authorizing distributors and
resellers to assemble computer hardware under the manufacturers brands. These trends reduce the costs to manufacturers and shift the burden of inventory risk to resellers like us, which could negatively impact our business.

We acquire products for resale from a limited number of vendors. The loss of any one of these vendors could have a material adverse effect on our business.

We acquire products for resale both directly from manufacturers and indirectly through distributors and other sources. The five vendors
supplying the greatest amount of goods to us constituted 70% and 72% of our total product purchases in the three months ended March 31, 2009 and 2008, respectively. Among these five vendors, purchases from Ingram Micro Inc., or Ingram,
represented 22% and 25% of our total product purchases in the three months ended March 31, 2009 and 2008, respectively. Purchases from Tech Data Corporation comprised 20% and 18% of our total product purchases in the three months ended
March 31, 2009 and 2008, respectively. Purchases from HP represented 10% and 13% of our total product purchases in the three months ended March 31, 2009 and 2008, respectively. Purchases from Synnex Corporation represented 11% and 9% of
our total product purchases in the three months ended March 31, 2009 and 2008, respectively. No other vendor supplied more than 10% of our total product purchases in the three months ended March 31, 2009 and 2008, respectively. If we were
unable to acquire products from Ingram, Tech Data, HP, or Synnex, we could experience a short-term disruption in the availability of products, and such disruption could have a material adverse effect on our results of operations and cash flows.

Substantially all of our contracts and arrangements with our vendors that supply significant quantities of products are terminable by such
vendors or us without notice or upon short notice. Most of our product vendors provide us with trade credit, of which the net amount outstanding at March 31, 2009 was $78.9 million. Termination, interruption, or contraction of relationships
with our vendors, including a reduction in the level of trade credit provided to us, could have a material adverse effect on our financial position.

Some product manufacturers either do not permit us to sell the full line of their products or limit the number of product units available to direct marketers such as us. An element of our business strategy is to
continue increasing our participation in first-to-market purchase opportunities. The availability of certain desired products, especially in the direct marketing channel, has been constrained in the past. We could experience a material adverse
effect to our business if we are unable to source first-to-market purchase or similar opportunities, or if we face the reemergence of significant availability constraints.



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We could experience system failures which would interfere with our ability to process orders.

We depend on the accuracy and proper use of our management information systems, including our telephone system. Many of our key functions depend on the
quality and effective utilization of the information generated by our management information systems, including:



| |  |  | our ability to manage inventory and accounts receivable collection;
| | - |  | -------------------------------------------------------------------



| |  |  | our ability to purchase, sell, and ship products efficiently and on a timely basis; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | our ability to maintain operations.
| | - |  | -----------------------------------

Our management information systems require continual upgrades to most effectively manage our operations and customer database. Although we maintain some redundant systems, with full data backup, a substantial interruption in management
information systems or in telephone communication systems, including those resulting from natural disasters as well as power loss, telecommunications failure, or similar events, would substantially hinder our ability to process customer orders and
thus could have a material adverse effect on our business.

We are dependent on key personnel.

Our future performance will depend to a significant extent upon the efforts and abilities of our senior executives. The competition for qualified
management personnel in the computer products industry is very intense, and the loss of service of one or more of these persons could have an adverse effect on our business. Our success and plans for future growth will also depend on our ability to
hire, train, and retain skilled personnel in all areas of our business, including sales representatives and technical support personnel. There can be no assurance that we will be able to attract, train, and retain sufficient qualified personnel to
achieve our business objectives.

The methods of distributing personal computers and related products are changing, and such changes may negatively
impact us and our business.

The manner in which personal computers and related products are distributed and sold is changing, and new
methods of distribution and sale, such as online shopping services, have emerged. Hardware and software manufacturers have sold, and may intensify their efforts to sell, their products directly to end users. From time to time, certain manufacturers
have instituted programs for the direct sales of large order quantities of hardware and software to certain major corporate accounts. These types of programs may continue to be developed and used by various manufacturers. Some of our vendors,
including Apple, HP, and Lenovo, currently sell some of their products directly to end users and have stated their intentions to increase the level of such direct sales. In addition, manufacturers may attempt to increase the volume of software
products distributed electronically to end users. An increase in the volume of products sold through or used by consumers of any of these competitive programs or distributed electronically to end users could have a material adverse effect on our
results of operations.

We depend heavily on third-party shippers to deliver our products to customers.

Many of our customers elect to have their purchases shipped by an interstate common carrier, such as UPS or FedEx Corporation. A strike or other
interruption in service by these shippers could adversely affect our ability to market or deliver products to customers on a timely basis.

We may
experience potential increases in shipping, paper, and postage costs, which may adversely affect our business if we are not able to pass such increases on to our customers.

Shipping costs are a significant expense in the operation of our business. Increases in postal or shipping rates and paper costs could significantly
impact the cost of producing and mailing our catalogs and shipping



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customer orders. Postage prices and shipping rates increase periodically, and we have no control over future increases. We have a long-term contract with
UPS, and believe that we have negotiated favorable shipping rates with our carriers. We generally invoice customers for shipping and handling charges. There can be no assurance that we will be able to pass on to our customers the full cost,
including any future increases in the cost, of commercial delivery services.

We also incur substantial paper and postage costs related to
our marketing activities, including producing and mailing our catalogs. Paper prices historically have been cyclical, and we have experienced substantial increases in the past. Significant increases in postal or shipping rates and paper costs could
adversely impact our business, financial condition, and results of operations, particularly if we cannot pass on such increases to our customers or offset such increases by reducing other costs.

We rely on the continued development of electronic commerce and Internet infrastructure development.

We have had an increasing level of sales made via the Internet in part because of the growing use and acceptance of the Internet by end users. Sales of
computer products via the Internet represent a significant and increasing portion of overall computer product sales. Growth of our Internet sales is dependent on potential customers using the Internet in addition to traditional means of commerce to
purchase products. We cannot accurately predict the rate at which they will do so.

Our success in growing our Internet business will
depend in large part upon the development of an increasingly sophisticated infrastructure for providing Internet access and services. If the number of Internet users or their use of Internet resources continues to grow rapidly, such growth may
overwhelm the existing Internet infrastructure. Our ability to increase the speed with which we provide services to customers and to increase the scope of such services ultimately is limited by, and reliant upon, the sophistication, speed,
reliability, and cost-effectiveness of the networks operated by third parties, and these networks may not continue to be developed or be available at prices consistent with our required business model.

We face many uncertainties relating to the collection of state sales and use tax.

We collect and remit sales and use taxes in states in which we have either voluntarily registered or have a physical presence. Various states have sought to impose on direct marketers the burden of collecting state
sales and use taxes on the sales of products shipped to their residents. In 1992, the United States Supreme Court affirmed its position that it is unconstitutional for a state to impose sales or use tax collection obligations on an out-of-state
mail-order company whose only contacts with the state are limited to the distribution of catalogs and other advertising materials through the mail and the subsequent delivery of purchased goods by United States mail or by interstate common carrier.
However, legislation that would expand the ability of states to impose sales and use tax collection obligations on direct marketers has been introduced in Congress on many occasions. Additionally, certain states have adopted rules that require
companies and their affiliates to register in those states as a condition of doing business with those state agencies.

Moreover, due to
our presence on various forms of electronic media and other operational factors, our contacts with many states may exceed the limited contacts involved in the Supreme Court case. We cannot predict the level of contacts that is sufficient to permit a
state to impose on us a sales or use tax collection obligation. Two of our competitors have elected to collect sales and use taxes in all states. If the Supreme Court changes its position, or if legislation is passed to overturn the Supreme
Courts decision, or if a court were to determine that our contacts with a state exceed the constitutionally permitted contacts, the expansion of a sales or use tax collection obligation on us in states to which we ship products would result in
additional administrative expenses to us, could result in tax liability for past sales as well as price increases to our customers, and could reduce future sales.



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Privacy concerns with respect to list development and maintenance may materially adversely affect our business.

We mail catalogs and send electronic messages to names in our proprietary customer database and to potential customers whose names we
obtain from rented or exchanged mailing lists. World-wide public concern regarding personal privacy has subjected the rental and use of customer mailing lists and other customer information to increased scrutiny. Any domestic or foreign legislation
enacted limiting or prohibiting these practices could negatively affect our business.

We are controlled by two principal stockholders.

Patricia Gallup and David Hall, our two principal stockholders, beneficially own or control, in the aggregate, approximately 64% of the outstanding
shares of our common stock. Due to their beneficial stock ownership, these stockholders can continue to elect the members of the Board of Directors and decide all matters requiring stockholder approval at a meeting or by a written consent in lieu of
a meeting. Similarly, such stockholders can control decisions to adopt, amend, or repeal our charter and our bylaws, or take other actions requiring the vote or consent of our stockholders and prevent a takeover of us by one or more third parties,
or sell or otherwise transfer their stock to a third party, which could deprive our stockholders of a control premium that might otherwise be realized by them in connection with an acquisition of our Company. Such control may result in decisions
that are not in the best interest of our public stockholders. In connection with our initial public offering, the principal stockholders placed substantially all shares of common stock beneficially owned by them into a voting trust, pursuant to
which they are required to agree as to the manner of voting such shares in order for the shares to be voted. Such provisions could discourage bids for our common stock at a premium as well as have a negative impact on the market price of our common
stock.



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Item 2Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about our purchases during the quarter ended March 31, 2009 of equity securities that we have registered
pursuant to Section 12 of the Exchange Act:

ISSUER PURCHASES OF EQUITY SECURITIES



|                    |  |                                             |  |                                     |  |                                                                              |  |                                                                                                                   |           
|------------------- |  | ------------------------------------------- |  | ----------------------------------- |  | ---------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- | ----------
|Period              |  | TotalNumber ofShares (orUnits)Purchased (1) |  | AveragePrice Paidper Share(or Unit) |  | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor
Programs |  | Maximum Number (orApproximate DollarValue) of Shares
(orUnits) that May Yet BePurchased Under thePlan or Programs
|01/01/09  01/31/09 |  |                                            |  |                                    |  |                                                                             |  | $                                                                                                                 | 11,265,683
|02/01/09  02/28/09 |  |                                            |  |                                    |  |                                                                             |  | $                                                                                                                 | 11,265,683
|03/01/09  03/31/09 |  | 35,465                                      |  | 2.99                                |  | 35,465                                                                       |  | $                                                                                                                 | 11,159,806
|                    |  |                                             |  |                                     |  |                                                                              |  |                                                                                                                   |           
|Total               |  | 35,465                                      |  | 2.99                                |  | 35,465                                                                       |  | $                                                                                                                 | 11,159,806



|(1) | On March 28, 2001, our Board of Directors announced approval of a share repurchase program of our common stock having an aggregate value of up to $15.0 million. Share purchases
are made in open market transactions from time to time depending on market conditions. The Program does not have a fixed expiration date.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 6Exhibits



|              |  |                                                                                                                                                                                                          
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                              
|              | 
|31.1*         |  | Certification of the Companys President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                          
|              | 
|31.2*         |  | Certification of the Companys Executive Vice President, Treasurer, and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|              | 
|32.1*         |  | Certification of the Companys President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                           
|              | 
|32.2*         |  | Certification of the Companys Executive Vice President, Treasurer, and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.



|* | Filed herewith.
|- | ---------------



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SIGNATURES

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



|                   |  |  |  |                                      |  |                                                                
|------------------ |  |  |  | ------------------------------------ |  | ---------------------------------------------------------------
|                   |  |  |  | PC CONNECTION, INC. AND SUBSIDIARIES
|                   |  |  | 
|Date: May 08, 2009 |  |  |  | By:                                  |  | /S/    PATRICIA GALLUP                                         
|                   |  |  |  |                                      |  | Patricia Gallup                                                
|                   |  |  |  |                                      |  | Chairman and Chief Executive Officer                           
|                   |  |  | 
|Date: May 08, 2009 |  |  |  | By:                                  |  | /S/    JACK
FERGUSON                                           
|                   |  |  |  |                                      |  | Jack Ferguson                                                  
|                   |  |  |  |                                      |  | Executive Vice President, Treasurer, andChief Financial Officer



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