FORM 10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


(Mark  One)
(X)     QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR 15(d) OF THE SECURITIES
EXCHANGE  ACT  OF  1934

For  the  quarterly  period  ended  October  5,  2006

                                       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 0-20022

                           POMEROY IT SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)

DELAWARE                                        31-1227808
(State or other jurisdiction of                 (IRS Employer
incorporation or organization)                  Identification No.)

                     1020 Petersburg Road, Hebron, KY 41048
                    (Address of principal executive offices)

                                 (859) 586-0600
              (Registrant's telephone number, including area code)

     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
requirements  for  the  past  90  days.

YES   X   NO
     ---      ---

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

  Large accelerated filer      Accelerated filer  X    Non-accelerated filer
                          ---                    ---                         ---

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

YES      NO X
    ---    ---

The number of shares of common stock outstanding as of November 5, 2006 was
12,493,254


<PAGE>
<TABLE>
<CAPTION>
                             POMEROY IT SOLUTIONS, INC.
                                 TABLE OF CONTENTS

Part I.     Financial Information
<S>         <C>                <C>                                             <C>
            Item 1.            Financial Statements:                            Page
                               Consolidated Balance Sheets as of October 5,
                               2006 (Unaudited) and January 5, 2006               1

                               Consolidated Statements of Operations for the
                               Three Months Ended October 5, 2006 and             3
                               2005 (Unaudited)

                               Consolidated Statements of Comprehensive
                               Income (Loss) for the Three Months Ended           4
                               October 5, 2006 and 2005 (Unaudited)

                               Consolidated Statements of Operations for the
                               Nine Months Ended October 5, 2006 and 2005         5
                               (Unaudited)

                               Consolidated Statements of Comprehensive
                               Income (Loss) for the Nine Months Ended            6
                               October 5, 2006 and 2005 (Unaudited)

                               Consolidated Statements of Cash Flows for
                               the Nine Months Ended October 5, 2006 and          7
                               2005 (Unaudited)

                               Notes to Consolidated Financial Statements
                               (Unaudited)                                        8

            Item 2.            Management's Discussion and Analysis of
                               Financial Condition and Results of Operations     18

            Item 3.            Quantitative and Qualitative Disclosure about
                               Market Risk                                       25

            Item 4.            Controls and Procedures                           25

Part II.    Other Information

            Item 1.            Legal Proceedings                                 27

            Item 1A.           Risk Factors                                      27

            Item 2.            Unregistered Sales of Equity Securities and
                               Use of Proceeds                                   27

            Item 3.            Defaults Upon Senior Securities                   27

            Item 4.            Submission of Matters to a Vote of Security
                               Holders                                           27

            Item 5.            Other Information                                 27

            Item 6.            Exhibits                                          27

SIGNATURES                                                                       28
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                              POMEROY IT SOLUTIONS, INC.
                             CONSOLIDATED BALANCE SHEETS

(in thousands)                                              October 5,    January 5,
                                                              2006          2006
                                                           ------------  ------------
<S>                                                        <C>           <C>
                                                           (Unaudited)
ASSETS

Current Assets:
Cash and cash equivalents                                  $      2,572  $      1,486
Certificates of deposit                                           1,049         3,629

Accounts receivable:
  Trade, less allowance of  $4,101 at October 5, 2006 and
    $4,355 at January 5, 2006                                   141,826       130,814
  Vendor receivables, less allowance of $117 at
    October 5, 2006 and $100 at January 5, 2006                   5,709         4,952
  Net investment in leases                                        2,054         1,998
  Other                                                           1,387         2,894
                                                           ------------  ------------
    Total receivables                                           150,976       140,658
                                                           ------------  ------------

Inventories                                                      15,075        13,665
Other                                                            11,475        11,730
                                                           ------------  ------------
    Total current assets                                        181,147       171,168
                                                           ------------  ------------

Equipment and leasehold improvements:
  Furniture, fixtures and equipment                              28,248        32,655
  Leasehold improvements                                          8,408         6,796
                                                           ------------  ------------
    Total                                                        36,656        39,451

  Less accumulated depreciation                                  23,707        24,656
                                                           ------------  ------------
    Net equipment and leasehold improvements                     12,949        14,795
                                                           ------------  ------------

Net investment in leases, net of current portion                    150           995
Goodwill                                                         98,314       101,048
Intangible assets, net                                            2,797         3,007
Other assets                                                      3,737         4,132
                                                           ------------  ------------
    Total assets                                           $    299,094  $    295,145
                                                           ============  ============
</TABLE>

                 See notes to consolidated financial statements.


                                        1
<PAGE>
<TABLE>
<CAPTION>
                               POMEROY IT SOLUTIONS, INC.
                               CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)                           October 5,  January 5,
                                                                   2006        2006
                                                              ------------  ------------
                                                                (Unaudited)
<S>                                                           <C>           <C>
LIABILITIES AND EQUITY

Current Liabilities:
Short-term borrowings                                         $          -  $    15,304
Accounts payable                                                    69,488       46,638
Deferred revenue                                                     2,956        3,444
Employee compensation and benefits                                  11,305        8,300
Accrued restructuring and severance charges                          4,193        5,791
Other current liabilities                                            6,739       11,182
                                                              ------------  ------------
    Total current liabilities                                       94,681       90,659
                                                              ------------  ------------

Commitments and contingencies

Equity:
  Preferred stock,  $.01 par value; authorized 2,000 shares
    (no shares issued or outstanding)                                    -            -
  Common stock, $.01 par value; authorized 20,000 shares
    (13,476 and 13,400 shares issued at October 5, 2006
    and January 5, 2006, respectively)                                 136          135
  Paid-in capital                                                   89,609       89,126
  Unearned compensation                                                  -       (1,198)
  Accumulated other comprehensive income                                19           24
  Retained earnings                                                125,121      125,521
                                                              ------------  ------------
                                                                   214,885      213,608
  Less treasury stock, at cost (982 and 810 shares at
    October 5, 2006 and January 5, 2006)                            10,472        9,122
                                                              ------------  ------------
      Total equity                                                 204,413      204,486
                                                              ------------  ------------
      Total liabilities and equity                            $    299,094  $   295,145
                                                              ============  ============
</TABLE>

                 See notes to consolidated financial statements.


                                        2
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands,except per share data)        Three Months Ended
                                        ----------------------------
                                         October 5,    October 5,
                                            2006          2005
                                        ------------   -------------
<S>                                     <C>           <C>
                                         (Unaudited)    (Unaudited)
Product and service revenues:
  Product                               $    93,678   $    129,281
  Service                                    61,255         55,720
                                        ------------   -------------
    Total revenues                          154,933        185,001
                                        ------------   -------------

Cost of product and service revenues:
  Product                                    86,307        120,058
  Service                                    45,966         42,427
                                        ------------   -------------
    Total cost of revenues                  132,273        162,485
                                        ------------   -------------

    Gross profit                             22,660         22,516
                                        ------------   -------------

Operating expenses:
  Selling, general and administrative        19,504         23,497
  Depreciation and amortization               1,250          1,351
  Goodwill charge                             3,472              -
  Other                                          89              4
                                        ------------   -------------
    Total operating expenses                 24,315         24,852
                                        ------------   -------------

Loss from operations                         (1,655)        (2,336)

Interest expense, net                             4            152
                                        ------------   -------------

Loss before income tax                       (1,659)        (2,488)
Income tax benefit                             (647)        (1,008)
                                        ------------   -------------
Net loss                                $    (1,012)   $    (1,480)
                                        ============   =============

Weighted average shares outstanding:
  Basic                                      12,591         12,583
                                        ============   =============
  Diluted                                    12,591 *       12,583 *
                                        ============   =============

Loss per common share:
  Basic                                 $     (0.08)   $     (0.12)
                                        ============   =============
  Diluted                               $     (0.08)*  $     (0.12)*
                                        ============   =============
</TABLE>

* Dilutive loss  per common share for the three months ended October 5, 2006 and
2005  would  have  been  anit-dilutive  if the number of weighted average shares
outstanding  were  adjusted  to reflect the dilutive effect of outstanding stock
options.

                 See notes to consolidated financial statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)                                  Three Months Ended
                                            --------------------------
                                             October 5,    October 5,
                                                2006          2005
                                            ------------  ------------
<S>                                         <C>           <C>
                                            (Unaudited)  (Unaudited)
Net loss                                    $    (1,012)  $    (1,480)
Other comprehensive income (loss):
  Foreign currency translation adjustment            (1)            -

                                            ------------  ------------
Comprehensive loss                          $    (1,013)  $    (1,480)
                                            ============  ============
</TABLE>

                 See notes to consolidated financial statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands,except per share data)         Nine Months Ended
                                        ----------------------------
                                         October 5,     October 5,
                                            2006            2005
                                        ------------    ------------
<S>                                     <C>             <C>
                                         (Unaudited)    (Unaudited)
Product and service revenues:
  Product                               $   274,636     $   375,617
  Service                                   195,107         167,241
                                        ------------    ------------
    Total revenues                          469,743         542,858
                                        ------------    ------------

Cost of product and service revenues:
  Product                                   252,614         347,438
  Service                                   148,650         124,941
                                        ------------    ------------
    Total cost of revenues                  401,264         472,379
                                        ------------    ------------

    Gross profit                             68,479          70,479
                                        ------------    ------------

Operating expenses:
  Selling, general and administrative        61,269          63,211
  Depreciation and amortization               3,819           4,248
  Goodwill charge                             3,472               -
  Other                                          99               5
                                        ------------    ------------
    Total operating expenses                 68,659          67,464
                                        ------------    ------------

Income (loss) from operations                  (180)          3,015

Interest expense, net                           475             579
                                        ------------    ------------

Income (loss) before income tax                (655)          2,436
Income tax expense (benefit)                   (255)            986
                                        ------------    ------------
Net income (loss)                       $      (400)    $     1,450
                                        ============    ============

Weighted average shares outstanding:
  Basic                                      12,611          12,542
                                        ============    ============
  Diluted                                    12,611  *       12,652
                                        ============    ============

Earnings (loss) per common share:
  Basic                                 $     (0.03)    $      0.12
                                        ============    ============
  Diluted                               $     (0.03) *  $      0.11
                                        ============    ============
</TABLE>

* Dilutive loss per common share for the nine months ended October 5, 2006 would
have  been  anit-dilutive  if  the number of weighted average shares outstanding
were  adjusted  to  reflect  the  dilutive  effect of outstanding stock options.

                 See notes to consolidated financial statements.


                                        5
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)                                  Nine Months Ended
                                            -------------------------
                                             October 5,   October 5,
                                                2006         2005
                                            ------------  -----------
                                             (Unaudited)  (Unaudited)
<S>                                         <C>           <C>
Net income (loss)                           $      (400)  $     1,450
Other comprehensive income (loss):
  Foreign currency translation adjustment            (5)          102

                                            ------------  -----------
Comprehensive income (loss)                 $      (405)  $     1,552
                                            ============  ===========
</TABLE>

                 See notes to consolidated financial statements.


                                        6
<PAGE>
<TABLE>
<CAPTION>
                                   POMEROY IT SOLUTIONS, INC.
                             CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)                                                           Nine Months Ended
                                                                     --------------------------
                                                                      October 5,    October 5,
                                                                         2006          2005
                                                                     ------------  ------------
                                                                      (Unaudited)   (Unaudited)
<S>                                                                  <C>           <C>
Cash flows from operating activities:
  Net income (loss)                                                  $      (400)  $     1,450
  Adjustments to reconcile net income to net cash
    from operating activities:
    Depreciation and amortization                                          3,819         4,248
    Stock option, restricted stock compensation and Employee Stock
      Purchase Plan Expense                                                1,186             -
    Restructuring and severance charges                                      133         1,794
    Goodwill impairment charge                                             3,472             -
    Provision for doubtful accounts                                          190         2,000
    Deferred income taxes                                                    605         3,177
    Loss on disposal of fixed assets                                          67             4
  Changes in working capital accounts, net of
    effects of acquisitions:
    Accounts receivable                                                  (10,525)        9,560
    Inventories                                                           (1,780)        2,267
    Other current assets                                                     (62)       (1,769)
    Net investment in leases                                                 862         1,492
    Accounts payable                                                      22,850       (15,245)
    Deferred revenue                                                        (488)         (122)
    Income tax payable                                                      (705)         (174)
    Employee compensation and benefits                                     3,005          (349)
    Other, net                                                            (5,364)       (3,971)
                                                                     ------------  ------------
  Net operating activities                                                16,865         4,362
                                                                     ------------  ------------
Cash flows from investing activities:
  Capital expenditures                                                    (1,172)       (1,314)
  Proceeds from sale of fixed assets                                           -             6
  Proceeds from redemption of certificates of deposit                      2,682             -
  Purchases of certificates of deposit                                      (102)          (77)
  Payment for covenant not-to-compete                                       (285)            -
  Acquisition of businesses                                                 (738)       (1,185)
                                                                     ------------  ------------
  Net investing activities                                                   385        (2,570)
                                                                     ------------  ------------
Cash flows from financing activities:
  Net payments of  short-term borrowings                                 (15,304)      (16,467)
  Payments of acquisition notes payable                                        -          (663)
  Proceeds from exercise of stock options and related tax benefit            192         2,463
  Purchase of treasury stock                                              (1,350)         (376)
  Proceeds from employee stock purchase plan                                 303           170
                                                                     ------------  ------------
     Net financing activities                                            (16,159)      (14,873)
                                                                     ------------  ------------
Effect of exchange rate changes on cash and cash equivalents                  (5)          102
                                                                     ------------  ------------
Change in cash and cash equivalents                                        1,086       (12,979)
Cash and cash equivalents:
  Beginning of period                                                      1,486        14,140
                                                                     ------------  ------------
  End of period                                                      $     2,572   $     1,161
                                                                     ============  ============
</TABLE>

                 See notes to consolidated financial statements.


                                        7
<PAGE>
                           POMEROY IT SOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.      Basis  of  Presentation

The  consolidated  financial  statements  have  been prepared in accordance with
accounting  principles  generally  accepted in the United States of America ("US
GAAP")  for interim financial information and with the instructions to Form 10-Q
and  Rule 10-01 of Regulation S-X.   Accordingly, they do not include all of the
information and footnotes required by US GAAP for complete financial statements.
Except as disclosed herein, there has been no material change in the information
disclosed  in  the  notes  to  consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended January 5, 2006.  In the
opinion of management, all adjustments (consisting of normal recurring accruals)
necessary  for  a  fair  presentation of the interim periods have been made. The
results  of operations for the three and nine-month period ended October 5, 2006
are  not  necessarily  indicative of the results that may be expected for future
interim  periods  or  for  the  year  ending  January  5,  2007.

2.     Recent  Accounting  Pronouncements

In  July  2006,  the  Financial  Accounting Standards Board ("FASB") issued FASB
Interpretation  No.  48,  Accounting  for  Uncertainty  in  Income  Taxes,  an
interpretation  of  FASB  Statement  No.  109  ("FIN 48").  FIN 48 clarifies the
accounting  for  income taxes by prescribing the minimum recognition threshold a
tax  position  is  required  to  meet  before  being recognized in the financial
statements.  FIN  48  also  provides  guidance  on  derecognition,  measurement,
classification,  interest  and  penalties,  accounting  in  interim  periods,
disclosure and transition. FIN 48 applies to all tax positions related to income
taxes  subject  to  FASB Statement No. 109, "Accounting for Income Taxes" ("FASB
No.  109").  FIN  48  is effective for fiscal years beginning after December 15,
2006.  Differences between the amounts recognized in the statements of financial
position prior to the adoption of FIN 48 and the amounts reported after adoption
should  be  accounted  for  as  a  cumulative-effect  adjustment recorded to the
beginning  balance of retained earnings. The Company is currently in the process
of  determining the impact, if any, that the adoption of FIN 48 will have on the
consolidated  financial  statements.

In  September  2006,  the  SEC  issued  Staff  Accounting  Bulletin  No.  108,
"Considering  the  Effects  of  Prior  Year  Misstatements  when  Quantifying
Misstatements  in Current Year Financial Statements" ("SAB No. 108"), to address
diversity  in practice in quantifying financial statement misstatements. SAB No.
108 requires the Company to quantify misstatements based on their impact on each
of its financial statements and related disclosures. SAB No. 108 is effective as
of  the  end of the Company's 2006 fiscal year, allowing a one-time transitional
cumulative  effect  adjustment  to  retained  earnings as of January 6, 2006 for
errors  that  were  not  previously  deemed material, but are material under the
guidance  in  SAB  No.  108.  The  Company is currently evaluating the impact of
adopting  SAB  No.  108  on  its  financial  statements.

In  September  2006,  the  FASB  issued SFAS No. 157, "Fair Value Measurements,"
which  defines fair value, establishes a framework for measuring fair value, and
expands  disclosures  about  fair value measurements. The provisions of SFAS No.
157  are  effective  as  of the beginning of the Company's 2008 fiscal year. The
Company  is  currently  evaluating  the  impact  of adopting SFAS No. 157 on its
financial  statements.

3.     Cash  and  Short-Term  Borrowings

The  Company  has  a $165.0 million Syndicated Credit Facility Agreement with GE
Commercial  Distribution  Finance. The credit facility has a three-year term and
its  components include a maximum of $75.0 million for inventory financing and a
revolver,  collateralized  primarily  by  accounts  receivable,  of up to $110.0
million.  The  credit facility also provides a letter of credit facility of $5.0
million. Interest on outstanding borrowings under the credit facility is payable
monthly  based  on  the  LIBOR  rate  and  a  pricing  grid.  As  of  October 5,
2006,  the  adjusted LIBOR rate was 7.32%. This credit facility expires June 28,
2007.

The  Company maintains a sweep account with its bank whereby daily cash receipts
are  automatically transferred as payment towards balances outstanding under the
Company's credit facility. As of October 5,


                                        8
<PAGE>
2006,  the  Company  had  no  outstanding  balance  under  the  Company's credit
facility.  As  of  January 5, 2006, the Company had an outstanding balance under
the  Company's  credit  facility  of  $15.3  million.

Under  the  terms  of  the  credit  facility,  the Company is subject to various
financial  covenants  including  maintenance  of a minimum level of tangible net
worth,  a  minimum  fixed charge coverage ratio, a maximum ratio of total funded
indebtedness to EBITDA, and a maximum net loss after tax. As of October 5, 2006,
Pomeroy  was  in  compliance  with  those  financial  covenants.

4.     Stock-Based  Compensation

Prior  to  January  6,  2006, the Company accounted for stock-based compensation
using  the  intrinsic  value  method  prescribed  in Accounting Principles Board
Opinion  No.  25  (APB  25),  "Accounting  for  Stock  Issued  to  Employees".
Accordingly,  compensation cost for stock options was measured as the excess, if
any,  of  the  quoted  market price of the Company's common stock at the date of
grant  over  the  amount an employee must pay to acquire the stock.  The Company
previously  adopted  SFAS  No.  123 for disclosure purposes and for non-employee
stock  options.

The Company adopted Statement of Financial Accounting Standards No. 123(R) (SFAS
123R)  effective January 6, 2006.  SFAS 123R requires the Company to measure the
cost  of  employee  services  received  in  exchange  for  an  award  of  equity
instruments and recognize this cost over the period during which the employee is
required  to  provide the services.  The Company has adopted SFAS 123R using the
modified prospective method and, therefore, results for periods prior to January
6,  2006  have  not  been  restated.

The  table  below  illustrates  the  effect of stock compensation expense on the
periods  presented  as  if the Company had always applied the fair value method:

<TABLE>
<CAPTION>
                                               Three Months Ended
                                                   October 5,
(In thousands, except per share data)                 2005
                                              --------------------
<S>                                           <C>
Income before stock compensation expense      $            (1,480)
Stock compensation expense                                   (897)

                                              --------------------
Pro forma net income (loss)                   $            (2,377)
                                              ====================

Basic earnings  per common share:
  Income  before stock compensation expense   $             (0.12)
  Stock compensation expense                                (0.07)

                                              --------------------
  Pro forma net income (loss)                 $             (0.19)
                                              ====================

Diluted earnings  per common share:
  Income  before stock compensation expense   $             (0.12)
  Stock compensation expense                                (0.07)

                                              --------------------
  Pro forma net income (loss)                 $             (0.19)
                                              ====================
</TABLE>

                                        9
<PAGE>
<TABLE>
<CAPTION>
                                               Nine Months Ended
                                                   October 5,
(In thousands, except per share data)                 2005
                                              -------------------
<S>                                           <C>
Income before stock compensation expense      $            1,450
Stock compensation expense                                (2,255)

                                              -------------------
Pro forma net income (loss)                   $             (805)
                                              ===================

Basic earnings  per common share:
  Income  before stock compensation expense   $             0.12
  Stock compensation expense                               (0.18)

                                              -------------------
  Pro forma net income (loss)                 $            (0.06)
                                              ===================

Diluted earnings  per common share:
  Income  before stock compensation expense   $             0.11
  Stock compensation expense                               (0.17)

                                              -------------------
  Pro forma net income (loss)                 $            (0.06)
                                              ===================
</TABLE>

No stock-based compensation was capitalized into inventory or fixed assets.  The
approximate  unvested  stock option expense as of October 5, 2006, which will be
recorded  as  expense in future periods, is $799 thousand.  The weighted average
time  over  which  this  expense  will be recorded is approximately 23.7 months.
Expense  for  the  quarter  and  nine months ended October 5, 2006 and estimated
expense  for  future  periods  is  net of the effect of estimated forfeitures of
18.5%.

The  Company  estimates the fair value of each option on the date of grant using
the  Black-Scholes option pricing model.  The Company has elected the simplified
method  to  calculate  the expected life of stock awards as permitted under SFAS
123R.  This method calculates an expected term based on the midpoint between the
vesting  date  and  the  end  of  the  contractual term of the stock award.  The
weighted-average  assumptions listed below were used for grants made in the nine
months  ended  October  5,  2006  and  2005:

<TABLE>
<CAPTION>
                               Three months ended   Three months ended
                                 October 5, 2006      October 5, 2005
<S>                            <C>                  <C>
     Expected volatility             45.17%                42.15%
     Risk-free interest rate          5.21%                 4.11%
     Expected life (years)            3.50                  3.88
     Dividend yield                   0.00%                 0.00%
</TABLE>

<TABLE>
<CAPTION>
                               Nine months ended   Nine months ended
                                October 5, 2006     October 5, 2005
<S>                            <C>                 <C>
     Expected volatility             52.33%              44.36%
     Risk-free interest rate          4.74%               3.79%
     Expected life (years)            2.48                3.69
     Dividend yield                   0.00%               0.00%
</TABLE>


                                       10
<PAGE>
Information  related  to  all stock options for the nine months ended October 5,
2006  is  shown  in  the  table  below:

<TABLE>
<CAPTION>
                                                                       Weighted           Weighted-Average
                                                                   Average Exercise     Remaining Contractual
                                               Shares                   Price                   Term
<S>                                   <C>                     <C>                     <C>
     Outstanding at January 5,
     2006                                         2,926,503   $                13.31
     Granted                                        246,250   $                 9.28
     Forfeitures                                   (773,039)  $                13.49
     Exercised                                      (29,167)  $                 5.98
                                      ----------------------
     Outstanding at October 5,
     2006                                         2,370,547   $                12.93              2.57 years
                                      ======================

     Exercisable at  October 5,
     2006                                         2,091,232   $                13.10              2.41 years
                                      ======================
</TABLE>

Information related to unvested stock options for the nine months ended October
5, 2006 is shown in the table below:

<TABLE>
<CAPTION>
                                                            Weighted-Average        Weighted-Average
                                                            Grant-Date Fair      Remaining Contractual
                                         Shares                  Value                   Term
<S>                              <C>                     <C>                     <C>
     Outstanding unvested
     stock options at
     January 5, 2006                           416,794   $                 4.63

     Granted                                   246,250   $                 3.40
     Vested                                   (280,196)  $                 3.78
     Forfeitures                              (103,533)  $                 4.54
                                 ----------------------

     Outstanding unvested stock
     options at October 5, 2006                279,315   $                 4.45         3.79 years
                                 ======================
</TABLE>

The  Company issued 31,833 restricted shares in the nine months ended October 5,
2006. Such shares are valued based on the quoted price of the Company's stock on
the  date of grant and recorded as compensation expense over the related vesting
period,  which  is  generally four years. Compensation cost, net of an estimated
forfeiture rate of 18.5%, related to previously-issued restricted shares totaled
$74  thousand  during  the  three months ended October 5, 2006 and $190 thousand
during  the  nine  months ended October 5, 2006. No similar expense was recorded
during the three months or nine months ended October 5, 2005. In connection with
the  adoption  of  SFAS  123R,  unearned  compensation aggregating $1.24 million
associated  with  previously-issued  restricted  shares has been reclassified to
paid-in  capital in the accompanying consolidated balance sheet as of October 5,
2006.

5.     Earnings  per  Common  Share

The  following is a reconciliation of the number of shares used in the basic EPS
and  diluted  EPS  computations:


                                       11
<PAGE>
<TABLE>
<CAPTION>
(in  thousands,  except  per  share  data)

                                    Three Months Ended October 5,
                         ------------------------------------- ------------
                                  2006                     2005
                         ------------------------   -----------------------
                                       Per Share                 Per Share
                          Shares         Amount       Shares       Amount
                         ---------    -----------   ---------   -----------
<S>                      <C>          <C>           <C>         <C>
     Basic EPS              12,591    $    (0.08)      12,583   $    (0.12)
     Effect of dilutive
       stock options             - *            - *         - *           - *
                         ---------    -----------   ---------   -----------
     Diluted EPS            12,591    $    (0.08)      12,583   $    (0.12)
                         =========    ===========   =========   ===========
</TABLE>

     * Not presented  herein  since  effect  on  loss  per  common  share  is
     anti-dilutive  for  the  three  months  ended October 5, 2006 and 2005. Had
     effect  on  loss  per  common  share  not been anti-dilutive, the number of
     diluted shares would have been 12,737 and 12,659 for the three months ended
     October  5,  2006  and  2005.

<TABLE>
<CAPTION>
                                    Nine Months Ended October 5,
                         ------------------------------------------------
                                 2006                       2005
                         -----------------------   ----------------------
<S>                      <C>         <C>           <C>        <C>
                                      Per Share                Per Share
                          Shares       Amount        Shares     Amount
                         ---------   -----------   ---------  -----------
     Basic EPS              12,611   $    (0.03)      12,542  $     0.12
     Effect of dilutive
       stock options             - *           - *       110       (0.01)
                         ---------   -----------   ---------  -----------
     Diluted EPS            12,611   $    (0.03)      12,652  $     0.11
                         =========   ===========   =========  ===========
</TABLE>

     * Not presented  herein  since  effect  on  loss  per  common  share  is
     anti-dilutive for the nine months ended October 5, 2006. Had effect on loss
     per common share not been anti-dilutive, the number of diluted shares would
     have  been  12,670  for  the  nine  months  ended  October  5,  2006.

6.     Treasury  Stock

On March 31, 2006, the Board of Directors of the Company authorized a program to
repurchase  up  to  500,000  shares,  at an aggregate price of no more than $5.0
million. The Company intends to effect such repurchases, in compliance with Rule
10b-18  under  the Securities Exchange Act of 1934.  The acquired shares will be
held in treasury or cancelled.  The Company anticipates financing the repurchase
program  out  of  working capital. This stock redemption program was approved to
remain in place and in full force/effect for a period of 18 months.  The Company
purchased  152,638  shares  at  an  average  price per share of $7.85 during the
fiscal  quarter ended October 5, 2006 and 172,638 shares at an average price per
share  of  $7.77  during  the  nine  months  ended  October  5,  2006.


                                       12
<PAGE>
7.     Goodwill  and  Long-Lived  Assets

Intangible  assets with definite lives are amortized over their estimated useful
lives.  The  following  table  provides  a  summary  of the Company's intangible
assets  with  definite  lives  as  of  October  5,  2006  and  January  5, 2006:

<TABLE>
<CAPTION>
(in thousands)
                                 Gross                         Net         Gross                      Net
                                Carrying    Accumulated     Carrying     Carrying    Accumulated   Carrying
                                 Amount    Amortization      Amount       Amount    Amortization    Amount
                               10/5/2006     10/5/2006      10/5/2006    1/5/2006     1/5/2006     1/5/2006
                               ----------  -------------  -------------  ---------  -------------  ---------
<S>                            <C>         <C>            <C>            <C>        <C>            <C>
Amortized intangible assets:
  Covenants not-to-compete     $    2,309  $       1,939  $         370  $   2,024  $       1,859  $     165
  Customer lists                    2,877          1,335          1,542      2,877          1,061      1,816
  Other intangibles                 1,268            383            885      1,268            242      1,026
                               ----------  -------------  -------------  ---------  -------------  ---------
  Total amortized intangibles  $    6,454  $       3,657  $       2,797  $   6,169  $       3,162  $   3,007
                               ==========  =============  =============  =========  =============  =========
</TABLE>

Amortized intangible assets are being amortized over periods ranging from 1.5 to
15  years  for covenants not-to-compete, 10 to 15 years for customer lists and 4
to  7  years  for  other intangibles.     For the quarter ended October 5, 2006,
amortization  expense  related to intangible assets was $166 thousand.   For the
quarter ended October 5, 2005, amortization expense related to intangible assets
was  $164  thousand.   For  the  nine months ended October 5, 2006, amortization
expense  related to intangible assets with definite lives was $495 thousand. For
the  nine  months  ended  October  5,  2005,  amortization  expense  related  to
intangible  assets  with  definite  lives  was  $624  thousand.

Projected future amortization expense related to intangible assets with definite
lives  is  as  follows:

<TABLE>
<CAPTION>
(in thousands)
<S>                  <C>      <C>
Fiscal Years:
2006                 $  177   October 6, 2006 thru January 5, 2007
2007                    674
2008                    651
2009                    587
2010                    408
2011+                   300
                     ------
           Total     $2,797
                     ======
</TABLE>

The  change  of  the  net  carrying amount of goodwill for the nine months ended
October  5,  2006  is  as  follows:

<TABLE>
<CAPTION>
<S>                                      <C>
Net carrying amount as of 1/5/06         $101,048
Goodwill recorded during first quarter        250
                                         ---------
Net carrying amount as of 4/5/06          101,298
Goodwill recorded during second quarter       488
                                         ---------
Net carrying amount as of 7/5/06          101,786
Goodwill charge                            (3,472)
                                         ---------
Net carrying amount as of 10/5/06        $ 98,314
                                         =========
</TABLE>

Pursuant  to  the  provisions  of  SFAS  142,  the Company performs its goodwill
impairment  testing  on an annual basis. Historically, the Company has performed
its  annual  goodwill impairment testing during the fourth quarter of its fiscal
year  and  reflects  the  results  of  that  testing  in its annual consolidated
financial  statements  included  in  its  Annual  Report  on  Form  10-K.


                                       13
<PAGE>
As part of its goodwill impairment testing, the Company reviews various factors,
such  as  the  market price of the Company's common stock, discounted cash flows
from projected earnings and values for comparable companies to determine whether
impairment  exists.  For  the year ended January 5, 2006, the Company determined
there  was  an  impairment.  The primary factor leading to the impairment is the
Company's  declining stock price in the fourth quarter of 2005.  The second step
of  the  goodwill impairment test was not yet completed prior to the issuance of
the fiscal 2005 financial statements. Therefore, the Company recognized a charge
of  $16  million  as  a reasonable estimate of the impairment loss in its fiscal
2005  financial  statements.

During  the  third quarter of fiscal 2006, the Company completed the second step
of  the  goodwill  analysis  as  required under SFAS 142. The second step of the
goodwill  impairment  test  used  to  measure the amount of the impairment loss,
compares  the  implied  fair  value of reporting unit goodwill with the carrying
amount of that goodwill. The implied fair value of goodwill is determined in the
same manner as the amount of goodwill recognized in a business combination. As a
result,  in  our  step two analysis, the Company allocated the fair value of the
reporting  unit determined in step 1 to all of the assets and liabilities of the
Company  (including any unrecognized intangible assets) as if the reporting unit
had  been acquired in a business combination and the fair value of the reporting
unit  was  the  price paid to acquire the reporting unit. The excess of the fair
value  of  the  reporting  unit  over  the  amounts  assigned  to its assets and
liabilities  is the implied fair value of the goodwill. The implied value of the
goodwill  calculated  in  our  step two analysis was approximately $96.2 million
compared  to  goodwill  initially  carried on the balance sheet of approximately
$115.7  million  as  of  January  5,  2006,  indicating a goodwill impairment of
approximately  $19.5  million.

As  discussed above, an initial estimated impairment of $16 million was recorded
for  the  year  ended  January  5,  2006.  As  a result of completing our step 2
analysis  in  the  third  quarter  of  fiscal  2006, an additional impairment of
approximately  $3.5  million  was  recorded  for the three and nine months ended
October  5,  2006.  Upon  completion  of  our  step  2  analysis,  the  amount
attributable  to unrecognized intangible assets such as customer lists and trade
name  was  determined  to  be greater than our initial estimates, resulting in a
lower  implied  fair  value  of  goodwill which resulted in an adjustment of our
estimated  goodwill  impairment  charge during the third quarter of fiscal 2006.

During  the  nine months ended October 5, 2006, the Company recorded a reduction
of  $2.7  million of goodwill. The amounts recorded consisted of $3.5 million in
goodwill  writedown,  $825 thousand and $10 thousand for payments under earn-out
agreements  and  a  miscellaneous  charge,  related  to  prior  acquisitions,
respectively,  offset  by  $97  thousand  in  collections  of  overpayments  .

8.     Supplemental  Cash  Flow  Disclosures

Supplemental  disclosures  with  respect  to  cash flow information and non-cash
investing  and  financing  activities  are  as  follows:

<TABLE>
<CAPTION>
(in thousands)
                                           Nine Months Ended October 5,
                                          ------------------------------
                                               2006            2005
                                          --------------  --------------
<S>                                       <C>             <C>
     Interest paid                        $          751  $          721
                                          ==============  ==============
     Income taxes paid                    $           91  $        1,422
                                          ==============  ==============
     Adjustment to purchase price
       of acquired assets and goodwill    $            -  $        4,528
                                          ==============  ==============
</TABLE>


                                       14
<PAGE>
9.     Litigation

There  are  various  legal actions arising in the normal course of business that
have  been  brought  against the Company. Management believes these matters will
not  have  a  material  adverse  effect  on  the Company's financial position or
results  of  operations.

10.     Segment  Information

Effective  in  the  fourth  quarter of 2005, the Company re-aligned its business
segments  and  operating segments into one business segment, which includes both
product  and  service  offerings. The Company follows the provisions of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the reporting of information about operating
segments  in  annual  and  interim  financial statements. Operating segments are
defined  as components of an enterprise for which separate financial information
is  available  that  is  evaluated  regularly  by  the  chief operating decision
maker(s) in deciding how to allocate resources and in assessing performance. The
Company's operating segments have similar economic characteristics and therefore
can be aggregated into one reporting segment. Two or more operating segments may
be  aggregated  into  a  single operating segment if the segments are similar in
each of the following areas: (1) the nature of the products and services (2) the
nature  of  the  production  processes (3) the type of class of customer for the
products  and  services  and  (4)  the  nature  of  the  regulatory environment.

Prior  to  fiscal  year  2005,  the  Company disclosed three reporting segments:
products,  services  and  leasing.  Monthly income statements were generated and
reviewed  by management for both the product and service businesses for decision
making  purposes.  The  segment  reporting  (product  and service) are no longer
reviewed  by  management on a regular basis and required significant manual work
to  develop  the  information  solely for quarterly external financial statement
reporting  purposes.

During  the  fourth  quarter  of  2005, the Company realigned its management and
reporting  responsibilities  into  functional  lines: Sales, Service Operations,
Finance and Administrative.  The Company also aligned sales and service delivery
into  five  domestic  geographic  regions  and  finance  and  administration  is
centralized.  Each of the geographic regions sell both products and services and
each  geographic  region  has similar economic characteristics.  As a result the
Company  now  reports  one reportable segment and the information in this report
has  been  revised  to  reflect  the  Company's  current  segment  reporting.

11.     Reclassifications

Certain  reclassifications  of prior period amounts have been made to conform to
the  current  period  presentation.

12.     Restructuring  and  Severance  Charges

During  the first nine months of fiscal 2006 and during fiscal 2005, the Company
recorded severance charges totaling $0.1 million and $0.9 million, respectively,
resulting  primarily  from  a  re-alignment  of  the  structure of the Company's
organization.  Severance  payments  will  continue to be made thru January 2007.

The  Company  also  recorded  during  fiscal  2004 a charge for severance in the
amount  of  $1.447  million related to the resignation of David B. Pomeroy II as
CEO of the Company.  Mr. Pomeroy will continue to serve as Chairman of the Board
of  the  Company.  Mr.  Pomeroy will continue to receive severance payments thru
January  2009.


                                       15
<PAGE>
As of October 5, 2006, the restructuring and severance charge accrual, consisted
of  the  following:

<TABLE>
<CAPTION>
(in thousands)                        Severance      Facility      Total
                                                   consolidation
                                     -------------------------------------
<S>                                  <C>          <C>              <C>
Accrual balance at January 5, 2006   $      876   $          125   $1,001
Charges accrued                             133                -      133
Cash payments                              (322)             (51)    (373)
                                     -------------------------------------
Accrual balance at April 5, 2006            687               74      761
Charges accrued                               -                         -
Cash payments                              (221)             (74)    (295)
                                     -------------------------------------
Accrual balance at July 5, 2006             466                -      466
Charges accrued                               -                         -
Cash payments                              (181)               -     (181)
                                     -------------------------------------
Accrual balance at October 5, 2006   $      285   $            -   $  285
                                     =====================================
</TABLE>

Also,  the  Company recorded a restructuring charge liability in connection with
the  ARC  acquisition  to  eliminate  certain duplicative activities and reduced
facility  requirements.  As  a  result, approximately $6.4 million of costs were
recorded  as  part  of the liabilities assumed in the ARC acquisition in October
2004. The restructuring charge consisted of costs of vacating duplicative leased
facilities of ARC and severance costs associated with exiting activities.  These
costs  are  accounted  for  under  EITF  95-3,  "Recognition  of  Liabilities in
Connection  with Purchase Business Combinations." These costs were recognized as
a  liability  assumed  in  the purchase business combination and included in the
allocation  of  the  cost to acquire ARC. Changes to the estimates primarily for
acquired  leases  included  in  the  currently  approved  plans of restructuring
through July 23, 2005 were recorded as an increase or decrease in goodwill, with
any  increases  in  estimates  thereafter  charged  to  operations.

<TABLE>
<CAPTION>
                                          Facility
(in thousands)                          consolidation
                                       ---------------
<S>                                    <C>
Total initial liability                $        3,715
Adjustments of initial liability                2,165
Cash payments                                  (1,159)
                                       ---------------
Liability balance at January 5, 2006            4,721
Cash payments                                    (278)
                                       ---------------
Liability balance at April 5, 2006              4,443
Cash payments                                    (273)
                                       ---------------
Liability balance at July 5, 2006               4,170
Cash payments                                    (278)
                                       ---------------
Liability balance at October 5, 2006   $        3,892
                                       ===============
</TABLE>

Additionally,  as  part  of  the  acquisition  of  ARC, the Company acquired the
remaining  obligations of ARC's existing restructuring plan, which was initially
recorded by ARC in fiscal 2002. The total obligations assumed in connection with
this  restructuring  plan  was  approximately  $1.5  million  at  July 23, 2004.


                                       16
<PAGE>
As  of October 5, 2006, the balance of the ARC fiscal 2002 accrued restructuring
costs  recorded  consisted  of  the  following:

<TABLE>
<CAPTION>
(in thousands)

Fiscal 2002 Restructuring Charge

                                         Facility        Other
                                      consolidations    charges    Total
                                     -------------------------------------
<S>                                  <C>               <C>        <C>
Total liability as of July 23, 2004  $           756   $    696   $ 1,452
                                     -------------------------------------
Adjustment of initial liability                  100          -       100
Cash payments                                   (812)      (671)   (1,483)
                                     -------------------------------------
Balance at January 5, 2006                        44         25        69
Cash payments                                    (33)        (3)      (36)
                                     -------------------------------------
Balance at April 5, 2006                          11         22        33
Cash payments                                    (11)        (3)      (14)
                                     -------------------------------------
Balance at July 5, 2006                            -         19        19
Cash payments                                      -         (3)       (3)
                                     -------------------------------------
Balance at October 5, 2006           $             -   $     16   $    16
                                     =====================================
</TABLE>


                                       17
<PAGE>
ITEM  2-MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
        RESULTS  OF  OPERATIONS

             Special Cautionary Notice Regarding Forward-Looking Statements
             --------------------------------------------------------------

Certain  of the matters discussed under the caption "Management's Discussion and
Analysis  of  Financial  Condition  and  Results  of Operations" contain certain
forward-looking  statements  regarding  future financial results of the Company.
The words "expect," "estimate," "anticipate," "predict," and similar expressions
are  intended  to  identify  forward-looking  statements.  Such  statements  are
forward-looking  statements  for  purposes of the Securities Act of 1933 and the
Securities  Exchange  Act of 1934, as amended, and as such may involve known and
unknown  risks,  uncertainties  and  other  factors  which  may cause the actual
results,  performance  or achievements of the Company to be materially different
from  future  results,  performance or achievements expressed or implied by such
forward-looking  statements.  Important  factors  that  could  cause  the actual
results,  performance  or  achievements of the Company to differ materially from
the  Company's  expectations  are  disclosed in this document including, without
limitation,  those  statements  made  in  conjunction  with  the forward-looking
statements  under  "Management's  Discussion and Analysis of Financial Condition
and  Results  of  Operations".  All  written  or oral forward-looking statements
attributable  to  the  Company are expressly qualified in their entirety by such
factors.


                                       18
<PAGE>

RESULTS  OF  OPERATIONS
The  following  table  sets  forth for the periods presented information derived
from  our  consolidated  statements  of  operations expressed as a percentage of
product  and  service  revenues:

<TABLE>
<CAPTION>
                                           Three Months Ended         Nine Months Ended
                                        ------------------------  -------------------------
                                                October 5,                October 5,
                                            2006         2005          2006       2005
                                        ------------------------  -------------------------
<S>                                     <C>          <C>          <C>          <C>
                                         (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Product and service revenues:
  Product                                     60.5%        69.9%        58.5%         69.2%
  Service                                     39.5%        30.1%        41.5%         30.8%
                                        -----------  -----------  -----------  ------------
    Total revenues                           100.0%       100.0%       100.0%        100.0%
                                        -----------  -----------  -----------  ------------
Cost of sales and service:
  Product                                     55.7%        64.9%        53.8%         64.0%
  Service                                     29.7%        22.9%        31.6%         23.0%
                                        -----------  -----------  -----------  ------------
    Total cost of revenues                    85.4%        87.8%        85.4%         87.0%
                                        -----------  -----------  -----------  ------------

  Gross profit                                14.6%        12.2%        14.6%         13.0%
                                        -----------  -----------  -----------  ------------

Operating expenses:
  Selling, general and administrative         12.6%        12.7%        13.0%         11.5%
  Depreciation and amortization                0.8%         0.7%         0.8%          0.8%
  Goodwill  charge                             2.2%         0.0%         0.7%          0.0%
  Other                                        0.1%         0.0%         0.0%          0.0%
                                        -----------  -----------  -----------  ------------
    Total operating expenses                  15.7%        13.4%        14.5%         12.3%
                                        -----------  -----------  -----------  ------------

Income (loss) from operations                 -1.1%        -1.2%         0.1%          0.7%

Interest expense, net                          0.0%         0.1%         0.1%          0.1%

                                        -----------  -----------  -----------  ------------
Income (loss) before income tax               -1.1%        -1.3%         0.0%          0.6%
Income tax expense (benefit)                  -0.4%        -0.5%         0.0%          0.2%

                                        -----------  -----------  -----------  ------------
Net income (loss)                             -0.7%        -0.8%         0.0%          0.4%
                                        ===========  ===========  ===========  ============
</TABLE>


                                       19
<PAGE>
                           POMEROY IT SOLUTIONS, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TOTAL  PRODUCT  AND  SERVICE  REVENUES.

QUARTER-TO-DATE.  Total product and service revenues decreased $30.1 million, or
16.3%, to $154.9 million in the third quarter of fiscal 2006 from $185.0 million
in  the  third  quarter  of  fiscal  2005.

Product  sales  decreased $35.6 million, or 27.5%, to $93.7 million in the third
quarter  of fiscal 2006 from $129.3 million in the third quarter of fiscal 2005.
The  decrease  in  product  sales  is primarily attributable to several factors:
continuing  competitive pressure in the marketplace; reduction in IT spending by
our  customers;  and  delays  in  IT  project deployments by our customers.  The
product  margins,  however,  increased  for the period due to the mix of product
sales.

Service revenues increased $5.6 million, or 10.1%, to $61.3 million in the third
quarter  of  fiscal  2006 from $55.7 million in the third quarter of fiscal year
2005.  The increase in service revenues relates primarily to the growth from new
service  agreements.  Service  margins  increased  to 25.0% in the third quarter
compared to 23.9% in the third quarter of 2005, driven by higher utilization and
cost  reduction.

YEAR-TO-DATE.  Total  product  and  service revenues decreased $73.2 million, or
13.5%,  to  $469.7  million  in the first nine months of fiscal 2006 from $542.9
million  in  the  first  nine  months  of  fiscal  2005.

Product sales decreased $101.0 million, or 26.9%, to $274.6 million in the first
nine  months  of  fiscal  2006  from  $375.6 million in the first nine months of
fiscal  2005.  The  year  over  year  decrease  in  product  sales  is primarily
attributable  to  several  factors:  continuing  competitive  pressure  in  the
marketplace; reduction in IT spending by our customers; and delays in IT project
deployments  by  our  customers.  The  year  over year product margins, however,
increased  due  to  the  mix  of  product  sales.

Service  revenues  increased  $ 27.8 million, or 16.6%, to $195.1 million in the
first nine months of fiscal 2006 from $167.3 million in the first nine months of
fiscal  year  2005.  This  increase in service revenues relates primarily to the
growth  from  new  service agreements.    The Company continues to take steps to
improve  utilization  and  productivity  and as a result, margins have increased
sequentially  in  the  first,  second  and  third  quarter  of  2006.

GROSS  PROFIT.

QUARTER-TO-DATE.  Gross profit increased $0.2 million, or 0.9%, to $22.7 million
in  the  third quarter of fiscal 2006 from $22.5 million in the third quarter of
fiscal  year  2005.  This  increase  is due primarily to the increase in service
revenues.  Gross  profit,  as a percentage of revenue, increased to 14.6% in the
third quarter of fiscal 2006 as compared to 12.2% in the third quarter of fiscal
2005.  This  increase  in  gross  margin  is primarily due to higher product and
service  gross  margins.

YEAR-TO-DATE.  Gross profit decreased $2.0 million, or 2.8%, to $68.5 million in
the first nine months of fiscal 2006 from $70.5 million in the first nine months
of  fiscal  2005.  The  decrease resulted primarily from the decrease in product
sales.  Gross  profit,  as  a  percentage  of revenue, increased to 14.6% in the
first  nine  months of fiscal 2006 as compared to 13.0% in the first nine months
of  fiscal  2005.  This increase in gross margin is primarily due to a change in
the  product/service  sales  mix,  with  a greater percentage from higher margin
service  revenue  that  produced  higher  gross  margins.

OPERATING  EXPENSES.

QUARTER-TO-DATE.  Operating  expenses  decreased  to  $24.3 million in the third
quarter of fiscal 2006, compared to $24.9 million in the third quarter of fiscal
2005.  Operating  expenses  decreased  as  a  result  of a reduction in bad debt
expense  and  restructuring  charge of $4.2 million and a reduction in operating
expenses.  These  reductions in expense were offset by an increase in expense of
$3.5  million recorded for write down of goodwill (discussed below), an increase
in  equity  compensation expense of $0.3 million and an increase in professional
fees  of  $0.5  million


                                       20
<PAGE>
in  the  third  quarter of 2006.  Expressed as a percentage of total product and
service  revenues, these expenses were 15.7% in the third quarter of fiscal 2006
compared  to  13.4%  in  the  third  quarter  of  fiscal  2005.

YEAR-TO-DATE.  Operating  expenses  increased  $1.2  million,  or 1.8%, to $68.7
million  in the first nine months of fiscal 2006 from $67.5 million in the first
nine  months  of  fiscal  2005. Operating expenses increased as a result of $3.5
million  recorded  for  write down of goodwill (discussed below), an increase in
equity compensation expense of $1.2 million and an increase in professional fees
of  $1.8  million,  offset  by  a decrease in bad debt expense and restructuring
charge  of  $4.0  million  and a reduction in operating expenses. Expressed as a
percentage  of total product and service revenues, these expenses were 14.6 % in
the  first nine months of fiscal 2006 compared to 12.4% in the first nine months
of  fiscal  2005.

WRITE  DOWN  OF  GOODWILL.  Pursuant  to the provisions of SFAS 142, the Company
performs  its  goodwill impairment testing on an annual basis. Historically, the
Company  has  performed its annual goodwill impairment testing during the fourth
quarter  of  its  fiscal  year  and  reflects the results of that testing in its
annual  consolidated  financial statements included in its Annual Report on Form
10-K.

As part of its goodwill impairment testing, the Company reviews various factors,
such  as  the  market price of the Company's common stock, discounted cash flows
from projected earnings and values for comparable companies to determine whether
impairment  exists.  For  the year ended January 5, 2006, the Company determined
there  was  an  impairment.  The primary factor leading to the impairment is the
Company's  declining stock price in the fourth quarter of 2005.  The second step
of  the  goodwill impairment test was not yet completed prior to the issuance of
the fiscal 2005 financial statements. Therefore, the Company recognized a charge
of  $16  million  as  a reasonable estimate of the impairment loss in its fiscal
2005  financial  statements.

During  the  third quarter of fiscal 2006, the Company completed the second step
of  the  goodwill  analysis  as  required under SFAS 142. The second step of the
goodwill  impairment  test  used  to  measure the amount of the impairment loss,
compares  the  implied  fair  value of reporting unit goodwill with the carrying
amount of that goodwill. The implied fair value of goodwill is determined in the
same manner as the amount of goodwill recognized in a business combination. As a
result,  in  our  step two analysis, the Company allocated the fair value of the
reporting  unit determined in step 1 to all of the assets and liabilities of the
Company  (including any unrecognized intangible assets) as if the reporting unit
had  been acquired in a business combination and the fair value of the reporting
unit  was  the  price paid to acquire the reporting unit. The excess of the fair
value  of  the  reporting  unit  over  the  amounts  assigned  to its assets and
liabilities  is the implied fair value of the goodwill. The implied value of the
goodwill  calculated  in  our  step two analysis was approximately $96.2 million
compared  to  goodwill  initially  carried on the balance sheet of approximately
$115.7  million  as  of  January  5,  2006,  indicating a goodwill impairment of
approximately  $19.5  million.

As  discussed above, an initial estimated impairment of $16 million was recorded
for  the  year  ended  January  5,  2006.  As  a result of completing our step 2
analysis  in  the  third  quarter  of  fiscal  2006, an additional impairment of
approximately  $3.5  million  was  recorded  for the three and nine months ended
October  5,  2006.  Upon  completion  of  our  step  2  analysis,  the  amount
attributable  to unrecognized intangible assets such as customer lists and trade
name  was  determined  to  be greater than our initial estimates, resulting in a
lower  implied  fair  value  of  goodwill which resulted in an adjustment of our
estimated  goodwill  impairment  charge during the third quarter of fiscal 2006.

INCOME  (LOSS)  FROM  OPERATIONS.

QUARTER-TO-DATE.  Loss  from  operations  decreased $0.6 million, or 26.1%, to a
loss  of  $1.7  million  in the third quarter of fiscal 2006 from a loss of $2.3
million  in the third quarter of fiscal 2005. The Company's operating margin was
(1.1)%  in  the third quarter of fiscal 2006 as compared to (1.2) % in the third
quarter  of  fiscal 2005. This decrease is the result of the net effect of (i) a
reduction  in  bad  debt  expense and restructuring charge of $4.2 million and a
reduction  in other operating expenses (ii) a decrease in operating expenses and
(iii) an increase in expense of $3.5 million recorded for write down of goodwill
(discussed  above),  an  increase in equity compensation expense of $0.3 million
and  an  increase  in  professional fees of $0.5 million in the third quarter of
2006.

YEAR-TO-DATE.  Income  (loss) from operations decreased $3.2 million, or 106.7%,
to a loss of $0.2 million in the first nine months of fiscal 2006 from income of
$3.0 million in the first nine months of fiscal 2005.  The decrease in the first
nine  months  is  a result of a decrease in revenues, $3.5 million write down of
goodwill  (discussed  above)


                                       21
<PAGE>
equity  compensation  expense  of $1.2 million, an increase in professional fees
offset  by  a  decrease  in  payroll  related  expenses,  bad debt expense and a
restructuring charge of $4.0 million related to third quarter of 2005.

INTEREST  EXPENSE.

QUARTER-TO-DATE.  Net  interest expense was $4 thousand during the third quarter
of fiscal 2006 as compared to net interest expense of $152 thousand during third
quarter  of  fiscal 2005.  This decrease in net interest expense was a result of
decreased  borrowings  under  the  Company's  credit  facility  and  increase in
interest  earned due to cash on hand, offset by an increase due to the accretion
of  interest  of  future rental payments that were accrued for a leased facility
that  was  part  of  the  ARC  acquisition.

YEAR-TO-DATE.  Net  interest  expense was $475 thousand in the first nine months
of  fiscal  2006  compared to net interest expense of $579 thousand in the first
nine  months of fiscal 2005.  This decrease in net interest expense was a result
of  decreased  borrowings  under  the  Company's credit facility and increase in
interest  earned due to cash on hand, offset by an increase due to the accretion
of  interest  of  future rental payments that were accrued for a leased facility
that  was  part  of  the  ARC  acquisition.

INCOME  TAXES.

QUARTER-TO-DATE.  The Company's effective income tax rate was 39.0% in the third
quarter  of  fiscal  2006 compared to 40.5% in the third quarter of fiscal 2005.
This  fluctuation  was principally related to the fluctuation in the calculation
of  state  and  local  income  taxes.

YEAR-TO-DATE.  The  Company's  effective  tax  rate  was 38.9% in the first nine
months of fiscal 2006 compared to 40.5% in the first nine months of fiscal 2005.
This  fluctuation  was principally related to the fluctuation in the calculation
of  state  and  local  income  taxes.

NET  INCOME (LOSS)

QUARTER-TO-DATE.  Net loss was $ 1.0 million in the third quarter of fiscal 2006
compared  to  a net loss of $1.5 million in the third quarter of fiscal 2005 due
to  the  factors  described  above.

YEAR-TO-DATE.  Net loss was $0.4 million in the first nine months of fiscal 2006
compared  to  net income of $1.5 million in the first nine months of fiscal 2005
due  to  the  factors  described  above.


                                       22
<PAGE>
                         LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $16.9 million in the first nine months
of  fiscal  2006.  Cash provided in investing activities was $0.4 million, which
included $2.6 million in proceeds from the redemption of certificates of deposit
offset  by  $0.7 million for prior year acquisitions, payments for covenants not
to  compete  of $0.3 million and $1.2 million for capital expenditures. Net cash
used in financing activities was $16.2 million, which included $15.3 million for
net  repayments  of  short-term  borrowings,  $1.4  million  for the purchase of
treasury  stock,  offset  by  $0.5  million  of  proceeds from exercise of stock
options  and  employee  stock  purchase  plan.

The amount of cash derived from operating activities will vary based on a number
of  business  factors  which  may  change  from time to time, including terms of
available  financing  from  vendors,  downturns in the Company's business and/or
downturns  in  the  businesses of the Company's customers.  However, a growth or
decline  in  service  revenue  in conjunction with a change in the proportion of
service  revenue to total revenue is an underlying driver of operating cash flow
during  the period of growth because a majority of the Company's service revenue
is  generated  based  upon  the billings of the Company's technicians.  The cash
outlay for these labor/payroll costs is incurred bi-weekly with each pay period.
The invoicing for the service is generated on various billing cycles as dictated
by  the customers, and the respective cash inflow typically follows within 30 to
60  days  of  invoice date, which may be as long as 60 to 120 days from the time
the services are performed.   This differs from product revenue in that the time
period  between  the  time  that  the  Company  incurs  the cost to purchase the
products  and  collects  the  revenue  from  its  customer is typically shorter,
usually  from  0  to  60  days, and the Company primarily orders inventory for a
particular  customer  rather  than  stocking  large  amounts  of inventory.  The
Company  anticipates  an  increase  in  service revenue and in the proportion of
service  revenue  to  total  revenue  which,  if  it  occurs,  may  result  in a
significant  decrease  in cash flows from operating activities during periods of
significant  growth  or  periods  of  excess  technical  capacity.  In addition,
certain  services,  primarily outsourcing contracts for the Company's Life Cycle
Services,  require  that  the  Company  maintain  a specific parts inventory for
servicing  the  customer;  thus, an increase or decrease in the type of services
provided  can  impact  inventory  levels  and  operating  cash  flows.

Cash  flows provided by operating activities in the nine months ended October 5,
2006  were  $16.9  million  as  compared  to  cash  flows  provided by operating
activities  of  $4.4  million  for the corresponding period of fiscal 2005.  The
increase  in  cash  flows  from operating activities in the first nine months of
2006  compared  to  the  first  nine  months of 2005 resulted primarily from the
timing of payments on accounts payable, offset by timing of receipts on accounts
netting to $18.0 million increase in cash provided over the corresponding period
in  2005. Other major factors impacting net cash flows from operating activities
are  fluctuations in net income, net investment in leases, employee compensation
and  benefits  as  well  as  from  changes  in  items  classified as other, net.

A  significant  part  of  Pomeroy's  inventories  are  financed  by  floor  plan
arrangements  with  third  parties.  At  October  5, 2006, these lines of credit
totaled  $78.5  million, including $75.0 million with GE Commercial Distribution
Finance  ("GECDF")  and  $3.5  million  with  IBM  Credit  Corporation  ("ICC").
Borrowings under the GECDF floor plan arrangements are made on thirty-day notes.
Borrowings  under the ICC floor plan arrangements are made on fifteen-day notes.
All  such  borrowings  are  secured  by  the  related  inventory.  Financing  on
substantially  all  of  the  arrangements  is  interest free due to subsidies by
manufacturers.  Overall, the average interest rate on these arrangements is less
than  1.0%.  The  Company  classifies  amounts  outstanding under the floor plan
arrangements  as  accounts  payable.

The  Company  has  a  $165.0  million  Syndicated Credit Facility Agreement with
GECDF.   The  credit facility has a three-year term and its components include a
maximum  of  $75.0  million  for  inventory  financing  as described above and a
revolving line of credit, collateralized primarily by accounts receivable, of up
to  $110.0 million; provided that the total amount outstanding at any time under
the inventory financing facility and the revolving line of credit may not exceed
$165.0  million.  The  credit facility also provides a letter of credit facility
of  $5.0  million.   The interest rate under the credit facility is based on the
London  InterBank  Offering Rate ("LIBOR") and a pricing grid.  As of October 5,
2006,  the adjusted LIBOR rate was 7.32%.  This credit facility expires June 28,
2007.

As  of  October  5,  2006,  the  Company  had  no  outstanding balance under the
Company's  credit  facility.  As  of  January  5,  2006,  the  Company  had  an
outstanding  balance  under the Company's credit facility of $15.3 million.  The
credit facility is collateralized by substantially all of the assets of Pomeroy,
except  those  assets  that  collateralize certain other financing arrangements.
Under  the terms of the credit facility, Pomeroy is subject to various financial
covenants.  As  of  October  5,  2006,  Pomeroy  was  in  compliance  with those
financial  covenants.


                                       23
<PAGE>
Pomeroy  believes  that  the  anticipated  cash flow from operations and current
financing  arrangements  will  be  sufficient  to  satisfy  Pomeroy's  capital
requirements  for  the next twelve months. The Company's credit facility expires
June 28, 2007. The Company intends to negotiate a new credit facility with terms
sufficient for its financing needs and does not anticipate any problems securing
a  new credit facility before June 28, 2007. However if the company is unable to
negotiate a new credit facility, it could adversely effect the Company's ability
to  operate.

On March 31, 2006, the Board of Directors of the Company authorized a program to
repurchase  up  to  500,000  shares,  at an aggregate price of no more than $5.0
million. The Company intends to effect such repurchases, in compliance with Rule
10b-18  under  the Securities Exchange Act of 1934.  The acquired shares will be
held in treasury or cancelled.  The Company anticipates financing the repurchase
program  out  of  working capital. This stock redemption program was approved to
remain in place and in full force/effect for a period of 18 months.  The Company
purchased  152,638  shares  at  an  average  price per share of $7.85 during the
fiscal  quarter ended October 5, 2006 and 172,638 shares at an average price per
share  of  $7.77  during  the  nine  months  ended  October  5,  2006.


                                       24
<PAGE>
ITEM  3-QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

The  Company  is  exposed  to  interest  rate  risk primarily through its credit
facility  with  GECDF.  Due  to the Company's current debt position, the Company
did  not  experience  a  material  impact  from interest rate risk for the third
quarter  of  fiscal  2006.

Currently,  the  Company does not have any significant financial investments for
trading  or  other  speculative  purposes  or  to manage interest rate exposure.

ITEM 4-CONTROLS AND PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

The  Company  maintains  disclosure  controls  and  procedures  (as  defined  in
Rules13(a)-15(e)  and  15(d)-15(e)  of  the  Securities Exchange Act of 1934, as
amended  (the "Exchange Act")) designed to provide reasonable assurance that the
information  required  to  be  reported in its Exchange Act filings is recorded,
processed,  summarized  and  reported  within  the  time  periods  specified and
pursuant to the regulations of the Securities and Exchange Commission, including
controls  and procedures designed to ensure that this information is accumulated
and  communicated  to  the  Company's  management, including its Chief Executive
Officer  and  Chief Financial Officer, as appropriate, to allow timely decisions
regarding  required  disclosure.  It  should  be noted that, because of inherent
limitations,  the  Company's  disclosure  controls  and procedures, however well
designed  and operated, can provide only reasonable, and not absolute, assurance
that  the  objectives  of  the  disclosure  controls  and  procedures  are  met.

As described in Item 9A of the Company's Annual Report on Form 10-K for the year
ended  January  5,  2006,  the Company reported that it identified four material
weaknesses  in  its  internal control over financial reporting. As a result, the
Company's  management, including its Chief Executive Officer and Chief Financial
Officer, concluded that as of January 5, 2006, the Company's disclosure controls
and  procedures  were not effective at a reasonable level of assurance, based on
the  evaluation  of these controls and procedures required by Exchange Act Rules
13(a)-15(e)  or  15(d)-15(e).

As  of  October  5, 2006, the four material weaknesses have not been remediated.
Accordingly,  the  Company's Chief Executive Officer and Chief Financial Officer
concluded  that,  as  of  October 5, 2006, the Company's disclosure controls and
procedures were not effective in providing reasonable assurance that information
required  to  be disclosed by us in reports we file or submit under the Exchange
Act  is  recorded,  processed,  summarized  and reported within the time periods
specified  in the SEC's forms and rules.  Despite these material weaknesses, the
financial  statements reported on Form 10-Q for the fiscal quarter ended October
5,  2006,  fairly  present, in all material respects, the consolidated financial
condition  and  results  of  operations  of  the  Company.

MATERIAL WEAKNESSES REMEDIATION PLANS:

Management  is  committed  to the remediation of the four material weaknesses as
well  as  the  continued  improvement of the Company's overall internal controls
over  financial  reporting.  Management has developed remediation plans for each
of  the four identified material weaknesses.  The Company currently is executing
a  remediation  plan  for  each  of the material weaknesses set forth below that
includes  the  following:

Actions  Relating  to  Maintaining Effective Control Over The Accrual of Service
--------------------------------------------------------------------------------
Billing  Calculations  and  Service  Revenue  Recognition.
----------------------------------------------------------
We  have  assessed  our  service  revenue  and expense recognition processes and
procedures.  We  developed and have begun to implement a remediation plan during
the  third  quarter  of 2006. Our remediation work is focusing on service parts,
service  contracts,  service  invoicing  and subcontracting processes to improve
their  internal controls over financial reporting. The Company's goal is to have
the  remediation  completed  during  the  early  part of the fourth quarter with
remediation  testing  commencing  during  November  2006.

Actions  Relating  to  Maintaining  Effective  Control  Over Financial Close and
--------------------------------------------------------------------------------
Reporting  Process.
-------------------
During  the  third  quarter  we  have  developed  and  implemented  several  new
accounting  policies  and procedures.  During the fourth quarter of 2006 we will
continue to develop and implement more accounting policies.    We have developed
and  implemented  more  structured  and  meaningful  general  ledger  account
reconciliations that now reflect reconciling items that will lead to more timely
resolution  and proper account classifications.  A detailed finance organization
training  plan  on


                                       25
<PAGE>
financial  controls,  policies and procedures, account reconciliations, GAAP and
SEC  disclosure  checklists  was  implemented during the second quarter of 2006.
During  the  third quarter, the Company has fully documented its Financial Close
and  Reporting  Process.  Monthly  controls  have  been  tested during the third
quarter  and  remediation  of  these  processes,  where  necessary, is underway.
Quarterly and annual controls will be tested during the fourth quarter and after
year  end.

Actions Related to Maintaining Effective Control Over Computer Applications Used
--------------------------------------------------------------------------------
in  Financial  Reporting.
-------------------------
The  Company  has  developed  and  implemented  controls over system changes and
upgrades  that  will  be  tested  early in the fourth quarter.  In addition, the
Company  has  addressed  the necessary changes to resolve the application issues
associated  with improper system access rights by developing and implementing an
IT Security Access Policy. A Segregation of Duties Framework will be utilized in
the  fourth  quarter  to  ensure  conflicts  within  key  applications have been
remediated  or  mitigated. Our remediation testing of this control weakness will
be  performed  during  the  fourth  quarter  of  2006.

Actions  Related  to  Maintaining  Effective  Controls Over the Payroll Process.
--------------------------------------------------------------------------------
We  have implemented new payroll policies and procedures for timely notification
of  terminated  employees.  The  Company  will  continue to improve the internal
controls  over  payroll  during  2006  by  implementing  additional  procedures,
including  automated  monitoring  controls,  that  will  hold  one-up  managers
accountable  and  responsible  for timely notifications of terminated employees.
Our  remediation  testing  of this control weakness will be performed during the
fourth  quarter  of  2006.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company's remediation plan for three of the four material weaknesses has not
been  in place long enough to show meaningful results.  It is expected, however,
that  the  remediation  of  these  four  material  weaknesses will significantly
improve  the  Company's  internal  controls  over financial reporting during the
latter  part  of  2006  and  beyond.


                                       26
<PAGE>
                          PART II - OTHER INFORMATION

ITEM 1-LEGAL PROCEEDINGS

There  are  various  legal actions arising in the normal course of business that
have  been  brought  against the Company. Management believes these matters will
not  have  a  material  adverse  effect  on  the Company's financial position or
results  of  operations.

ITEM 1A-RISK FACTORS
NONE

ITEM 2-UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 31, 2006, the Board of Directors of the Company authorized a program to
repurchase  up  to  500,000  shares,  but no more than $5.0 million. The Company
intends  to  effect  such  repurchases, in compliance with Rule 10b-18 under the
Securities  Exchange  Act of 1934.  The acquired shares will be held in treasury
or  cancelled.  The  Company anticipates financing the repurchase program out of
working  capital.  This stock redemption program was approved to remain in place
and  in  full  force/effect  for  a  period  of  18  months.

<TABLE>
<CAPTION>
                                   Issuer Purchases of Equity Securities
                                                            (c) Total number
                                                            of shares               (d) Maximum number
                                         (b) Average        purchased as part       of shares that may yet
                   (a) Total number of   price paid per     of publicly             be purchased under the
Period             shares purchased      share              announced plan          plan
<S>               <C>                  <C>                  <C>                     <C>
4/6/06 - 5/5/06                     -  $                 -                       -                 500,000
5/6/06 - 6/5/06                     -  $                 -                       -                 500,000
6/6/06 - 7/5/06                20,000  $              7.17                  20,000                 480,000
7/6/06 - 8/5/06                11,980  $              7.21                  11,980                 468,020
8/6/06 - 9/5/06                49,750  $              7.78                  49,750                 418,270
9/6/06 - 10/5/06               90,908  $              7.97                  90,908                 327,362

                  -------------------                       -----------------------------------------------
Total                         172,638                                      172,638                 327,362
                  ===================                       ===============================================
</TABLE>

During the nine months ended October 5, 2006, the Company did not pay any cash
dividends.  Pomeroy has no plans to pay cash dividends in the foreseeable
future, and the payment of such dividends is restricted under Pomeroy's current
credit facility.  Under such credit facility, cash dividends and stock
redemptions are limited to $5 million annually.

ITEM 3-DEFAULTS UPON SENIOR SECURITIES
None

ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None

ITEM 5-OTHER INFORMATION
None

ITEM 6-EXHIBITS
(a) Exhibits
     10.1     Third  Amendment  to  Amended  and Restated Employement Agreement,
              dated  as  of  October 1, 2006, between Pomeroy IT Solutions, Inc.
              and Stephen E. Pomeroy (incorporated by reference as Exhibit 10(D)
              (iii)(A) to the Company's Current Report on Form 8-K filed October
              19, 2006).
     31.1     Section 302 CEO Certification
     31.2     Section 302 CFO Certification
     32.1     Section 906 CEO Certification
     32.2     Section 906 CFO Certification


                                       27
<PAGE>
                                    SIGNATURE

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.

                                        POMEROY IT SOLUTIONS, INC.
                                        --------------------------
                                               (Registrant)


Date: November 14, 2006                 By:  /s/ Kevin G. Gregory

                                        ----------------------------------------
                                        Kevin G. Gregory
                                        Senior Vice President and
                                        Chief Financial Officer