<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   _________


                                   FORM 10-Q

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

                         For the quarterly period ended
                                 July 31, 1998

                                       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 1-14192

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

                              VANSTAR CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

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

          DELAWARE                                       94-2376431
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)


                 1100 Abernathy Road, Building 500, Suite 1200
                             Atlanta, Georgia 30328
                    (Address of Principal Executive Offices)

                                 (770) 522-4700
              (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
filing requirements for the past 90 days. Yes  X      No 
                                             -----      -----


         The number of outstanding shares of the Registrant's Common Stock, par
value $.001 per share, was 44,563,243 on August 31, 1998.



                                  Page 1 of 18
<PAGE>   2



                              VANSTAR CORPORATION

                                   FORM 10-Q

                                     INDEX


                         PART I. FINANCIAL INFORMATION
                                              
<TABLE>
<CAPTION>
                                                                                          Page
                                                                                      ---------
     <S>        <C>                                                                    <C>
     Item 1.    Financial Statements

                Consolidated Balance Sheets as of July 31, 1998 and
                     April 30, 1998                                                        3

                Consolidated Statements of Income for the Three Months
                     Ended July 31, 1998 and 1997                                          4

                Consolidated Statement of Stockholders' Equity                             5

                Consolidated Statements of Cash Flows for the Three
                     Months Ended July 31, 1998 and 1997                                   6

                Notes to Consolidated Financial Statements                                 8

     Item 2.    Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                                  12

     Item 3.    Quantitative and Qualitative Disclosures about
                     Market Risk                                                          16


                           PART II. OTHER INFORMATION

     Item 1.    Legal Proceedings                                                         17

     Item 5.    Other Information                                                         17

     Item 6.    Exhibits and Reports on Form 8-K                                          17

                Signatures                                                                18

</TABLE>



                                       2
<PAGE>   3



                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                              VANSTAR CORPORATION
                                        
                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                               JULY 31,          APRIL 30,
                                                                                 1998              1998
                                                                             ------------     ------------
                               ASSETS                                         (unaudited) 

<S>                                                                          <C>              <C>
Current assets:
    Cash                                                                     $        781     $      9,476
    Receivables, net of allowance for doubtful accounts of
         $10,000 at July 31, 1998 and $8,262 at April 30, 1998                    284,401          354,171
    Inventories                                                                   305,049          470,474
    Deferred income taxes                                                          17,564           17,387
    Prepaid expenses and other current assets                                      14,873           14,304
                                                                             ------------     ------------
          Total current assets                                                    622,668          865,812
Property and equipment, net                                                        54,378           53,303
Other assets, net                                                                  83,675           81,272
Goodwill, net of accumulated amortization of $11,432 at July 31,
     1998 and $10,113 at April 30, 1998                                           105,306          106,796
                                                                             ------------     ------------
                                                                             $    866,027     $  1,107,183
                                                                             ============     ============

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                         $    101,988     $    290,187
    Accrued liabilities                                                            54,556           63,590
    Deferred revenue                                                               35,558           33,288
    Short-term borrowings                                                         274,156          308,351
    Current maturities of long-term debt                                            4,933            5,800
                                                                             ------------     ------------
          Total current liabilities                                               471,191          701,216
Long-term debt, less current maturities                                             2,079            2,337
Other long-term liabilities                                                           242              943

Commitments and contingencies

Company-obligated mandatorily redeemable convertible
     preferred securities of subsidiary trust holding solely
     convertible subordinated debt securities of the Company                      194,827          194,739

Stockholders' equity:
    Common stock, $.001 par value: 100,000,000 shares authorized,
         43,538,822 shares issued and outstanding at July 31, 1998,
         43,489,030 shares issued and outstanding at April 30, 1998                    43               43
    Additional paid-in capital                                                    133,173          132,703
    Retained earnings (since a deficit elimination of $78,448
         at April 30, 1994)                                                        65,137           75,576
    Accumulated other comprehensive (loss)                                           (665)            (374)
                                                                             ------------     ------------
          Total stockholders' equity                                              197,688          207,948
                                                                             ------------     ------------
                                                                             $    866,027     $  1,107,183
                                                                             ============     ============
</TABLE>

          See accompanying notes to consolidated financial statements


                                       3
<PAGE>   4


                              VANSTAR CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME
                     (In thousands, except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>

                                                                                  THREE MONTHS ENDED
                                                                                       JULY 31,
                                                                           ---------------------------------
                                                                               1998               1997
                                                                           ------------       --------------
<S>                                                                        <C>                <C>
Revenue:
Acquisition services                                                       $    537,807         $    581,249
   Other services                                                               117,355               99,385
                                                                           ------------       --------------
       Total revenue                                                            655,162              680,634
                                                                           ------------       --------------

Cost of revenue:
   Acquisition services                                                         489,422              524,645
   Other services                                                                73,975               63,411
                                                                           ------------       --------------
       Total cost of revenue                                                    563,397              588,056
                                                                           ------------       --------------

Gross margin                                                                     91,765               92,578

Selling, general and administrative expenses                                     94,901               73,458
                                                                           ------------       --------------

OPERATING INCOME (LOSS)                                                          (3,136)              19,120

   Interest income                                                                  122                  404
   Financing expense, net                                                        (9,814)              (5,792)
                                                                           ------------       --------------

Income (loss) from continuing operations before income taxes
     and distributions on preferred securities of Trust                         (12,828)              13,732

Income tax benefit (provision)                                                    4,618               (4,944)
                                                                           ------------       --------------

Income (loss) from continuing operations before
     distributions on preferred securities of Trust                              (8,210)               8,788
Distributions on convertible preferred securities of
     Trust, net of income taxes                                                  (2,229)              (2,228)
                                                                           ------------       --------------
NET INCOME (LOSS)                                                          $    (10,439)      $        6,560
                                                                           ============       ==============

EARNINGS (LOSS) PER SHARE:
     Basic                                                                 $      (0.24)      $         0.15
                                                                           ============       ==============

     Diluted                                                               $      (0.24)      $         0.15
                                                                           ============       ==============

COMMON SHARES AND EQUIVALENTS OUTSTANDING
     Basic                                                                       43,517               42,919
                                                                           ============       ==============

     Diluted                                                                     43,517               44,033
                                                                           ============       ==============
</TABLE>


          See accompanying notes to consolidated financial statements


                                       4
<PAGE>   5



                              VANSTAR CORPORATION

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (In thousands)
                                  (unaudited)

<TABLE>
<CAPTION>

                                                                                                   
                                                                                                   ACCUMULATED                
                                          COMMON STOCK            ADDITIONAL                          OTHER             TOTAL
                                   -------------------------       PAID-IN        RETAINED        COMPREHENSIVE     STOCKHOLDERS'
                                      SHARES        AMOUNT         CAPITAL        EARNINGS           INCOME             EQUITY
                                   -----------   -----------    -------------   ------------    ----------------   ---------------

<S>                                <C>           <C>            <C>             <C>             <C>                <C>
Balance at April 30, 1998               43,489   $       43     $     132,703   $     75,576    $          (374)   $       207,948

Comprehensive income (loss):
 Net (loss)                                 --           --                --        (10,439)                --            (10,439)
 Other comprehensive income
    (loss) net of income tax:
    Unrealized gain (loss) on
      available-for-sale securities         --           --                --             --               (314)              (314)
    Foreign currency translation
      adjustment                            --           --                --             --                 23                 23
                                                                                                                   ---------------

  Other comprehensive income (loss)                                                                                           (291)
                                                                                                                   ---------------

Comprehensive income (loss)                                                                                                (10,730)

Issuance of Common Stock:
  Exercise of stock options,
    including tax benefit                   50           --               470             --                  --               470
                                   -----------   ----------     -------------   ------------    ----------------   ---------------
Balance at July 31, 1998                43,539           43     $     133,173         65,137    $           (665)          197,688
                                   ===========   ==========     =============   ============    ================   ===============
</TABLE>



          See accompanying notes to consolidated financial statements


                                       5
<PAGE>   6



                              VANSTAR CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (unaudited)
<TABLE>
<CAPTION>

                                                                                        THREE MONTHS ENDED
                                                                                             JULY 31,
                                                                                ---------------------------------
                                                                                     1998                1997
                                                                                --------------    ---------------
<S>                                                                             <C>               <C>
Cash Flows from Operating Activities:
    Net income (loss)                                                           $      (10,439)   $         6,560
    Adjustments:
       Depreciation and amortization                                                     8,478              5,049
       Deferred income taxes                                                                --              3,688
       Provision for doubtful accounts                                                   2,766                 32
       Noncash financing expense                                                            61                 61
       Changes in operating assets and liabilities:
          Receivables                                                                   67,004            (74,810)
          Inventories                                                                  165,425            (68,094)
          Prepaid expenses and other assets                                             (3,593)            (5,634)
          Accounts payable                                                            (188,111)            61,498
          Accrued and other liabilities                                                 (7,174)            (1,738)
                                                                                --------------    ---------------
             Total adjustments                                                          44,856            (79,948)
                                                                                --------------    ---------------
Net cash provided by (used in) operating activities                                     34,417            (73,388)

Cash Flows from Investing Activities:
    Capital expenditures                                                                (7,015)            (6,693)
    Purchase of business, net of cash acquired                                              --            (32,486)
                                                                                --------------    ---------------
Net cash used in investing activities                                                   (7,015)           (39,179)

Cash Flows from Financing Activities:
    Payments on long-term debt                                                          (2,202)            (5,739)
    Borrowings (repayments) under line of credit, net                                  (34,195)           122,369
    Issuance of common stock                                                               300                744
                                                                                --------------    ---------------
Net cash (used in) provided by financing activities                                    (36,097)           117,374
                                                                                --------------    ---------------

Net (decrease) increase in cash                                                         (8,695)             4,807
Cash at beginning of the period                                                          9,476              5,686
                                                                                --------------    ---------------
Cash at end of the period                                                       $          781   $         10,493
                                                                                ==============   ================

Supplemental disclosure of cash flow information:
    Cash paid during the period for:
         Interest                                                               $        7,213   $          2,177
         Discounts and net expenses on receivables securitization                        3,046              2,760
         Distributions on preferred securities of Trust                                  3,396              3,396
         Income taxes, net of refunds                                                     (569)               628

</TABLE>


          See accompanying notes to consolidated financial statements


                                       6
<PAGE>   7



                              VANSTAR CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (unaudited)
                                  (Continued)

<TABLE>
<CAPTION>

                                                                                      THREE MONTHS ENDED
                                                                                           JULY 31,
                                                                              -----------------------------------
                                                                                   1998                1997
                                                                              ---------------     ---------------
<S>                                                                           <C>                 <C>
Supplemental disclosure of noncash investing and financing activities:
     Equipment acquired under capital leases                                  $         1,127     $           122

     Sysorex purchase:
          Fair value of assets acquired                                                           $        85,451
          Cash paid, net of cash received                                                                 (32,486)
                                                                                                  ---------------
          Liabilities assumed                                                                     $        52,965
                                                                                                  ===============

</TABLE>

          See accompanying notes to consolidated financial statements


                                       7
<PAGE>   8



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Reporting

       The financial statements for Vanstar Corporation ("Vanstar" or the
"Company") for the three months ended July 31, 1998 and July 31, 1997 are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial reporting and Securities and
Exchange Commission regulations. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, the financial statements
reflect all adjustments (of a normal and recurring nature) which are necessary
for a fair presentation of the financial position, results of operations,
stockholders' equity and cash flows for the interim periods. The results of
operations for the three months ended July 31, 1998 are not necessarily
indicative of the results to be expected for the entire fiscal year. These
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended April 30, 1998. Certain prior period amounts
have been reclassified to conform to the current presentation.

Estimates

       The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements

       The Financial Accounting Standards Board recently issued a new standard,
Financial Accounting Standards Board ("FASB") Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information, which is applicable
for fiscal years beginning after December 15, 1997. This statement establishes
standards for reporting information about operating segments in annual and
interim financial statements, although this statement is not required to be
applied to interim financial statements in the initial year of its application.
Therefore, these disclosures will be included for the first time in the
Company's annual financial statements for the year ending April 30, 1999. The
statement defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief decision-makers in deciding how to allocate resources and in assessing
performance. The statement requires that segment profit or loss, certain
specific revenue and expense items and segment assets be reported, as well as
reconciled to the financial statements.

2.  EARNINGS PER SHARE

       Basic earnings per share are computed using the weighted average number
of shares of Common Stock during the period and Diluted earnings per share are
computed using the weighted average number of shares of Common Stock and
dilutive Common Stock equivalents outstanding during the period. Common Stock
equivalents are computed for the Company's outstanding options using the
treasury stock method.


                                       8
<PAGE>   9



3.  COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SECURITIES OF
         SUBSIDIARY TRUST HOLDING SOLELY CONVERTIBLE SUBORDINATED DEBT
         SECURITIES OF THE COMPANY

       During October 1996, Vanstar Financing Trust, a Delaware statutory
business trust of which the Company owns all of the common trust securities
(the "Trust"), sold 4,025,000 Trust Convertible Preferred Securities
("Preferred Securities"). The Preferred Securities have a liquidation value of
$50 per security and are convertible at any time at the option of the holder
into shares of the Company's $.001 common stock (the "Common Stock") at a
conversion rate of 1.739 shares for each Preferred Security, subject to
adjustment in certain circumstances. Distributions on Preferred Securities
accrue at an annual rate of 6 3/4% of the liquidation value of $50 per
Preferred Security and are included in "Distributions on convertible preferred
securities of Trust, net of income taxes" in the Consolidated Statements of
Income. The proceeds of the private placement, which totaled $194.4 million
(net of initial purchasers' discounts and offering expenses totaling $6.9
million) are included in "Company-obligated mandatorily redeemable convertible
preferred securities of subsidiary trust holding solely convertible
subordinated debt securities of the Company" on the Consolidated Balance
Sheets. The Company has entered into several contractual arrangements (the
"Back-up Undertakings") for the purpose of fully and unconditionally supporting
the Trust's payment of distributions, redemption payments and liquidation
payments with respect to the Preferred Securities. Considered together, the
Back-up Undertakings constitute a full and unconditional guarantee by the
Company of the Trust's obligations on the Preferred Securities.

       The Trust invested the proceeds of the offering in 6 3/4% Convertible
Subordinated Debentures due 2016 (the "Debentures") issued by the Company. The
Debentures bear interest at 6 3/4% per annum generally payable quarterly on
January 1, April 1, July 1 and October 1. The Debentures are redeemable by the
Company, in whole or in part, on or after October 5, 1999 at designated
redemption prices. If the Company redeems the Debentures, the Trust must redeem
on a pro rata basis Preferred Securities having an aggregate liquidation value
equal to the aggregate principal amount of the Debentures redeemed. The sole
asset of the Trust is $207.5 million aggregate principal amount of the
Debentures. The Debentures and related income statement effects are eliminated
in the Company's consolidated financial statements.

4.  SALE OF ACCOUNTS RECEIVABLE

       Effective December 20, 1996, the Company, through a non-consolidated
wholly-owned special purpose corporation, established a revolving funding trade
receivables securitization facility (the "Securitization Facility"), which
currently provides the Company with up to $200 million in available credit. In
connection with the Securitization Facility, the Company sells, on a revolving
basis, certain of its trade receivables ("Pooled Receivables") to the special
purpose corporation, which in turn sells a percentage ownership interest in the
Pooled Receivables to a commercial paper conduit sponsored by a financial
institution. These transactions have been recorded as a sale in accordance with
FASB Statement No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. The amount of the Pooled
Receivables, which totaled $296.2 million at July 31, 1998, is reflected as a
reduction to receivables. The Company retains an interest in certain amounts of
the assets sold. At July 31, 1998, the amount of that retained interest totaled
$128.3 million and is included in receivables. The Company is retained as
servicer of the Pooled Receivables. Although management believes that the
servicing revenues earned will be adequate compensation for performing the
services, estimating the fair value of the servicing asset was not considered
practicable. Consequently, a servicing asset has not been recognized in the
Consolidated Balance Sheets. The gross proceeds resulting from the sale of the
percentage ownership interests in the Pooled Receivables totaled $175 million
as of July 31, 1998. Such proceeds are included in cash flows from operating
activities in the Consolidated Statements of Cash Flows. Discounts and net
expenses associated with the sales of the receivables totaling $3.0 million and
$2.8 million are included in Financing expenses, net on the Consolidated
Statements of Income for the three months ended July 31, 1998 and 1997,
respectively.

5.  FINANCING EXPENSES, NET

       Financing expenses, net includes interest incurred on borrowings under
the Company's financing agreement with IBM Credit Corporation ("IBMCC") and
discounts and net expenses associated with the Securitization Facility.


                                       9
<PAGE>   10



6.  ACQUISITIONS

       On July 7, 1997, the Company acquired certain assets and assumed certain
liabilities of Sysorex Information Systems, Inc. ("Sysorex"), a government
technology provider. The purchase price was approximately $54.5 million, and a
contingent payment of 500,000 shares of the Company's common stock based on the
financial performance of the acquired business for the period from July 8, 1997
through April 30, 1999. The Sysorex acquisition was accounted for as a purchase
and the excess of the cost over the fair value of net assets acquired is being
amortized on a straight line basis over 20 years.

7.  COMMITMENTS AND CONTINGENCIES

       On July 3, 1997, a trust claiming to have purchased shares of the Common
Stock filed suit in Superior Court of the State of California. The suit is
entitled David T. O'Neal Trust, Dated 4/1/77, v. Vanstar Corporation, et al.,
Consolidated Case No. CV767266. On January 21, 1998, the same plaintiff, along
with another plaintiff claiming to have purchased shares of Common Stock, filed
suit in the United States District Court for the Northern District of
California, making allegations virtually identical to those in the earlier
suit. The recent suit is captioned David T. O'Neal Trust, Dated 4/1/77, et al.
v. Vanstar Corporation, et al., Case No. C-98-0216 MJJ. Both suits named as
defendants the Company, certain directors and officers of the Company, and the
Company's principal stockholder, Warburg Pincus Capital Co., L.P., and certain
of its affiliates. The complaints in both suits generally allege, among other
things, that the defendants made false or misleading statements or concealed
information regarding the Company and that the plaintiffs, as holders of the
Common Stock, suffered damage as a result.

       The plaintiffs in both suits seek class action status, purporting to
represent a class of purchasers of Common Stock between March 11, 1996 and
March 14, 1997, and seek damages in an unspecified amount, together with other
relief. The complaint in the first suit purports to state a cause of action
under California law; the complaint in the recent suit purports to state two
causes of action under the Securities Exchange Act of 1934. On July 23, 1998,
the California Superior Court dismissed the state court complaint as to certain
individual defendants. The plaintiffs subsequently have agreed to dismiss the
state court complaint as to all remaining defendants other than the Company and
Richard Bard, a director of the Company. The Company believes that the
plaintiffs' allegations in both suits are without merit and intends to defend
the suits vigorously.

       Various legal actions arising in the normal course of business have been
brought against the Company and certain of its subsidiaries. Management
believes that the ultimate resolution of these actions will not have a material
adverse effect on the Company's financial position or results of operations,
taken as a whole.

8.  SUBSEQUENT RESTRUCTURING

       In August, 1998, the Company announced a program to reduce expenses in
line with expected revenue and industry dynamics. This program to reduce
expenses includes a reduction in workforce and elimination of some of its
facilities through consolidation, during the second quarter in accordance with
approved management plans. In addition, the Company will write-off redundant
equipment and systems associated with the centralized service dispatch and
scheduling functions. The Company will also liquidate excess spare parts due to
the centralization of its spare parts management and the outsourcing of a
substantial portion of its spare parts procurement and repair to a single
vendor. The Company will also write-off redundant equipment and systems
associated with certain finance functions that were affected by the realignment
of the business into two operating units and the reduction of workforce. The
Company expects to take a pre-tax charge of approximately $50 million during
the second quarter ending October 31, 1998.

       As the Company implements its strategic plan to respond to current
industry dynamics, there can be no assurance that additional restructuring
actions will not be required. In addition, there can be no assurance that the
estimated costs of the restructuring program will not change.


                                      10
<PAGE>   11



9.  COMPREHENSIVE INCOME

       Effective for the quarter ended July 31, 1998, the Company adopted FASB
Statement No. 130, Reporting Comprehensive Income ("Statement 130"). Statement
130 establishes standards for the reporting and display of comprehensive income
in a full set of general purpose financial statements, however, the adoption of
this statement has no impact on the Company's net income or stockholders'
equity. Comprehensive income includes net income plus items that, under
generally accepted accounting principles, are excluded from net income and
reflected as a component of equity, such as currency translation adjustments
and unrealized gains and losses on available-for-sale securities. Statement 130
also requires the accumulated balance of other comprehensive income to be
displayed separately from retained earnings and additional paid-in capital in
the equity section of the statement of financial position. Prior period
financial statements have been reclassified to conform to the requirements of
Statement 130.

       The components of comprehensive income, net of related tax, for the
three month periods ended July 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>

                                                        Three Months Ended July 31,
                                                     ----------------------------------
                                                          1998               1997
                                                     ---------------    ---------------
<S>                                                  <C>                <C>
Net income (loss)                                    $       (10,439)   $         6,560
Unrealized gains (losses) on securities                         (314)              (837)
Foreign currency translation adjustments                          23                 --
                                                     ---------------    ---------------
Comprehensive income (loss)                          $       (10,730)  $          5,723
                                                     ===============    ===============
</TABLE>


       The components of accumulated other comprehensive income, net of related
tax, at July 31, 1998 and April 30, 1998 are as follows:

<TABLE>
<CAPTION>

                                                        July 31,          April 30,
                                                          1998               1998
                                                     ---------------    ---------------
<S>                                                  <C>                <C>
Unrealized gains (losses) on securities              $          (521)   $          (207)
Foreign currency translation adjustments                        (144)              (167)
                                                     ---------------    ---------------
Accumulated comprehensive income (loss)              $          (665)   $          (374)
                                                     ===============    ===============
</TABLE>

                                      11
<PAGE>   12



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

         The following discussion and analysis of the financial condition and
 results of operations of the Company should be read in conjunction with the
 unaudited consolidated financial statements and related notes of the Company
 included elsewhere in this report. This Management's Discussion and Analysis
 of Financial Condition and Results of Operations and other parts of this
 Quarterly Report on Form 10-Q contain forward-looking statements that involve
 risks and uncertainties. Among the risks and uncertainties to which the
 Company is subject are the risks inherent in the Company's substantial
 indebtedness, the fact that the Company has experienced significant
 fluctuations in revenues and operating results, product supply shortages, the
 risks associated with managing the Company's inventory and service offerings
 in light of product life cycles and technological change, risks associated
 with the changes described under "Recent Developments" below, the risks
 associated with implementing management responses to changing technology and
 market conditions, the Company's relationship with its significant customers,
 intense price competition in the Company's markets and the Company's
 dependence upon its key vendors. As a result, the actual results realized by
 the Company could differ materially from the results discussed in the
 forward-looking statements made herein. Words or phrases such as "will,"
 "hope," "anticipate," "expect," "intend," "estimate," "project," "plan" or
 similar expressions are intended to identify forward-looking statements.
 Readers are cautioned not to place undue reliance on the forward-looking
 statements made in this Quarterly Report on Form 10-Q.

RECENT DEVELOPMENTS

       The Company's primary vendors provide various incentives for promoting
and marketing their products. In addition, the Company is participating in
"Build-to-Order" and "Final Assembly" programs with Compaq, IBM and
Hewlett-Packard, which have reduced the Company's inventory requirements. More
detailed information regarding these matters is described in the "Certain
Business Factors" section of Vanstar's Annual Report on Form 10-K for the year
ended April 30, 1998 under the headings "Dependence on Key Vendors, Vendor
Incentives and Product Supply," "Inventory Management" and "Build-to-Order
Delivery Model and Final Assembly." The Company's primary vendors have
announced or instituted changes in their sales incentive and inventory
management programs. Specifically, the major manufacturers have announced that
they will (i) limit price protection to 4 weeks rather than the unlimited
protection previously available, (ii) allow product returns on an average of 2%
to 3% of product sales per quarter, rather than the 5% of sales per quarter
previously available, and (iii) provide incentives based solely on sales of the
manufacturers' products, rather than on purchases of the products from the
manufacturers, as well. Further changes in these programs could have a material
adverse effect on the Company's operating results.

       In August, the Company announced a program to reduce expenses in line
with expected revenue and new industry dynamics. The actions taken to reduce
expenses include a reduction in the Company's workforce and consolidation of
certain facilities. In addition, the Company will write-off redundant equipment
and systems associated with its centralized service dispatch and scheduling
functions. The Company will also liquidate excess spare parts due to the
centralization of its spare parts management and the outsourcing of a
substantial portion of its spare parts procurement and repair to a single
vendor. The Company will also write-off redundant equipment and systems
associated with certain finance functions affected by the Company's realignment
discussed below. This expense reduction program is expected to result in a
pre-tax charge of approximately $50 million, which the Company expects to incur
in the second quarter ending October 31, 1998.

       Also in August, the Company announced a corporate realignment which will
result in the formation of two distinct operating units:  Professional Services,
which will concentrate on strategic enterprise network consulting, and Life
Cycle Management Services, a combination of Acquisition Services and Life Cycle
Services, which will focus on operational support and product acquisition
through the company's Life Cycle Management portfolio of services.  Each unit
will be responsible for its respective sales, operations, marketing, and certain
finance functions.  Both units will be supported by shared corporate functions,
including human resources, information technology management, legal, finance and
corporate communications.

             
RESULTS OF OPERATIONS

       When compared to the results for the three months ended July 31, 1997,
the Company's results of operations for the three months ended July 31, 1998
were impacted by the following transactions. On July 7, 1997, the Company
acquired certain assets and assumed certain liabilities of Sysorex, a
government technology provider, for a purchase price of approximately $54.4
million, and a contingent payment of 500,000 shares of Common Stock based on
the future financial performance of the acquired business.


                                      12
<PAGE>   13



       Vanstar's three primary sources of revenue are: Acquisition Services
(formerly referred to as "Product"), Life Cycle Services and Professional
Services. The Company refers to the integration of the offerings of design and
consulting, acquisition and deployment, operation and support, and enhancement
and migration as "Life Cycle Management." For larger clients, Vanstar can
manage every phase of the life cycle of its customers' PC networks. Acquisition
Services revenue is primarily derived from the sale of computer hardware,
software, peripherals and communications devices manufactured by third parties
and sold by the Company, principally to implement integration projects. Life
Cycle Services revenue is primarily derived from services performed for the
desktop and focused on the client or user of the PC network. These support
services include desktop installation, repair and maintenance, moves, adds and
changes, extended warranty, asset management and help desk. Professional
Services revenue is primarily derived from high value-added services, including
services focused on the server and communication segments of the PC network
infrastructure. Professional Services revenue includes network installation,
design and consulting, and enhancement and migration, as well as server
deployment and support and training and education services. In prior periods,
Other revenue was derived primarily from fees earned on the distribution
services agreement with ComputerLand Corporation (formerly with Merisel FAB).
Pursuant to the distribution services agreement, the Company provided product
distribution to franchises and affiliates of ComputerLand Corporation
("Computerland"), a subsidiary of Synnex Technologies, Inc. ("Synnex"), through
January 1998. Prior to the quarter ended July 31, 1998 the Company had reported
training and education services revenue with Other revenue. The Company has
reclassified all prior periods to conform with the current period presentation.

       The following table sets forth for the unaudited periods indicated, the
Company's (i) revenue, gross margin and gross margin percentage by revenue
source, (ii) selling, general and administrative expenses in total and as a
percentage of total revenue and (iii) operating income in total and as a
percentage of total revenue (dollars in thousands).

<TABLE>
<CAPTION>

                                                                   Three Months Ended
                                                                        July 31,
                                                             --------------------------------
             REVENUE:                                             1998              1997
                                                             -------------     --------------
             <S>                                             <C>               <C>
              Acquisition services                           $     537,807     $      581,249
              Life cycle services                                   78,444             56,194
              Professional services                                 38,911             39,144
              Other                                                     --              4,047
                                                             -------------     --------------
                   Total revenue                             $     655,162     $      680,634
                                                             =============     ==============
             GROSS MARGIN:
              Acquisition services                           $      48,385     $       56,604
              Life cycle services                                   28,575             15,867
              Professional services                                 14,805             16,132
              Other                                                     --              3,975
                                                             -------------     --------------
                   Total gross margin                        $      91,765     $       92,578
                                                             =============     ==============

             GROSS MARGIN PERCENTAGE:
              Acquisition services                                     9.0%               9.7%
              Life cycle services                                     36.4%              28.2%
              Professional services                                   38.0%              41.2%
              Other                                                     --               98.2%
                                                             -------------     --------------
                   Total gross margin percentage                      14.0%              13.6%
                                                             =============     ==============
             Selling, general and
                 administrative expenses                     $      94,901     $       73,458
                   % of total revenue                                 14.5%              10.8%

             Operating income (loss)                         $      (3,136)    $       19,120
                   % of total revenue                                (0.5%)               2.8%

</TABLE>

                                      13
<PAGE>   14



Three Months Ended July 31, 1998 as Compared to the Three Months Ended July 31,
1997

       Acquisition services. Revenue decreased 7.5% to $537.8 million for the
three months ended July 31, 1998 from $581.2 million for the three months ended
July 31, 1997. Gross margin decreased 14.5% to $48.4 million for the three
months ended July 31, 1998 from $56.6 million for the three months ended July
31, 1997. The decrease in both revenue and gross margin is primarily a result
of a significant decline in Average Sales Prices ("ASPs") for computers. In
addition, manufacturer product shortages in July significantly curtailed
customer orders and shipments at the end of the three months ended July 31,
1998. Gross margin percentage decreased to 9.0% for the three months ended July
31, 1998 from 9.7% for the three months ended July 31, 1997. The revenue
shortfall also resulted in a decrease in vendor incentive funds from computer
manufacturers, which negatively impacted gross margin percentage. In addition,
Vanstar operates in a very aggressive price environment that will continue to
put pressure on ASPs and gross margin. Any further decrease in ASPs, decrease
in vendor incentive funds or additional product shortages could have a material
adverse effect on Acquisition services revenue and gross margin.

       Life Cycle services. Revenue increased 39.6% to $78.4 million for the
three months ended July 31, 1998 from $56.2 million for the three months ended
July 31, 1997. This increase was the result of increased demand for the
Company's overall life cycle service offerings. Gross margin increased 80.1% to
$28.6 million for the three months ended July 31, 1998 from $15.9 million for
the three months ended July 31, 1997. Gross margin percentage increased to 36.4%
for the three months ended July 31, 1998 compared with 28.2% for the three
months ended July 31, 1997. During the three months ended July 31, 1997, the
Company had focused additional resources on training and achieving a high level
of customer service.

       Professional services. Revenue decreased 0.6% to $38.9 million for the
three months ended July 31, 1998 from $39.1 million for the three months ended
July 31, 1997. The decrease was a result of a high number of project
completions in the Company's fourth quarter and slower than expected sales and
start-ups of new projects during the three months ended July 31, 1998. In
addition, education services revenue decreased approximately $2.0 million for
the three months ended July 31, 1998 compared to the three months ended July
31, 1997 primarily due to the sale of the classroom instruction portion of the
education services business in January 1998. Gross margin decreased 8.2% to
$14.8 million for the three months ended July 31, 1998 from $16.1 million for
the three months ended July 31, 1997. Gross margin percentage decreased to
38.0% for the three months ended July 31, 1998 from 41.2% for the three months
ended July 31, 1997. The decrease in gross margin percentage was the result of
higher direct labor costs as a percentage of revenue due to lower utilization
rates during the period.

       Other. Revenue is zero for the three months ended July 31, 1998 compared
to $4.0 million for the three months ended July 31, 1997 due to the elimination
of the fees earned on the distribution agreement with ComputerLand, a
subsidiary of Synnex. Pursuant to the distribution services agreement, the
Company provided product distribution to franchises and affiliates of
ComputerLand. That agreement terminated in January 1998.

       Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 29.2% to $94.9 million for the three
months ended July 31, 1998 from $73.5 million for the three months ended July
31, 1997. The increase in selling, general and administrative expenses was
primarily due to the increase in services revenue as a percentage of total
revenue (which carries higher selling, general and administrative expenses than
acquisition services) and increases in corporate infrastructure. Selling,
general and administrative expenses as a percentage of revenue increased to
14.5% for the three months ended July 31, 1998 from 10.8% for the three months
ended July 31, 1997. The increase in selling, general and administrative
expenses as a percentage of revenue is also a function of the decline in total
revenue because expense levels are based, in part, on future anticipated
revenue levels.

       Operating income. The Company incurred an operating loss of ($3.1)
million for the three months ended July 31, 1998 compared to operating income
of $19.1 million for the three months ended July 31, 1997 as a result of the
factors discussed above. Operating income (loss) as a percentage of total
revenue decreased to (0.5%) for the three months ended July 31, 1998 from 2.8%
for the three months ended July 31, 1997.


                                      14
<PAGE>   15



       Financing expenses, net. Financing expenses, net for the three months
ended July 31, 1998 and 1997 represents primarily interest incurred on
borrowings under the Company's financing agreement with IBM Credit Corporation
("IBMCC") and net expenses associated with the Company's Securitization
Facility. Financing expenses increased 69.4% to $9.8 million for the three
months ended July 31, 1998 from $5.8 million for the three months ended July
31, 1997 due to higher average borrowings partially offset by lower interest
rates. The increase in borrowings, which resulted in higher financing expenses,
was due to the Company's purchasing significant quantities of inventory from
manufacturers to take advantage of volume discounts. These inventory purchases
were financed primarily with the Company's line of credit.

       Taxes. The effective tax rates for the three months ended July 31, 1998
and 1997 of 36% were different than the U.S. statutory rate of 35% due to state
tax provisions. At July 31, 1998 and April 30, 1998, the Company has recorded
net deferred tax assets of $17.6 million and $17.4 million, respectively. The
full realization of the deferred tax assets carried at July 31, 1998 is
dependent upon the Company's achieving sufficient future pretax earnings.
Although realization is not assured, management believes that sufficient
taxable income will be generated from operations to realize the net deferred
tax assets.

       Distributions on convertible preferred securities of trust, net of tax.
In October 1996, the Trust issued 4,025,000 Preferred Securities as part of a
refinancing plan directed at reducing the Company's overall interest costs.
Distributions on Preferred Securities accrue at an annual rate of 6 3/4% of the
liquidation value of $50 per security and are included in "Distributions on
convertible preferred securities of Trust, net of income taxes" in the
Consolidated Statements of Income (see note 3 of Notes to Consolidated
Financial Statements).

LIQUIDITY AND CAPITAL RESOURCES

       During the three months ended July 31, 1998, the Company utilized cash
generated from operations, including sales of certain of its trade receivables,
to fund its operations, working capital requirements, payments on its long-term
debt and purchases of capital equipment.

       Effective December 20, 1996, the Company established the Securitization
Facility, which currently provides the Company with up to $200 million in
available credit. Pursuant to the Securitization Facility, the Company, through
a wholly owned subsidiary, sells an undivided percentage ownership interest in
the Pooled Receivables. As of July 31, 1998, the proceeds of the sales totaled
$175 million.

       The Company's operating activities provided cash of $34.4 million for
the three months ended July 31, 1998 as a result of decreases in both accounts
receivable and inventories partially offset by a decrease in accounts payable.
The decrease in accounts receivable was primarily a result of decreased sales
during the quarter ended July 31, 1998. The decrease in inventory was a result
of the Company's transitioning to a "Build-to-Order" delivery model as part of
the supply chain reengineering by the manufacturers. The decrease in accounts
payable was primarily funded through the short-term line of credit.

       During the three months ended July 31, 1998, the Company used cash of
$7.0 million for capital expenditures. The Company plans to make additional
investments in its automated systems and its capital equipment throughout the
remainder of fiscal year 1999.

       The Company currently has a $500 million line of credit under its
Financing Program Agreement with IBMCC. At July 31, 1998 the Company had $333.7
million outstanding under that facility, of which $59.5 million is included in
accounts payable and $274.2 million is classified as short-term borrowings.
Borrowings under the line of credit are subject to certain borrowing base
limitations and are secured by portions of the Company's inventory, accounts
receivable, and certain other assets. As of July 31, 1998 amounts borrowed
under the line of credit bear interest at a rate generally equal to the London
Interbank Offered Rate plus 1.6% (representing a rate of 7.3% at July 31,
1998). The line of credit is currently scheduled to expire October 31, 1998.

       The Company believes that future cash generated from operations,
together with cash available through its Financing Program Agreement with IBMCC
and from the Securitization Facility, will be sufficient to meet its cash
requirements through at least fiscal year 1999.


                                      15
<PAGE>   16



YEAR 2000

       Many existing computer systems, including certain of the Company's
internal systems, use only the last two digits to identify years in the date
field. As a result, those systems may not accurately distinguish years in the
21st century from years in the 20th century, or may not function properly when
faced with years later than 1999. This problem is generally referred to as the
"Year 2000 Issue." Computer systems that are able to deal correctly with dates
after 1999 are referred to as "Year-2000-Compliant."

       With respect to its internal systems and operations, the Company is
addressing the Year 2000 Issue through a five-phase project plan. The five
phases of the plan are:

(1)  Inventory and Assessment, which included compiling an inventory of
     hardware and software, then assessing the effects of 21st-century dates on
     each system and, in the case of systems that are not yet
     Year-2000-Compliant, the risk to the Company's business if that system
     were not operating.

(2)  Solution Planning, which generally involved organizing and planning the
     task of ensuring that the Company's computer systems are
     Year-2000-Compliant. This process included classifying the systems into
     units ("Production Groupings") and scheduling the Production Groupings for
     conversion, generally with the goal of treating the most important and
     vulnerable systems first. This phase also included contacting all vendors
     for the status of their software and plans for compliance.

(3)  Conversion, which involves making necessary changes to render each
     Production Grouping Year-2000-Compliant.

(4)  Testing each Production Grouping.

(5)  Implementing each Production Grouping.

       The Company has completed the first two phases of the plan and has begun
phase three. In addition, some of the Company's systems are already
Year-2000-Compliant. The Company hopes to complete all five phases of the plan
early in calendar year 1999.

       The Company expects to implement successfully the systems and
programming changes necessary to address the Year 2000 Issue. Moreover, the
Company does not expect the costs associated with that implementation to be
material to the Company's financial position or results of operations over the
term of the project.

       The statements above describing the Company's plans and objectives for
handling the Year 2000 Issue and the expected impact of the Year 2000 Issue on
the Company are forward-looking statements. Those statements involve risks and
uncertainties that could cause actual results to differ materially from the
results discussed above. Factors that might cause such a difference include,
but are not limited to, delays in executing the plan outlined above and
increased or unforeseen costs associated with the implementation of the plan
and any necessary changes to the Company's systems. Any inability on the part
of the Company to implement necessary changes in timely fashion could have an
adverse effect on future results of operations.  Moreover, even if the Company
successfully implements the changes necessary to address the Year 2000 Issue,
there can be no assurance that the Company will not be adversely affected by
the failure of others to become Year-2000-Compliant.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Non applicable


                                      16
<PAGE>   17



                           PART II. OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

         On July 3, 1997, a trust claiming to have purchased shares of the
Common Stock filed suit in Superior Court of the State of California. The suit
is entitled David T. O'Neal Trust, Dated 4/1/77, v. Vanstar Corporation, et
al., Consolidated Case No. CV767266. On January 21, 1998, the same plaintiff,
along with another plaintiff claiming to have purchased shares of Common Stock,
filed suit in the United States District Court for the Northern District of
California, making allegations virtually identical to those in the earlier
suit. The recent suit is captioned David T. O'Neal Trust, Dated 4/1/77, et al.
v. Vanstar Corporation, et al., Case No. C-98-0216 MJJ. Both suits named as
defendants the Company, certain directors and officers of the Company, and the
Company's principal stockholder, Warburg Pincus Capital Co., L.P., and certain
of its affiliates. The complaints in both suits generally allege, among other
things, that the defendants made false or misleading statements or concealed
information regarding the Company and that the plaintiffs, as holders of the
Common Stock, suffered damage as a result.

         The plaintiffs in both suits seek class action status, purporting to
represent a class of purchasers of Common Stock between March 11, 1996 and
March 14, 1997, and seek damages in an unspecified amount, together with other
relief. The complaint in the first suit purports to state a cause of action
under California law; the complaint in the recent suit purports to state two
causes of action under the Securities Exchange Act of 1934. On July 23, 1998,
the California Superior Court dismissed the state court complaint as to certain
individual defendants. The plaintiffs subsequently have agreed to dismiss the
state court complaint as to all remaining defendants other than the Company and
Richard Bard, a director of the Company. The Company believes that the
plaintiffs' allegations in both suits are without merit and intends to defend
the suits vigorously.

         Various other legal actions arising in the normal course of business
have been brought against the Company and certain of its subsidiaries.
Management believes that the ultimate resolution of these actions will not have
a material adverse effect on the Company's financial position or results of
operations, taken as a whole.

ITEM 5.     OTHER INFORMATION

         On August 31, 1998, the Company announced the resignation of Jay
Amato, its former President and Chief Operating Officer. Mr. Amato will remain
with the Company as a consultant for one year.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

A.  EXHIBITS

<TABLE>
<CAPTION>

         Exhibit
           No.             Description
         -------           -----------
         <S>               <C>
           3*              Bylaws of the Registrant, as amended

           27*             Financial Data Schedule



           *      Filed herewith
</TABLE>


B.  REPORTS ON FORM 8-K

         No Current Reports on Form 8-K were filed by the Company during the
quarter ended July 31, 1998.


                                      17
<PAGE>   18



                                   SIGNATURES


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

                                    VANSTAR CORPORATION




Dated:  September 14, 1998           By:    /s/ Kauko Aronaho
                                            -------------------------------
                                     Name:  Kauko Aronaho
                                     Title: Senior Vice President and Chief
                                            Financial Officer



                                      18