FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (MF Raleigh)

MULTIPLE ZONES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MZON)") else Response.Write("(NASDAQ: MZON)") end if %>
707 S. Grady Way
Renton, WA 98055-3233
(206)430-3000

ALEXANDRIA, Va., October 23, 1996/FOOLWIRE/ --- Multiple Zone reported net sales of $109.4 million, an 86% increase from $58.7 million in the third quarter of 1995. Revenues were down 2% sequentially from the second quarter of 1996. Earnings for the third quarter were $3.2 million, or $0.24 EPS, a 340% increase from $0.73 million or $0.07 per share in the same quarter last year. Earnings were flat when compared to the $0.24 EPS that the company netted in the fiscal second quarter.

SOLID BUT SLIGHTLY DISAPPOINTING QUARTER. Sales were somewhat disappointing for the company, primarily on the Macintosh business. Multiple Zones had a particularly soft July and August, driven by the extended Fourth of July holiday. The company made earnings expectations through solid expense and gross product margin control. Increased hardware sales catered to their strategy of increasing gross profit dollars through higher average size.

REVENUE BREAKDOWN. International operations, 15% of the company's business, were $13.9 million, an increase of 131.7%. This was due to the addition of subsidiaries in Austria, Germany and the Netherlands and sales growth in Denmark, France and the United Kingdom. Hardware sales accounted for 83% of total net sales, up from 71% last year. Total hardware sales increased 112% from the prior year's third quarter. The company had solid peripherals sales, with communications products, data storage devices multimedia and input products leading the pack.

PC-CPU/WINTEL SALES. PC division sales grew 129% over last year to 32.1% of company total revenues, compared 25.6% in the third quarter of last year. The addition of the H-P Vectra 500 PCs enhanced their product offering to business customers. The recently-acquired Compaq consumer line is beginning to do well. Overall, sales of PC-Wintel PCs are ramping up nicely to about 8% of company total sales compared to only 1% a year. PC peripheral sales showed strength this quarter. Windows95 was responsible for $1.8 million in revenues last year. Taking this out, PC sales in the quarter compare more favorably. About half of the PC-CPU sales were IBM products, with the next largest being Toshiba at over 20%. From a merchandizing and marketing perspective, PC-Wintel growth is benefitting from two key drivers: (1) they have a presenting a better storefront in their catalog and (2) they have expanded their product offerings. Notebook and laptop computers represented 81% of PC-CPU sales.

MACINTOSH SALES. They were pleased with Mac operating system sales, particularly given the challenges in the marketplace. Mac OS sales were up 67% and declined slightly to 68% of revenues from 74% of revenues last year. The 67% growth rate did not meet their growth objective, due primarily to a shortage of Apple PowerBooks, a constrained supply of Power Computer CPUs and a decrease in average selling price. Apple-branded CPU sales decreased to 22% of total company sales compared to 27% last year. Mac clones now represent of Mac OS CPU sales since their introduction in January of this year. They will carry the new Motorola line when it is released, probably at the end of this year.

FOCUS ON '"OUTBOUND" SALES. The company focused on marketing to business, education and government. There "corporate outbound" sales are among the lowest among the publicly traded direct markets so they view this as a key opportunity. Some recent management changes may result in a temporary softness of outbound sales.

CATALOG CIRCULATION. In September, Multiple Zone increased their circulation of PC Zone to 1.5 million a month from one million and MacZone grew to three million a month to two million. This is now their circulation threshold through August of 1997. They have maintained their cost of advertising. The company is pleased with the results of this added circulation, especially the PC side. The quarterly Learning Zone continues to do well, increasing circulation by 50% with an average order size of more than $500 and a gross product margin two full points higher than company average. Learning Zone has also begun to lease products and the results are promising.

GROSS MARGINS. Continued purchasing improvements drove performance that was slightly stronger than anticipated. Gross margins came in at 14.2%, up from 13.3% last year and 13.9% in the second quarter. Purchases direct from vendors increased to 76% of total company purchases. Increased volume resulting in vendor rebates and focusing on simple purchasing negotations has resulted in better pricing. This improvement was experienced across the board.

OPERATING EXPENSES. SGA moved favorably, declining to 9.5% from 9.9% in the second quarter. This is over a full point lower than last year, reflected top line growth and cost containment. Net cost of advertising remains quite low at 0.50%. Other expenses decreased as a result of lower interest expense.

LOOKING AHEAD. The company anticipates strong demand in the fourth quarter, due to seasonal trends and other factors. Intel's announcement of no price decrease bodes well for supply and demand. Apple's recent price reductions are already quite stimulating to demand. The company anticipates the constrained availability of PowerBooks and Power Computing CPUs to continue. The company remains comfortable with the lower range of analyst expectations for the fourth quarter. With respect to 1997, the company remains confident in current analyst expectations.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.