Zones Announces Financial Results for the Second Quarter of 2008

AUBURN, WA, Jul 31 (MARKET WIRE) --
Zones, Inc. (the "Company," "Zones"(TM)) (NASDAQ: ZONS):

-- Total net sales in Q2 2008 were $158.3 million compared with $192.2
million in Q2 2007
-- Net income was $0.25 per share in Q2 2008 compared with $0.30 per
share in Q2 2007
-- Customer unassisted sales in Q2 2008 represented 35.9% of total net
sales

Zones, a single-source direct marketing reseller of name-brand
information technology products, today announced its results for the
quarter ended June 30, 2008. Total net sales decreased 17.6% to $158.3
million in the quarter ended June 30, 2008 compared with $192.2 million
for the same quarter of 2007. The Company reported net income of $3.6
million, or $0.25 per diluted share, for the quarter ended June 30, 2008
compared with net income of $4.4 million, or $0.30 per diluted share, for
the same quarter of 2007.

Firoz Lalji, Zones' CEO and Chairman, commented, "Although disappointed by
our financial performance this quarter, we continue to be confident we are
prepared to face the operating challenges in this period of economic
uncertainty." Lalji continued, "In view of prevailing economic conditions,
we are reducing our expectations for growth; however, we plan to continue
to invest for the longer term through account executive hiring and
investments in infrastructure."

Net sales for the six months ended June 30, 2008 decreased 4.5% to $325.1
million, compared with $340.4 million for the corresponding period of
2007. Net income for the six months ended June 30, 2008 decreased 7.5% to
$6.2 million, or $0.43 per diluted share, compared with net income of $6.7
million, or $0.46 per diluted share, for the corresponding period of 2007.

Operating Highlights

Consolidated outbound sales to businesses and public sector customers
decreased 17.4% to $157.5 million in the quarter ended June 30, 2008
compared with $190.7 million in the corresponding period of 2007. The
company experienced sales declines in all segments of its business. Most
notable was the 25.1% decline in sales to large enterprise customers.
Customer unassisted sales (primarily Web-based) were $56.8 million, and
represented 35.9% of total second quarter 2008 net sales.

Gross profit margin was 13.1% in the second quarter of 2008, compared with
11.7% in the second quarter of 2007. The year over year expansion in gross
profit margin percentage was primarily due to improvements in selling
margins, an increase in contributions from enterprise software agreements,
and a decline in lower margin sales to national Fortune 1000 customers,
offset by a reduction in vendor programs. Gross profit margins as a
percent of sales are expected to vary on a quarterly basis due to vendor
programs, product mix, pricing strategies, customer mix, and economic
conditions.

Total selling, general and administrative expenses, as a percent of net
sales, were 8.4% in the second quarter of 2008. This represents an
increase over 6.7% of net sales in the same quarter in 2007. This
percentage increases was primarily due to the decrease in sales volume
coupled with increases in certain expense categories including salaries,
wages and benefits.

Asset Management

The Company's balance sheet remained strong and the quarter ended with a
cash balance of $17.1 million. Consolidated working capital was $61.1
million at June 30, 2008, compared with $55.0 million at December 31,
2007.

Inventories decreased to $20.3 million at June 30, 2008 from $21.3 million
at December 31, 2007. Inventory turned at a rate of 25 times annually
during the quarter. Trade accounts receivable decreased to $67.4 million
at June 30, 2008, compared with $73.6 million at December 31, 2007. Days
sales outstanding were 39 days compared with 41 days at December 31, 2007.

About Zones, Inc.

Zones, Inc. is a single-source direct marketing reseller of name-brand
information technology products to the small-to-medium-sized business
market, enterprise accounts and public sector accounts. Zones sells these
products through outbound and inbound account executives, a national field
sales force, catalogs and the Internet. Zones offers more than 150,000
products from leading manufacturers including Adobe, Apple, Avaya, Cisco,
HP, IBM, Kingston, Lenovo, Microsoft, NEC, Nortel Networks, Sony, Symantec
and Toshiba.

Incorporated in 1988, Zones, Inc. is headquartered in Auburn, Washington.
Buying information is available at http://www.zones.com, or by calling
800-258-2088. The Company's investor relations information can be accessed
online at www.zones.com/IR.

Going Private Acquisition

On July 31, 2008, Zones issued a separate press release announcing its
agreement to be acquired in a going private transaction.

This press release may contain statements that are forward-looking. These
statements are made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. These statements are based on
current expectations that are subject to risks and uncertainties that
could cause actual results to differ materially from historical results
or those anticipated. These risk factors include, without limitation, the
effect of fluctuating or unfavorable economic conditions on IT purchasing
trends and price competition, and the Company's ability to appropriately
react to those changing conditions; future growth; account executive
hiring and productivity; increased expenses of being a public company;
pressure on margin; competition; state tax uncertainties; rapid
technological change and inventory obsolescence; reliance on vendor
relationships; dependence on personnel; potential disruption of business
from information systems failure; reliance on outsourced distribution;
variations in gross profit margin percentages due to vendor programs and
credits, product and customer mix, pricing strategies, and economic
conditions; and other risks and uncertainties detailed in the Company's
filings with the SEC.

ZONES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)

June 30, December 31,
2008 2007
----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 17,111 $ 12,004
Receivables, net of allowances of $1,329 and
$1,213 67,359 73,581
Vendor receivables, net of allowances of $833
and $780 11,071 15,139
Inventories 20,271 21,278
Prepaid expenses 942 861
Deferred income taxes 1,377 1,377
----------- ------------

Total current assets 118,131 124,240

Property and equipment, net 3,286 3,383
Goodwill 5,098 5,098
Deferred income taxes 411 411
Other assets 191 190
----------- ------------

Total assets $ 127,117 $ 133,322
=========== ============

LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,223 $ 37,040
Inventory financing 13,169 20,252
Accrued liabilities 10,648 11,989
----------- ------------

Total current liabilities 57,040 69,281

Deferred rent obligation 1,614 1,733
----------- ------------

Total liabilities 58,654 71,014
----------- ------------

Commitments and contingencies

Shareholders' equity:
Common stock 35,629 35,676
Retained earnings 32,837 26,632
Foreign currency translation (3)
----------- ------------

Total shareholders' equity 68,463 62,308
----------- ------------
Total liabilities & shareholders' equity $ 127,117 $ 133,322
=========== ============

ZONES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

For the three months For the six months
ended June 30, ended June 30,
2008 2007 2008 2007
--------- --------- --------- ---------

Net sales $ 158,333 $ 192,232 $ 325,089 $ 340,414
Cost of sales 137,531 169,813 284,723 299,795
--------- --------- --------- ---------

Gross profit 20,802 22,419 40,366 40,619
Selling, general and
administrative expenses 13,333 12,797 27,151 25,394
Advertising expense 1,822 2,243 3,565 4,126
--------- --------- --------- ---------

Income from operations 5,647 7,379 9,650 11,099
--------- --------- --------- ---------

Other (income) expense (139) 239 (243) 215

Income before income taxes 5,786 7,140 9,893 10,884
Provision for income taxes 2,160 2,731 3,689 4,164
--------- --------- --------- ---------

Net income $ 3,626 $ 4,409 $ 6,204 $ 6,720
========= ========= ========= =========

Basic earnings per share $ 0.27 $ 0.34 $ 0.47 $ 0.51
Shares used in computation of
basic earnings per share 13,186 13,127 13,171 13,132
========= ========= ========= =========

Diluted earnings per share $ 0.25 $ 0.30 $ 0.43 $ 0.46
Shares used in computation of
diluted earnings per share 14,556 14,720 14,581 14,720
========= ========= ========= =========

Operating Highlights
Supplemental Data

Three months ended Six months ended
6/30/2008 6/30/2007 6/30/2008 6/30/2007
--------- --------- --------- ---------
Operating Data
Unassisted net sales (in
000's) $ 56,795 $ 47,704 $ 111,174 $ 82,022
Sales force, end of period 350 324

Average Productivity
(annualized)
Per Account Executive (in
000's) $ 1,810 $ 2,373 $ 1,858 $ 2,101
Per Employee (in 000's) $ 833 $ 1,149 $ 855 $ 1,018

Product Mix (% of sales)
Notebook & PDA's 20.5% 15.7% 24.2% 14.7%
Desktops & Servers 18.3% 25.1% 16.9% 23.7%
Software 19.2% 15.8% 17.3% 16.1%
Storage 6.5% 6.9% 6.9% 7.3%
NetComm 5.0% 4.4% 4.9% 5.0%
Printers 7.7% 7.7% 7.2% 8.2%
Monitors & Video 7.8% 9.0% 7.8% 9.4%
Memory & Processors 2.8% 4.6% 2.9% 4.9%
Accessories & Other 12.2% 10.8% 11.9% 10.7%

Contact:
Ronald McFadden
Zones, Inc.
Chief Financial Officer
253-205-3000

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