MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q
Quarterly Overview We are a leading provider of information technology ("IT") hardware, software and services to small, medium and large businesses and public sector institutions in North America, Europe, the Middle East, Africa and Asia-Pacific. Currently, our offerings in North America and the United Kingdom include IT hardware, software and services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely software and select software-related services.
Consolidated net sales were $969.9 million in the third quarter of 2009, down 17% from the $1.17 billion reported in the third quarter of 2008. Gross profit for the three months ended September 30, 2009 declined 13% to $133.5 million, while gross margin increased 60 basis points to 13.8% driven by a year over year increase in sales of higher margin services as a percentage of total net sales. We reported earnings from operations of $11.9 million for the third quarter. Results of operations for the three months ended September 30, 2009 included the effects of the following items:
• severance and restructuring expenses of $4.0 million, $2.5 million net of tax, primarily related to the departure of our President and Chief Executive Officer from the Company. Comparatively, the third quarter of 2008 included no severance and restructuring charges;

• legal and other professional fees of $560,000, $346,000 net of tax, associated with the trade credits restatement remediation and ongoing litigation. Comparatively, the third quarter of 2008 included no similar fees;

• net foreign currency losses of $93,000. Comparatively, the third quarter of 2008 results included $3.3 million of foreign currency losses; and

• $1.5 million of tax benefit from the true-up of foreign tax credits after filing of the Company's 2008 U.S. federal tax return and the recognition of certain tax benefits from the settlement of audits. Comparatively, third quarter 2008 results included $1.1 million of tax benefit related to federal and state research and development credits recorded during the quarter.

On a consolidated basis, we reported net earnings from continuing operations of $7.3 million and diluted earnings per share from continuing operations of $0.16 for the third quarter.
Our focus on cash flow initiatives continued to yield benefits in the third quarter, and, as a result, we ended the quarter with outstanding long-term debt under our senior revolving credit facility of $155.5 million, a $36.0 million increase during the third quarter to fund anticipated seasonal working capital needs, but down $72.5 million from December 31, 2008.
Details about segment results of operations can be found in Note 13 to the Consolidated Financial Statements in Part I, Item 1 of this report.

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INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Our discussion and analysis of financial condition and results of operations is intended to assist in the understanding of our consolidated financial statements, the changes in certain key items in those consolidated financial statements from period to period and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.
Updated Guidance
Because of stronger than expected third quarter performance, but moderated by our anticipation of continued softness in EMEA compared to our fourth quarter forecast, we are revising our outlook for diluted earnings per share from continuing operations to be between $0.83 and $0.88 for the full year of 2009, including $0.18 to $0.23 of diluted earnings per share expected in the fourth quarter of 2009. This outlook does not include the impact of any severance and restructuring expenses, expenses associated with the restatement investigation and administration or related litigation, or other one-time charges.
Critical Accounting Estimates General
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). For a summary of significant accounting policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results, however, may differ from estimates we have made. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.
There have been no changes to the items disclosed as critical accounting estimates in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008.

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INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations The following table sets forth for the periods presented certain financial data as a percentage of net sales for the three and nine months ended September 30, 2009 and 2008: Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 As Restated As Restated (1) (1) Net sales 100.0 % 100.0 % 100.0 % 100.0 % Costs of goods sold 86.2 86.8 86.0 86.2 Gross profit 13.8 13.2 14.0 13.8 Selling and administrative expenses 12.1 11.9 12.7 11.7 Goodwill impairment - - - 8.6 Severance and restructuring expenses 0.4 - 0.4 0.1 Earnings (loss) from operations 1.3 1.3 0.9 (6.6 ) Non-operating expense, net 0.3 0.5 0.2 0.3 Earnings (loss) from continuing operations before income taxes 1.0 0.8 0.7 (6.9 ) Income tax expense (benefit) 0.2 0.2 0.2 (2.5 ) Net earnings (loss) from continuing operations 0.8 0.6 0.5 (4.4 ) Net earnings from a discontinued operation - - 0.1 - Net earnings (loss) 0.8 % 0.6 % 0.6 % (4.4 )%

(1) See Note 2 "Restatement of Consolidated Financial Statements" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008 and Note 2 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Net Sales. Net sales for the three months ended September 30, 2009 decreased 17% compared to the three months ended September 30, 2008. Net sales for the nine months ended September 30, 2009 decreased 19% compared to the nine months ended September 30, 2008. Our net sales by operating segment were as follows (dollars in thousands):

Three Months Ended Nine Months Ended September 30, % September 30, % 2009 2008 Change 2009 2008 Change As Restated As Restated (1) (1) North America $ 685,996 $ 850,869 (19 %) $ 2,059,628 $ 2,568,811 (20 %) EMEA 248,437 281,366 (12 %) 800,403 981,858 (18 %) APAC 35,502 32,821 8 % 98,226 114,470 (14 %) Consolidated $ 969,935 $ 1,165,056 (17 %) $ 2,958,257 $ 3,665,139 (19 %)

(1) See Note 2 "Restatement of Consolidated Financial Statements" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008 and Note 2 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Net sales in North America decreased 19%, or $164.9 million, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Hardware and software sales declined 24% and 15%, respectively, while services revenue grew 13% year over year. The increase in services net sales is primarily due to several large professional services engagements during the three months ended September 30, 2009. The challenging demand environment for IT products resulted in year over year declines in our business. Additionally, the decline in software sales year over year also relates to the previously announced program changes with our largest software partner. We continue to increase the mix of services as a total of our net sales, which increased from 6% of net sales to 9% of net sales year ever year. North America had 1,166 account executives at September 30, 2009, a decrease from 1,439 at September 30, 2008. Net sales per average number of account executives in North America decreased 2% to approximately $577,000 for the three months ended September 30, 2009 from approximately $588,000 for the three months ended September 30, 2008.

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INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Net sales in North America decreased 20%, or $509.2 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, again as a result of the challenging demand environment.
Net sales in EMEA decreased 12%, or $32.9 million, in U.S. dollars, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Excluding the effects of foreign currency movements, net sales were down 2% compared to the third quarter of last year. In U.S. dollars, hardware, software and services sales declined 18%, 7% and 5%, respectively year over year. The global IT demand environment continues to be challenging, contributing to the year over year decreases in all product categories. In addition, part of the decline in software sales year over year relates to the previously announced changes in programs with our largest software partner. EMEA had 716 account executives at September 30, 2009, an increase from 686 at September 30, 2008. Net sales per average number of account executives in EMEA decreased 17% to approximately $349,000 for the three months ended September 30, 2009 compared to approximately $422,000 for the three months ended September 30, 2008.
Net sales in EMEA decreased 18%, or $181.5 million, in U.S. dollars, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Excluding the effects of foreign currency movements, net sales were down 3% compared to the nine months ended September 30, 2008. In U.S. dollars, hardware and software sales declined 25% and 15%, respectively, while sales of services improved 17% year over year. The year over year improvement in sales of services primarily resulted from the contribution of MINX Limited (a networking solutions provider), acquired in July 2008.
Our APAC segment recognized net sales of $35.5 million and $98.2 million for the three and nine months ended September 30, 2009, a year over year increase of 8% for the three month period and a year over year decrease of 14% for the nine month period. Excluding the effects of foreign currency movements, net sales were up 12% compared to the third quarter of last year, primarily resulting from an increase in public sector spending in Australia in the 2009 quarter, and down 2% compared to the nine months ended September 30, 2008.
The percentage of net sales by category for North America, EMEA and APAC were as follows for the three months ended September 30, 2009 and 2008:

North America EMEA APAC Three Months Ended Three Months Ended Three Months Ended September 30, September 30, September 30, Sales Mix 2009 2008 2009 2008 2009 2008 Hardware 62 % 67 % 41 % 44 % <1 % - Software 29 % 27 % 58 % 55 % 98 % 100 % Services 9 % 6 % 1 % 1 % 2 % <1 % 100 % 100 % 100 % 100 % 100 % 100 %

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INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The percentage of net sales by category for North America, EMEA and APAC were as follows for the nine months ended September 30, 2009 and 2008: North America EMEA APAC Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, Sales Mix 2009 2008 2009 2008 2009 2008 Hardware 59 % 64 % 35 % 38 % 1 % - Software 33 % 31 % 64 % 61 % 97 % 100 % Services 8 % 5 % 1 % 1 % 2 % <1 % 100 % 100 % 100 % 100 % 100 % 100 %

Currently, our offerings in North America and the United Kingdom include IT hardware, software and services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely software and select software-related services.
Gross Profit. Gross profit for the three months ended September 30, 2009 declined 13% compared to the three months ended September 30, 2008, with a 60 basis point increase in gross margin. Gross profit for the nine months ended September 30, 2009 declined 18% compared to the nine months ended September 30, 2008, with gross margin increasing by 20 basis points. Our gross profit and gross profit as a percentage of net sales by operating segment were as follows (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30, % of % of % of % of 2009 Net Sales 2008 Net Sales 2009 Net Sales 2008 Net Sales As As Restated Restated (1) (1) North America $ 93,301 13.6 % $ 106,062 12.5 % $ 286,092 13.9 % $ 342,050 13.3 % EMEA 35,417 14.3 % 43,050 15.3 % 113,094 14.1 % 146,386 14.9 % APAC 4,768 13.4 % 4,978 15.2 % 13,916 14.2 % 18,218 15.9 % Consolidated $ 133,486 13.8 % $ 154,090 13.2 % $ 413,102 14.0 % $ 506,654 13.8 %

(1) See Note 2 "Restatement of Consolidated Financial Statements" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008 and Note 2 to our Consolidated Financial Statements in Part I, Item 1 of this report.

North America's gross profit declined 12% compared to the three months ended September 30, 2008, but as a percentage of net sales, gross margin increased 110 basis points year over year, reflecting improved margins in the services category of approximately 90 basis points and a 30 basis point improvement attributable to increases in margin generated by freight. These increases in margin were partially offset by decreases in margin related to agency fees for enterprise software agreement renewals and an increase in the write-downs of inventories as a percentage of sales of approximately 10 basis points each. Product margin, including vendor funding, decreased by 40 basis points, but these decreases were offset by a 30 basis point improvement in margin attributable to the extinguishment of certain restatement-related trade credits during the quarter through negotiated settlement or other legal release of the recorded liabilities. Gross profit per average number of account executives increased 7% to approximately $79,000 for the three months ended September 30, 2009 from approximately $73,000 for the three months ended September 30, 2008. For the nine months ended September 30, 2009, gross profit declined 16% compared to the nine months ended September 30, 2008, but as a percentage of net sales, gross margin improved 60 basis points reflecting increased sales of services, which are generally at higher margins.

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INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) EMEA's gross profit declined 18% for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Excluding the effects of foreign currency movements, gross profit was down 9% compared to the third quarter of last year. As a percentage of net sales, gross margin decreased 100 basis points due primarily to an approximate 30 basis point decline in each of
(i) product margin, which includes vendor funding, (ii) services business margin and (iii) supplier discounts, as well as a decrease in agency fees for enterprise software agreement renewals of approximately 20 basis points. These decreases were offset partially by an increase in margin generated by freight of approximately 10 basis points. Gross profit per average number of account executives decreased 23% to approximately $50,000 for the three months ended September 30, 2009 compared to approximately $65,000 for the three months ended September 30, 2008. For the nine months ended September 30, 2009, gross profit declined 23% compared to the nine months ended September 30, 2008. Excluding the effects of foreign currency movements, gross profit was down 8% compared to the nine months ended September 30, 2008. As a percentage of net sales, gross margin declined 80 basis points for the nine months ended September 30. 2009, primarily due to decreases in product margin, including vendor funding. APAC's gross profit decreased for the three months ended September 30, 2009 by 4% compared to the three months ended September 30, 2008. Excluding the effects of foreign currency movements, gross profit was flat compared to the third quarter of last year. As a percentage of net sales, gross margin declined by 180 basis points, primarily due to decreases in software product margin, which includes vendor funding, of approximately 170 basis points and decreases in agency fees from enterprise software agreement renewals of approximately 50 basis points offset partially by improved margins in the services category of over 40 basis points. For the nine months ended September 30, 2009, gross profit declined 24% compared to the nine months ended September 30, 2008. Excluding the effects of foreign currency movements, gross profit was down 11% compared to the nine months ended September 30, 2008. As a percentage of net sales, gross margin declined 170 basis points for the nine months ended September 30, 2009, primarily due to decreases in agency fees from enterprise software agreement renewals offset partially by improved margins in the services category. Operating Expenses.
Selling and Administrative Expenses. Selling and administrative expenses decreased $21.5 million, or 15% for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Selling and administrative expenses decreased $52.6 million, or 12% for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Selling and administrative expenses as a percent of net sales by operating segment for the three and nine months ended September 30, 2009 and 2008 were as follows (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30, % of % of % of % of 2009 Net Sales 2008 Net Sales 2009 Net Sales 2008 Net Sales As As Restated Restated (1) (1) North America $ 79,354 11.6 % $ 97,337 11.4 % $ 260,441 12.6 % $ 295,054 11.5 % EMEA 34,402 13.8 % 37,502 13.3 % 103,122 12.9 % 118,390 12.1 % APAC 3,867 10.9 % 4,298 13.1 % 11,268 11.5 % 14,032 12.3 % Consolidated $ 117,623 12.1 % $ 139,137 11.9 % $ 374,831 12.7 % $ 427,476 11.7 %

(1) See Note 2 "Restatement of Consolidated Financial Statements" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008 and Note 2 to our Consolidated Financial Statements in Part I, Item 1 of this report.

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INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued) North America's selling and administrative expenses decreased 18%, or $18.0 million, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, with selling and administrative expenses increasing slightly to 11.6% of net sales for the quarter. The decrease in selling and administrative expenses is primarily attributable to the realization of the effects of cost reduction initiatives we have implemented over the past several quarters, and, to a lesser extent, the effect of lower variable costs. Salaries, sales incentives and benefits accounted for approximately $15 million of the decrease, with an additional $2 million decline in travel and entertainment and a $1 million decline in marketing expenses. Included in selling and administrative expenses in the three months ended September 30, 2009 are professional fees and costs of $560,000 associated with the trade credits restatement issues discussed in Note 2 "Restatement of Consolidated Financial Statements" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008 and Note 2 to our Consolidated Financial Statements in Part I, Item 1 of this report.
The effect of the cost reduction initiatives on North America's selling and administrative expenses is not as significant in the comparison of the nine months ended September 30, 2009 to the nine months ended September 30, 2008, which declined $34.6 million or 12% due to the following:
• Approximately $13.5 million of selling and administrative expenses associated with Calence, LLC are reflected in the three months ended March 31, 2009 with no comparable expenses in the three months ended March 31, 2008, as Calence was acquired on April 1, 2008;

• Non-cash stock-based compensation expense of $4.1 million recorded in the first quarter of 2009 associated with the termination of the long-term incentive award for the Chief Executive Officer and the President of our North America operating segment discussed in Note 8 to our Consolidated Financial Statements in Part I, Item 1 of this report; and

• Professional fees and costs for the nine months ended September 30, 2009 of $7.2 million associated with the trade credits restatement issues.

Notwithstanding these increases in selling and administrative costs year over year, salaries, sales incentives and equity compensation still declined $33 million, travel and entertainment declined $4 million and marketing . . .