More Red Ink for Sagging Wespercorp : Slow Sales Result in a $1.9-Million Loss
Wespercorp, the Tustin computer-parts marker plagued with losses for the last two years, reported yet more red ink Tuesday, putting the company even further behind in its struggle to regain momentum.
Losses for the second quarter, which ended Dec. 31, 1984, hit $1.92 million, nearly triple the $676,000 loss in same period a year earlier. Revenues for the quarter were a scant $1.9 million, 46% below those of the comparable period a year ago.
Company officials said sagging sales, not out-of-control expenses, were the primary reason for the skyrocketing losses. Last month, however, the company did lay off 20 employees, about 11% of its work force, to reduce costs.
“The real question is whether we can get the sales up to respectable levels,” said George E. Dashiell, who took over last month as president and chief executive of the ailing company. He said Wespercorp is not considering additional layoffs.
For the first six months of its 1985 fiscal year, the once high-flying company lost $1.64 million, compared with a loss of $934,000 in the year-earlier period. Revenues for the half were $5.23 million, down 23% from the year before.
Echoing similar concerns throughout the computer industry, Dashiell said sales of Wespercorp’s principal product, controllers that allow computers to work with printers and disk and tape drives, have been dropping steadily for several months. The current sales level, he said, is about 20% below that of last year.
Although Dashiell attributed a part of the drop to sluggish market conditions that have plagued virtually all members of the industry, he acknowledged that Wespercorp’s struggles to avoid bankruptcy have probably turned off potential customers as well.
“The demand for our product is softer than we expected, and, on top of that, the market in general is soft,” Dashiell complained. The $1.92 million loss for the most recent quarter, he added, was about $50,000 greater than initial projections.
Accounting Costs High
Company officials also blamed a portion of the losses on the increased legal and accounting expenses Wespercorp incurred when it negotiated a multimillion-dollar bail-out package with its principal lenders last year. The plan, with an additional $2 million in credit, came just two months after the company announced that it was facing bankruptcy.
The bail-out provided Wespercorp with the cash it needs to continue operating, but Dashiell said he doubts the company could resume its money-making ways until “sometime” after next July, when its new fiscal year begins. And Dashiell cautioned that profit potential depends on “a number of uncertainties,” including the successful introduction of new products and no additional softening of the markets for its current products.
Wespercorp’s troubles were underscored by the qualifications issued by its auditors’ latest year-end financial report.
2 Lawsuits Pending
Among the primary concerns of Touche Ross & Co. are Wespercorp’s potential obligations from two lawsuits pending against the company. The suits, asking for a total of $5 million, were filed by two utility companies that had contracted to buy a computerized billing system from Wespercorp before the company decided to discontinue that product line last year.
