4th-Quarter Result Blamed on New-Product Cost : MSI Data Expects $2-Million Loss
MSI Data Corp., a Costa Mesa electronics maker whose fortunes have declined dramatically over the last year, said Monday it expects to report a loss of about $2 million for its fiscal 1985 fourth quarter and its first full-year loss in a decade.
In its release of unaudited estimates, the company blamed unexpected costs of introducing its new product line for the loss--which is expected to total about $1.3 million for the year that ended March 31. Last year, MSI Data turned a profit of $4.1 million.
The company said sales, too, declined for the year, dropping an estimated 8.5% to about $56 million from $61.2 million the year earlier.
MSI’s announcement is the latest in a series of bad news from the company, which created the market for hand-held inventory counting devices 18 years ago. About two months ago, MSI announced that it had indefinitely suspended its quarterly dividend of 10 cents per share to conserve cash. A few weeks later, the company was hit with a $100-million industrial espionage-bribery lawsuit filed by its major competitor.
But MSI’s problems go back further. Over the last several years, the company has lost its momentum and market share to more aggressive competitors, particularly Telxon Corp. in Akron, Ohio. Telxon makes similar devices for bar-code scanning, sales-order recording, supermarket inventory-taking and other tasks requiring portable, computerized machines.
Although analysts had long suggested that MSI was too relaxed toward its competitors, it wasn’t until the current fiscal year that MSI’s earnings went into the steady decline that has ended in the company’s first red ink since 1975.
Charles Strauch, MSI’s president and chief executive since last July, was unavailable for comment on the latest announcement. However, earlier this year he blamed the company’s sagging fortunes on its tardiness in introducing a competitively priced, technologically advanced product line. Strauch said at the time that MSI’s new devices, finally unveiled in late February, would give the MSI the boost it needed.
But a company spokesman said Monday that a pre-tax provision of $3.3 million to cover the cost of introducing the new product lines and writing down the value of old inventory was responsible for the fourth-quarter loss.
Although final, audited figures are expected to be released in late May, the company spokesman said MSI decided to release the preliminary results because they represented a substantial change from results earlier in the year. Through the first nine months of its 1985 fiscal year, MSI had reported total profits of $652,000.
In addition to its financial woes, MSI has also been slapped with a $100-million bribery suit filed by Telxon. The suit, still awaiting trial, charges that MSI paid a former Telxon employee $24,000 for sensitive customer lists, marketing strategies and pricing schedules of its European operations.
