Tandon Posts Net Loss; Digital’s Profit Drops

Two computer companies, Tandon and Digital Equipment, on Tuesday reported results that are further indications of widespread troubles in their industry.

Chatsworth-based Tandon reported a $15-million loss for its third quarter ended June 28 that resulted mostly from increased inventory reserves and new-product costs.

The loss compared to net income of $10.4 million for the same period last year. Sales plummeted 41% to $62.3 million.

Tandon, principally a manufacturer of disk drives for personal computers, has now posted losses for four straight quarters and has embarked on a program to shrink the company to cope with weak demand for its products and a flood of cheap imports, particularly from Japan.

The company laid off 850 workers in March, 1984, and has dismissed 370 in recent weeks. It is also suing Mitsubishi and Teac, two big Japanese electronics companies, for patent infringement.

Tandon said the immediate cause of the loss last quarter was its own move to increase inventory reserves for its older 5-inch floppy disk drives as well as lower-capacity hard disk drives.

Also to blame, the company said, were “significant start-up and maturation costs” for new products, including 3 1/2-inch hard disk drives, 5-inch high-capacity hard drives and new IBM-compatible computer systems.

Tandon also reported cash and equivalents of $50.5 million, compared to $40.9 million at the close of the 1985 second quarter, due mostly to the sale of $13 million in inventory.

For the nine months ended June 28, Tandon had a loss of $50.2 million, compared to net income of $30.2 million for the same period last year. Sales were $214.1 million versus $305 million.

Digital Equipment, the world’s second-largest computer maker, said its fiscal fourth-quarter profit fell 23% from a year earlier, despite a 12% revenue gain.

“Our non-U.S. business grew nicely in the quarter, despite the strength of the dollar,” Digital Equipment President Kenneth H. Olsen said. “However, here at home, weakness in the manufacturing sector of the economy caused some of our customers to postpone their computer purchases.”

Several U.S. makers of minicomputers and larger-scale data processors have experienced earnings slumps in recent months. Analysts attribute the downturn in part to the sluggish economy, which has prompted cutbacks in corporate capital spending plans.

In the quarter ended June 29, Maynard, Mass.-based Digital said net income fell to $100.4 million, while revenue climbed 11% to $1.85 billion. For the full fiscal year, however, Digital said profit jumped 36% from the previous year to $446.7 million as annual revenue rose 20% to $6.69 billion.