Analysts Differ About Prospects for Tandon
In the wake of yet another dismal quarterly report at Tandon Corp. that brings its net loss to $50.2 million for the first three quarters, industry analysts differ about the future of the Chatsworth-based maker of computer disk drives.
Bob Grandhi, who follows the company for E. F. Hutton in New York, said he sees Tandon evolving into more of an offshore computer assembler, with diminished interest to investors.
He predicted that the company, plagued by competition from cheap imports and slumping sales of the personal computers for which it makes disk drives, would lose about $2.5 million, or 5 cents a share, in its fourth quarter ending Sept. 27. And Grandhi said he is not sure the losses will end there.
But two industry experts in California were more hopeful.
Losses May Not Be Over
Michael Murphy, editor of the California Technology Stock Letter, sees Tandon’s future as fairly bright, although he acknowledged he is not sure the losses have ended with Tandon’s third quarter.
Nevertheless, he said, most industry observers are convinced Tandon will win its patent-infringement suit against Mitsubishi and TEAC, two big Japanese competitors, and that, when the losses end, Tandon should be in good shape. Some analysts have speculated that Tandon is a likely merger candidate.
Murphy said Tandon had about $2 million in operating profits in its last quarter, and remains in a strong cash position.
Jim Porter, president of Disk/Trend Inc., which studies the disk-drive business, said he thinks things will pick up for Tandon for the rest of the year. “Tandon remains a very low-cost producer,” he said.
Low-cost or not, the company has had its troubles, as have others in the extremely competitive disk-drive business. Disk drives are computer memory systems that imprint onto and read data from magnetic disks.
Tandon last week reported a $15-million loss for its third quarter ended June 28, mostly because of increased inventory reserves and new-product costs. Sales fell to $62.3 million from $106.3 million, a drop of 41%. It was the company’s fourth straight losing quarter.
