Disk Drive Firm Plans Revamping : Computer Memories President Resigns; Quarterly Loss Seen
Computer Memories, struggling to cope with the loss of IBM as a customer, announced Friday the resignation of its president and a major restructuring designed to shrink the company and de-emphasize its disk drive business.
The Chatsworth-based company said it will sell its new Singapore plant, write down assets and post an unspecified loss for the third quarter ending Dec. 31. Computer Memories also disclosed that it slashed its domestic work force last week to 130 from 190, with most of the 60 dismissals coming in Chatsworth.
Chairman Irwin Rubin said Computer Memories also is looking for an acquisition and will try to diversify out of disk drive manufacturing, possibly into a business outside of the computer industry.
Rubin will take on the added duties of company president, replacing Gary W. Streuter, 39, who resigned effective Dec. 31 after about six months in the job. Computer Memories also said that Abraham Brand, a former president and co-founder, is resigning as a director and corporate secretary.
The resignations follow last October’s departure of Chairman Finis F. Conner, who quit after just four weeks on the job. He was replaced by Rubin, who had held the job before him.
Prospects Appear Dim
“I’ve known about Streuter’s leaving for more than three months,” Rubin said. “We decided this would be an appropriate time for him to go.”
Rubin, who turned 58 Thursday, “has got to perform some miracles,” said James Porter, president of Disk/Trend Inc., a market research firm.
Analysts said the company’s prospects appear dim unless it can find a buyer or use its substantial cash assets--$22.6 million as of Sept. 30--to acquire another company with more promising technology.
“I think they’re headed for a big disaster here,” said Michael Murphy, editor of California Technology Stock Letter.
Disk drives are the equipment that personal computers use to store and retrieve data. U.S. manufacturers have suffered recently from slumping computer sales and an influx of cheaper foreign drives from Asia.
Computer Memories is in a particularly tough situation because more than 80% of its sales are to IBM, which decided last summer not to renew its contract at the end of this month.
Merger or Acquisition
“Their possibilities are to see themselves merged, or maybe find something to buy and rescue the business, or to liquidate the company,” said Steven L. Ossad, who follows Computer Memories for L. F. Rothschild, Unterberg, Towbin in New York.
Porter said the company has failed to drum up new business to replace IBM’s and was slow to introduce advanced disk drives.
As part of its restructuring, Computer Memories said Friday that it signed a letter of intent to sell its Singapore manufacturing plant to an unnamed buyer in three or four months and will lay off 300 to 350 of its 750 workers there by Jan. 1. The company said write-downs will be taken as a result of the move.
As with many other high-tech companies, Computer Memories’ decline has been precipitous. Its sales for the fiscal year ended March 31 totaled $108.7 million, up more than seven times from two years before, largely on the strength of orders from IBM.
In its first quarter ended June 30, the company had record earnings of $4.8 million on record sales of $50.5 million. Its U.S. work force stood at 600 in July, and its Singapore operation was thriving as more production was shifted there.
