Silicon Systems Reports 1st Loss in Three Years : Computer Chip Slump Catches Up With Firm

Silicon Systems Inc. on Thursday reported its first quarterly loss in nearly three years.

The Tustin-based company, which had more successfully weathered the global slump in the computer chip market than many of its competitors, blamed continued weak sales and increased research-and-development spending for the $2.4-million loss during the first quarter of its 1986 fiscal year.

Silicon System’s loss for the three months ended Dec. 28 compared with net earnings of $1.6 million a year earlier.

First-quarter revenues dropped 31% to $11.3 million, from $16.4 million, continuing a steady slide which began during the second half of 1985.

Silicon System’s report comes on the heels of an announcement by Santa Clara-based Intel Corp., one of the nation’s largest makers of computer chips, that it will lay off 700 workers amid a staggering 99% plunge in net earnings for fiscal 1985.

Although Silicon Systems had forecast late last year that it would post a loss for the quarter, the amount disclosed Thursday took some members of the investment community by surprise.

Larger Than Anticipated

“The loss was substantially larger than what I was anticipating,” said Jay Vleeschhouwer, an analyst with Cantor Fitzgerald & Co. Inc. of Los Angeles. Vleeschhouwer said he had expected the quarterly loss to total less than $1 million.

“As a result of the larger than expected loss, I have lowered my expectations for the remaining three quarters of the year,” he said. “In fact, I think it’s possible they will post a second-quarter loss, but may return to profitability by the June quarter.”

“For us, the recession in the semiconductor industry lasted just one quarter too long,” said Carmelo J. Santoro, Silicon System’s chairman, in a prepared statement. “We believed that our new fiscal year would begin with strong markets and higher revenues.”

New orders during the first quarter totaled $14.7 million, signaling a possible upturn in revenues for the current quarter, the company said. One product Silicon Systems hopes will improve the outlook for 1986 is a single-chip modem, which it introduced late last year. A modem allows computer data to be transmitted over telephone lines to another computer.

“Their gross margins are very sensitive to revenues. As the revenues fell off, their ability to absorb overhead and cost diminished,” Vleeschhouwer said.