AST Research Cheered by IBM Announcement
When IBM’s new product announcement reached AST Research’s executive suite Wednesday morning, officers of the 5-year-old company sighed in relief.
The computer giant’s moves, long known for causing havoc for competitors and suppliers, would not have anywhere near the devastating impact some had feared.
“In fact,” said AST President Safe Qureshey, “I didn’t see much of any impact at all on what AST does.”
What AST does--and has turned into the core of a $100-million-plus annual business--is make “turbo-charging” enhancement products for IBM’s line of desk-top computers. Although the so-called “after market” has been good to AST, the company is vulnerable to changes in IBM products and to any moves by IBM to appropriate some of AST’s turf by introducing competing products.
According to Wall Street analysts, the stock market had been prepared for IBM to introduce direct competitors to AST’s memory-increasing and multifunction boards. These products slip into the back of a computer to expand its data storage potential and allow it to perform additional tasks.
But rather than introduce directly competing products, IBM announced Wednesday that it will soon begin shipping upgraded versions of its Personal Computer AT and XT models and will cut prices 5% to 25% on many of its products.
Analysts conceded that because the enhanced models offer more data storage capacity than their predecessors, they could pose a threat to AST’s memory-expanding products.
Yet, the same analysts discounted that potential threat because IBM did not introduce a product that directly competes with AST’s most popular products: a board that allows a computer to perform different functions simultaneously and a novel “memory banking” board that significantly increases the amount of data that can be stored and retrieved.
From the performance of AST’s stock recently, investors had expected the news to be worse. Over the last several months, AST’s stock price, which hit an all-time high of $32.75 in December, has fallen by nearly 50%, closing Tuesday at $16.87 by Tuesday.
However, in trading Wednesday, following the IBM announcement, the stock rose $1 to $17.87.
“The announcement was not a major negative, and, apparently, the market had been prepared for a major negative,” said Thomas Galvin, an analyst with Shearson Lehman American Express in New York. “What IBM announced is at the midpoint to the low end of the scale of what they could have done to AST.”
