Anaheim’s General Automation May Be Out of Woods
After six financially troubled years with losses topping $44 million, executives at General Automation Inc. say they finally have overcome the last of the obstacles separating the beleaguered Anaheim computer company from profitability.
Earlier this week, the company said it had received the last of the funds needed to virtually eliminate long-term debt that once totaled $48.3 million. The money came from a public offering that netted General Automation $6.2 million.
And just two weeks ago, the company sold the last of the operations slated for divestiture in the grand plan to turn the company around. General Automation sold its ailing minicomputer business to Industrial Electronic Resources Inc., a privately held firm in Corona, for what a company spokesman would identify only as a sum “in the low six figures.” General Automation will continue servicing its existing minicomputer customers with products obtained from IER.
But company officials say the bulk of their efforts will be focused on developing and marketing General Automation’s 3-year-old line of microcomputers. They will be able to pursue that goal free from the mound of debt that for years siphoned off operating and development funds and frightened off potential customers who didn’t want to invest thousands of dollars in a computer system made by a company in danger of folding.
“We’re where we set out to be today,” said Leonard Mackenzie, chairman and chief executive of General Automation. “All the things that we needed to get cleaned up, we got cleaned up.”
Mackenzie said the company already is seeing heightened customer faith in its Zebra line of microcomputers. He declined to provide specific figures but said sales for the current quarter are meeting company projections.
And General Automation’s more than 100 dealers in the United States are showing a greater willingness to push the company’s products, “mainly because they’re less afraid of resistance,” said John Murray, General Automation’s chief financial officer.
The company also has regained its place on the National Assn. of Security Dealers computerized listings. General Automation was removed from the list in April, 1985, when its net worth fell below NASD’s minimum requirement of $375,000.
‘Going to Be Around?’
“The big knock on General Automation has always been (whether) they’re going to be around,” said Brent W. Berry, a vice president at Bateman Eichler, Hill Richards Inc. in Pasadena.
Some analysts believe that the company still could go under. Although General Automation should post a rare profit for the last quarter, it is due largely to a $9.5-million extraordinary gain from renegotiating the bulk of its now-retired debt.
“They’ve got their house in order. Now the question is, can they turn it into a reality? Can they deliver?” Berry said.
Murray, the chief financial officer, said he believes so, now that the toughest battle--cleaning up the company’s debt--has been won.
“That was the slugfest, to get the balance sheet cleaned up,” Murray said.
The balance sheet’s woeful state at the end of the company’s 1985 fiscal year prompted General Automation’s auditors to question whether the company could survive.
“We told them what we were planning,” Mackenzie said. “They said, ‘That’s fine, but this is what you’ve got now,’ ” and proceeded to issue a report that said General Automation has a shareholders’ deficit of $5.2 million, a loss of $8 million and $13.4 million in bank debt at the end of its 1985 fiscal year.
Took Two Years Longer
Mackenzie said it took two years longer than he had planned to get the company’s affairs in order, but he added that the delay has proved to be a blessing.
The bearish stock market of 1984 never would have allowed General Automation to complete a public offering like the one that just raised $6.2 million for the company, Mackenzie said. And the Pick operating system--the backbone of the company’s Zebra family of business-oriented microcomputers--today is much more accepted then it was two years ago, Mackenzie said. As a result, General Automation products are easier to sell.
Mackenzie said he gambled the future of his company on the Pick system because he felt it would become the fastest-growing and potentially the most profitable in the industry.
So far, his decision has proved right--at least according to a report by InfoCorp of Cupertino. The research firm says growth in the worldwide market for Pick-based systems has outstripped the computer market as a whole, jumping from $433 million in 1983 to $948 million in 1985. InfoCorp estimates the market at $1.3 billion this year.
Sales of General Automation’s Pick-based microcomputers have climbed as the company phased down its minicomputer business. In 1984, the first full year of sales, the microcomputers brought in $11.2 million, or 14.8% of total sales. For the first nine months of the company’s 1986 fiscal year, Zebra sales were $10.6 million, 42.8% of revenue.
Lost $4.5 Million
While General Automation is expected to post a slight profit for its fiscal 1986 fourth quarter, ended July 31, the company lost $4.5 million in the first nine months of the year. The audited 1986 fiscal year report is due at the end of September.
Now that the company is on track, Mackenzie says he plans to concentrate on improving production efficiency for the six models of Zebra microcomputers currently being produced and eventually to expand the line.
