Digitext Signs Contract Calling for Wang to Distribute Its Line
Digitext said it has signed its biggest contract ever, a distribution agreement that will be worth at least $3.6 million and possibly more than $300 million, with computer giant Wang Laboratories.
The deal calls for Wang to be the exclusive worldwide distributor for Digitext’s products, which are systems for entering text into computers by shorthand. The systems use a keyboard that instantly converts stenographic strokes into regular text.
Wang, whose negotiations with Digitext were disclosed in October, will pay $3.6 million to sell the Westlake Village company’s equipment over an initial eight-month period. Wang has options to renew the distribution rights every year for the next five years.
Lawrence West Melquiond, Digitext’s president, said that, if Wang exercises all of its options, it will buy at least $300 million of Digitext equipment. Wang officials declined to say how likely that is.
Closes Other Agreement
Digitext also announced the closing of a previously disclosed, $600,000 agreement granting Wang a two-year warrant to acquire up to 1.2 million Digitext shares. If Wang exercises the warrant, it would become one of the Digitext’s two largest shareholders, with a 24% stake.
Digitext’s stock closed at $13.25 after the agreements were announced Wednesday, down $1.25 from the day before. By Monday’s close, the stock had fallen to $10.75.
The company’s stock, which was below $4 as recently as late August, has swung sharply since the company went public in February. Its highest close has been $15.
The distribution deal is not expected to immediately increase the payroll at Digitext, which employs all of its 25-member staff in Westlake Village. The company’s assembly work is handled by subcontractors.
Wang spokesman Paul Henning said demand for Digitext’s system is expected to be “particularly strong” in the insurance, medical and publishing fields.
The Digitext-Wang agreements follow a period of dissension among directors and financial losses at Digitext. It lost $689,352, or 18 cents a share, on revenue of $103,874 in its first quarter ended June 30. In the last fiscal year, the company lost $2.6 million.
