Layoffs, Further Losses Reported by Alpha Micro : Founders, Back in Control, Seek Ways of Revitalizing Santa Ana Computer Firm

Alpha Microsystems Inc. has laid off about 5% of its work force and expects to report losses for the fourth quarter and full year, officials of the struggling Santa Ana computer maker said this weekend.

Following the company’s annual shareholders’ meeting Saturday, Chairman Robert Hitchcock said the company had laid off 19 employees last week as part of a new cost-cutting drive. In addition, Chief Financial Officer John Cain confirmed that the company has written down the value of its older computer parts inventory and expects to report unspecified losses for the quarter that ended Sunday. For the first nine months of the fiscal year, the company lost $938,000.

The two moves come just six weeks after Hitchcock and Richard Wilcox, the founders of Alpha Microsystems, resumed control of the troubled company following a bitter power struggle with the management team they had hired to operate the company 4 1/2 years ago.

Hitchcock told shareholders he and the new management team had spent the last six weeks evaluating the company’s operations in the hope of developing a strategy that would make Alpha Micro profitable again. The company, once a moneymaker, stock market favorite and technology leader, has lost more than $4.4 million since 1985.

Although the two founders said the new operating strategy has yet to be developed, they publicly detailed for the first time the financial and strategic concerns with the previous management that led them to fight for the helm of the company they started in 1977.

Wilcox said that under former president and chief executive Richard Cortese, Alpha Micro had lost some of the technological superiority that had been the basis of its rapid growth in the early 1980s.

“We used to be in the forefront of technology,” said Wilcox, an engineer and the author of Alpha Micro’s unique operating system. “We want to get back to where we were, as opposed to being just another general supplier of micro computers for business.”

Wilcox said the company should focus strictly on exploiting the full potential of its own operating system rather than building machines that can work with other systems. Operating systems, such as that written by Wilcox more than a decade ago, are a set of instructions dictating how a computer will process information.

Although the Alpha Micro operating system enjoys a strong reputation in the computer industry, some analysts believe it has limited the company’s growth since Alpha Micro systems are less able to work with other systems than those made by competitors. Under Cortese, Alpha Micro had developed secondary operating systems that were designed to let its machines work with more commonly available operating systems, such as the UNIX system developed by AT&T.;

However, Hitchcock said, that strategy forced Alpha Micro to downplay its own technological strengths and to enter a marketing game that it couldn’t win because of the difficulty of setting its products apart from others.

Hitchcock said he and Wilcox also were quite concerned by moves last summer to find a buyer or merger partner for Alpha Micro because that would have meant the end of the company’s independence.

Cortese had argued last year that to survive and compete against such industry giants as IBM and Digital Equipment Corp., Alpha Micro needed to amass size and corporate strength. Given the company’s limited product line and proprietary operating system, Cortese argued, a merger, rather than sales growth, was more likely to give Alpha Micro the size it needed to compete effectively.

In August, Cortese asked the company to consider merging with Point 4, a Tustin computer maker. “That’s what brought everything to a head,” Wilcox said, explaining why the founders decided last August to launch a proxy fight for control of the company. “We didn’t think a merger was in the best interests of the company.”