AST Research to Report a Decline in Profits Despite Sales Growth
AST Research Inc.’s entry into personal computer manufacturing late last year has boosted sales to record highs, but profits have suffered, President Safi Qureshey said Tuesday.
The Irvine-based company is expected today to report third-quarter profits of $3.4 million, down nearly 47% from the $6.4 million posted a year ago. Revenues for the period ended March 31 were $55.4 million, a 33% increase over the $41.5 million recorded in the prior year.
For the record:
12:00 a.m. April 23, 1987 FOR THE RECORD
Los Angeles Times Thursday April 23, 1987 Orange County Edition Business Part 4 Page 2 Column 6 Financial Desk 1 inches; 30 words Type of Material: Correction
Sales for the first nine months of AST Research Inc.’s fiscal 1987 increased 8%. The Times erroneously reported in Wednesday’s edition that the Irvine-based computer company’s sales declined during the period.
Despite the surge in sales, the quarter was the fourth consecutive period that AST’s profits have declined from the prior year’s, a development that has forced the company to re-examine its operations and make some dramatic changes in its product lines.
For the first nine months of the year, the company is expected to report profits of $10.2 million, down 56% from the prior year. Sales for the period were $142.8 million, down 8% from the year before.
In December, AST began manufacturing its own line of IBM-compatible personal computers. Since then the company has shipped more than 7,000 systems. Qureshey said the new systems generated $14 million in sales during the third quarter and are expected to double that amount in the current period.
But Qureshey said the cost of developing the new system and getting it into full-scale manufacturing has strained profit margins. He said he expects profits to remain depressed during the fourth quarter before picking up again next fiscal year.
Founded in 1981 as a maker of enhancement products for the IBM personal computer, the company prospered for five years as the PC market grew. But last April, IBM cut off several sources of sales to the company by offering as standard features some of the enhancement extras that AST had marketed to IBM users.
Although sales and profits plunged immediately, the company tried to make up for the loss by introducing new products for Apple computers and by acquiring a line of enhancement products for Digital Equipment Corp. systems.
It wasn’t until December, however, that AST completed its biggest move and began manufacturing its own line of IBM-compatible personal computers.
