Micropolis Recovering After Short Grind in Rumor Mill
Micropolis’ stock is still recovering after a story in a computer trade publication reported that the Chatsworth maker of computer disk drives was suffering from production slowdowns because of supply problems. Micropolis denied the report.
The stock closed at $34 a share Monday. Last Tuesday, it dropped $3.50 a share to $32.875 after Electronic News said production of some of Micropolis’ high-speed, high-capacity drives was slowing down because of problems with Read/Rite, a troubled Milpitas company that provides Micropolis with “thin-film heads.”
A disk drive stores and retrieves information for computers. The head that is supplied by Read/Rite is the component that reads and writes information magnetically on a rigid disk in the drive.
Chairman Quoted
The story quoted Micropolis Chairman Stuart Mabon as saying Read/Rite’s problems were hurting Micropolis’ production. But after the story appeared, Micropolis executives said it was inaccurate.
While Micropolis has experienced problems getting supplies from Read/Rite, they said, production was unaffected because Micropolis can buy heads from other suppliers.
Dundas I. Flaherty, Micropolis senior vice president for finance, said the company buys parts for its drives from several suppliers and is not dependent on one company.
Computer-industry observers believe that Micropolis has two other head suppliers, Control Data in Minneapolis and Applied Magnetics in Santa Barbara.
Micropolis would not disclose how much business it does with Read/Rite. Analyst James Stone of Shearson Lehman Brothers said Read/Rite is a small supplier for Micropolis. He said the Micropolis disk drives that use the Read/Rite heads probably account for only about 1% of the company’s total sales.
Stone said he believes the stock fell so much because investors tend to be skittish about the volatile group of stocks involving computer equipment.
“When they saw smoke, they said there must be fire,” Stone said. “It’s still an extremely solid company.”
In the year ended Dec. 26, Micropolis earned $18.2 million, contrasted with $2.8 million a year earlier, and sales more than doubled to $213 million. Analysts expect even better results this year.
