Computer Debut, Stock Plunge : The Week AST Was Hit by a Double Whammy

When AST Research officials chose last Monday as the day to announce their newest personal computer--and selected the classy surroundings of New York City’s Guggenheim Museum for the event--they hoped that it would be a day to remember.

But they didn’t suspect just how memorable.

“We couldn’t have picked a worse day to make a product announcement,” said Robert Maples, who oversees investor relations for the Irvine-based technology company. “Who could have known the stock market would fall 500 points?”

To the dismay of AST officials, the market’s historic nosedive overshadowed news about the computer--and many other of events Monday.

Maples noticed that the handful of Wall Street financial analysts who attended the company’s presentation seemed nervous and preoccupied, as the market plunged lower every hour.

“It was like disbelief that this could be happening,” Maples said.

When AST sent a press release about the new computer to the Dow Jones electronic news service on Monday, it went unnoticed by the media amid the avalanche of stock market news.

“It was a sad day for us,” Maples said.

AST is one of many Orange County corporations affected by last week’s roller coaster ride on Wall Street. Besides a disquieting decline in AST stock, company officials believe the general uncertainty surrounding the market could have a long-term impact on AST’s ability to raise capital for future needs.

“When the stock market is in a calamitous state like it is,” said Jerry Ulrich, AST’s chief financial officer, “the likelihood of being able to go out and raise money, especially for a high-tech company, is very low at almost any price.”

On “Black Monday,” AST’s stock plummeted $3.75 to $11.625, wiping out nearly a quarter of the company’s market value in a single day.

AST’s stock recovered a little of its losses Tuesday and Wednesday, then Thursday fell sharply to a 52-week low of $10. It fell another $1.50 on Friday to finish the week at $8.50.

AST employees were kept abreast of the company’s stock performance through a sign posted on an office wall listing daily opening and closing prices.

Although AST has no employee stock-purchase plan, about 200 executives have received options to buy company stock at below-market prices as part of their compensation packages. With the drop in AST stock, “the incentive factor related to the stock option has been a little bit diminished,” Ulrich said.

On Thursday morning, Maples was talking with a reporter in his office when he received a phone call about AST stock. The caller told him the company’s shares had dropped sharply from the previous day’s close of $11.875.

Maples said: “$9.375? Oh, man! What’s the market doing?”

Maples told the caller that the company had made no announcements Thursday that would explain the stock’s dip.

Besides the overall market decline, another possible explanation for the sharp drop in AST stock was a “sell” recommendation issued by an analyst at Furman Selz Mager Dietz & Birney, a New York investment firm. The analyst may have been anticipating AST’s announcement Friday that its first-quarter earnings fell 98% to $72,000 from $3.1 million in the year-earlier period.

Despite last week’s wild market action, Maples said he hasn’t been deluged by calls from anxious investors or AST employees.