Dataproducts Corp. to Post Loss for Year; Plant Closure Cited
The ink will be red when computer printer manufacturer Dataproducts Corp. announces its year-end earnings later this week.
The Woodland Hills company, the nation’s largest independent maker of computer printers, last week confirmed it will post a sizeable loss for the fiscal year ended March 26, in part because of a $16 million charge against its earnings.
The charge-offs include about $10 million to close Dataproducts’ Milford, N.H., printer plant and move nearly all of the work to Woodland Hills. The remaining amount of the charge-off pertains to a $75 million overseas investment that Dataproducts plans to bring back into the United States, primarily because changes in the federal tax laws make it less attractive to invest the money abroad.
Chairman Jack Davis obviously is not pleased that Dataproducts will post a loss for the year, although he declined to disclose the exact loss. But moving the plant was needed, Davis said, because Dataproducts has too much manufacturing space. He said the company’s savings will make up the $10 million within a year.
‘Prudent Business Decision’
“I wouldn’t call this retrenching. I’d call this a prudent business decision,” Davis said.
Despite the loss, Davis is not discouraged. He said the market has been strengthening for Dataproducts. In the past few months it has disclosed some new long-term contracts, including a five-year, $25 million agreement to supply printers to Edward D. Jones & Co, a financial services company in Missouri.
In July, the company bought Imaging Solutions, a former Exxon unit, that gave Dataproducts all the rights to a new solid ink-jet printer that works by melting a solid chunk of ink and spraying it quietly onto a sheet of paper. The move, which resulted in a $6.7 million loss for its second quarter ended Sept. 26, puts Dataproducts in position to reap all future profits from the printer, Davis said.
The long-awaited printer has not made a dent in the market, and may not for some time, but Dataproducts is clearly betting it will become a major force in the computer printer business. Davis expects its sales to be $10 million to $20 million in the current fiscal year.
Price Questioned
Some industry analysts have praised the technology, but questioned whether the price for the new printer, at $2,795, is too high. They also have said that the ink-jet product will be best as a color printer instead of the black-and-white version Dataproducts is selling now.
Davis, who acknowledges he did not like the product when he first interviewed for the chief executive’s job back in 1986, now touts the printer with zeal.
He argues that the ink-jet printer costs about the same as a laser printer and is less complicated, so it should not require as much repair and maintenance work. He also said that the company is aggressively working on a color version, as well as developing plans for versions that will print such things as bar codes on packages.
Bhanu Bhattasali, an industry analyst with Dataquest, a San Jose market research firm, praises the printer technology. He said that once the technology gains acceptance by customers, some models can be developed that will sell for less than $1,000.
“The promise is there. It is only a matter of time to see the real benefit of the technology accepted in the office and industrial environment. It always takes some time,” Bhattasali said.
The company, in the past, has been considered by some analysts to be a potential takeover candidate. It has a considerable amount of cash on hand and owns 21 acres of land in the San Fernando Valley that some real estate brokers have estimated to be worth about $30 million. The stock closed Monday at $9 per share.
Separately, the company disclosed that it is putting in an anti-takeover measure that will effectively allow shareholders to buy additional stock cheaply to dilute a potential corporate raiders’ stake.
Davis said Dataproducts has not been approached by a suitor and is unaware of anyone who might be interested in buying the company.
