Turmoil Subsides : Digitext Finally Ships Its Flagship Keyboard

After months of production delays and management turmoil, Digitext in Thousand Oaks is now shipping the first models of its main product, a keyboard that rapidly enters text into a computer.

“We are out there actually trying to sell the product,” said Patrick A. Moore, Digitext’s chief financial officer.

The turnabout has not impressed the stock market as yet, but Patrick J. Rooney, a Digitext director since February, 1987, is betting that the company has turned the corner. Rooney recently acquired an option to buy 500,000, or 10.1%, of Digitext’s 4.94 million total shares outstanding for $2 a share.

Rooney acquired the Digitext option May 24 as part of a complex transaction involving several parties, according to documents filed last week with the Securities and Exchange Commission.

He also received the right to vote that stock in the meantime, according to the SEC filings.

“I think Digitext has a very big opportunity, now that we are restructuring things,” Rooney said in an interview.

Digitext’s $14,500 machine, called the Digitext-ST, is intended to help court reporters, librarians and government officials quickly enter vast amounts of text from stenography notes, typewritten pages and other media to a computer’s memory banks.

Digitext, founded in 1983, spent four years developing the machine and had hoped to begin full-scale shipments in the fall of 1987. Computer giant Wang Laboratories signed up to be the exclusive marketer of the Digitext-ST, and planned initially to buy $800,000 worth of the machines for resale.

But Digitext ran into problems. Last October, Digitext announced that production would be delayed for several months because test models disclosed flaws in some of the keyboard’s main parts. At the same time, Lawrence W. Melquiond resigned as Digitext’s president and chief executive.

The delays cost Digitext dearly. The company has lost $12 million between its inception and last Dec. 31. Its stock, which peaked at $15 a share in late 1986, collapsed at the end of 1987. It has improved little since then, closing Monday at $1.875 in over-the-counter trading.

But Digitext’s problems began to abate early this year when the company hired Phil Haines, an electrical engineer and consultant, to help solve the keyboard problems, Moore said. And on May 3, Haines succeeded Kaufman as Digitext’s chairman and chief executive.

Rooney has had a stormy business career. In March, he was convicted in U.S. District Court in New York on one count of filing a false income tax return for 1983 and one count of conspiracy related to that crime. He was acquitted on a third charge of tax evasion.

Rooney said “I’m innocent, and appealing” the two convictions.

He is best known, however, for serving as chairman of the now-defunct New York brokerage firm Rooney Pace from 1978 to 1985. Rooney Pace shut down operations in January, 1987, and last year filed for protection under the U.S. bankruptcy code. The firm has been permanently barred from membership in the New York Stock Exchange because of alleged securities violations.