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President David Kay Resigns at Financially Shaky Kaypro

San Diego County Business Editor

Beset by financial losses and pressured by its principal lender to repay as much as $8.5 million in overdue loans, Kaypro Corp. announced Friday that its president, David Kay, has resigned.

Kay, 43, is the son of Kaypro founder, chairman and chief executive Andrew Kay and has been with the Solana Beach-based personal computer company since 1980. In an interview, Kay said his departure was entirely voluntary.

“I was not forced out or asked to leave. The timing just seems to be right. I have a lot of ideas,” Kay said, adding that he as yet has no specific business plans.

No permanent replacement was named for Kay. His father will take over as president on an interim basis, company spokesman Joseph Marcello said. Kay also is giving up his seat on Kaypro’s board, whose three remaining directors are his father, his mother, Mary, and his brother, Allan.

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Marcello and John Hentrich, who recently returned to Kaypro as vice president in charge of sales and marketing, are putting together a new strategy for Kaypro,Kay said Friday.

Kay’s resignation comes at a time when the company is attempting to renegotiate loans that are overdue to Commonwealth Financial Corp. of Walnut Creek. Commonwealth President William F. Plein said Friday that Kaypro was given a two-week extension, until Oct. 14, to come up with a plan for repaying the line-of-credit debt. Company sources said the debt is from $7.5 million to $8.5 million.

Plein refused to speculate on what Commonwealth will do to try to collect its loans if Kaypro fails to come up with an acceptable plan.

Kaypro’s cash has been critically low in recent quarters, forcing Andrew Kay recently to lend the company $2.3 million from his personal funds for working capital.

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The company has lost nearly $30 million over the last four years. Citing production difficulties, delays in new products and the higher cost of dynamic random access memory semiconductors, Kaypro reported a loss of $4.4 million on sales of $58.9 million for the nine months ending May 27.

For the fiscal year ending August, 1987, Kaypro reported a loss of $9.6 million on sales of $105.6 million.

Layoffs Scheduled

The company has put much of the blame for this year’s losses on the increased cost of the DRAMs used in Kaypro machines from an average $3 per chip to $12. While the cost has added significantly to Kaypro’s production expenses--there are an average of 36 DRAMs in most Kaypro PCs--Kaypro has been forced to hold the line on wholesale prices for competitive reasons.

To cut costs, Kaypro announced in August that it was laying off 35 workers. The layoffs were only the most recent in a series of cuts; Kaypro’s current payroll of 300 is down from 526 employees a year ago.

Last month, the company also delayed the introduction of two computer products: a laptop model and a clone of one of IBM’s Personal Systems/2 personal computers.

An innovator in the early 1980s in the production of “transportable” personal computers that used the CP/M computer operating system, Kaypro’s sales zoomed to $119.6 million in 1984 from $5.5 million in 1982. But the company fell on hard times as the IBM PC and its clones equipped with the MS-DOS operating system came to dominate the personal computer market.

Kaypro finally introduced a family of IBM-compatible machines in early 1986 and has been trying to regain its market position ever since. According to a June survey by InfoCorp, a Cupertino market research firm, two of Kaypro’s IBM-compatible lines, the PC and the 286 combined, accounted for 3% of all PCs sold at independent retail outlets.

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