Price Cutting, Cost Control Measures Blamed : AST Forecasts Loss of $7 Million to $9 Million for Second Quarter

AST Research Inc., an Irvine technology firm that has expanded rapidly in the personal computer market, said Thursday that it expects to report a loss of $7 million to $9 million for the fiscal second quarter ended Dec. 31.

The company attributed the anticipated red ink to aggressive price cutting by AST’s competitors as well as internal cost-cutting measures and an accounting charge related to the anticipated sale of one of its businesses.

AST also said it expects to report sales of $110 million for the quarter. The quarterly results will be released in about 3 weeks.

For the year-earlier quarter, AST reported earnings of $2 million on sales of $92.6 million.

The expected loss reflects heated competition within the personal computer market. AST entered that market in 1987 with the introduction of a line of IBM-compatible machines, and its rapid sales gains surprised many industry observers.

Analysts had been forecasting a weak second quarter for the firm, but the magnitude of AST’s expected losses caught some by surprise.

Lawrence Harris, a securities analyst with Bateman Eichler, Hill Richards in Los Angeles, said he had been projecting a loss of about $1 million for the quarter.

Harris said that AST has been under pressure to cut prices on its Premium/286 line of personal computers in the wake of earlier price cuts by competitors such as Wyse Technology. In December, the San Jose company slashed prices by 10% to 15% on many competing products, Harris said.

In addition, sales of AST’s Premium/286 computers have been hurt by the introduction in September of a competing IBM product.

But the bulk of the losses would come from the accounting charge that AST would incur if it decides to sell off its Camintonn division, which makes products for systems compatible with Digital Equipment Corp. computers.

AST said the sale of Camintonn and other cost-cutting steps would probably result in a charge to earnings of as much as $6 million.

Revenue generated by the Camintonn unit accounted for about 2.5% of AST’s $413 million in sales last year, said Bruce Edwards, AST chief financial officer.

Edwards said AST is considering selling the unit because “it no longer fits with our core business of IBM compatible systems.”

AST’s earnings projection was made after the close of stock market trading Thursday. The company’s stock closed at $8.50 per share, down 37.5 cents.