Prime Computer Says Takeover Battle Will Hurt Its Quarterly Earnings

Prime Computer Inc. said its profit for the current quarter will be well below Wall Street estimates, and it largely blamed the decline on steep costs of defending itself against a hostile takeover bid by Tustin-based MAI Basic Four Inc.

In a statement Friday, the Natick, Mass., minicomputer maker said earnings for the quarter ending March 31 will be lower than expected because of expenses incurred during the 4-month-old takeover battle with MAI. The company said it has lost “a significant number of customers” because of the uncertainty resulting from the takeover attempt.

Prime said some of its customers “have indicated an unwillingness to purchase from a highly leveraged company such as is contemplated in the tender offer by MAI.”

MAI, which manufactures and repairs business computers, has offered to acquire Prime’s stock for $20 per share in a deal valued at $970 million. MAI proposes to finance the purchase almost entirely with borrowed funds, including high-yield securities or “junk bonds” that will be underwritten by Drexel Burnham Lambert.

Prime’s stock closed Friday well below the MAI offer at $17.375, down 75 cents in New York Stock Exchange trading.

Prime declined to provide specific estimates for the first quarter. But the company said current Wall Street estimates, which on average project earnings per share of 25 cents, “are significantly higher than the company expects to report.”

In 1988’s first quarter, Prime earned $14.5 million, or 30 cents a share, on revenue of $364 million.

Prime said its financial results will also be adversely affected by expenses resulting from its ongoing corporate reorganization, which includes the elimination of 1,200 jobs worldwide. The company said the costs of two recent acquisitions also will reduce first-quarter results.

MAI’s bid has been on hold because a federal judge blocked the offer on grounds that MAI has not provided enough information about its relationship with Drexel Burnham. MAI has appealed that ruling, and a federal appellate court is expected to announce a decision next week.