Kaypro Optimistic About Its Future; Analysts Not So Sure : Computers: The troubled company’s new president will oversee a major restructuring, including possible layoffs and a shift in production to Holland.
Kaypro Corp. has high expectations for a newly appointed president who will oversee a major restructuring of the personal computer manufacturer. But market analysts Wednesday questioned whether the beleaguered company can turn a profit in the industry’s current slowdown.
Kaypro on Friday announced a $19.3-million net loss for the year ended Aug. 31, contrasted with with a net loss of $11.4 million for the same period the year before. Year-end sales plunged to $21.8 million, from $72.2 million in 1988.
“It is unlikely, in their present financial condition, that they can really make any move,” said George Thompson, assistant editor and market analyst for Datapro Research in Delran, N.J. “What I see them needing is a massive infusion of capital, but performance has been so bad to date that not many people would be willing to purchase their stock.”
The appointment Monday of Roy Salisbury, 33, as president marks the first time in 33 years that control of the company founded by Andrew Kay has fallen into the hands of a non-family member.
The post was previously held by David Kay, who served as president a mere two weeks before appointing Salisbury. David Kay had resigned from the company 18 months earlier to work as an independent consultant before his brief return.
Salisbury, a former management consultant with little experience in the microcomputer industry, said he hopes to revive the faltering company by attracting badly needed capital from outside investors. Kaypro’s cash problems have already forced the company to seek extended payment terms from its suppliers.
“I believe, to be successful, we’re going to have to hit some sales levels we haven’t hit in a while,” Salisbury said. “It’s going to be tough, but we’re going to give all our key competitors a run for (their) money. There’s no doubt Kaypro was once a leader in the industry, and we’re going to bring it back there.”
In the past three years, Kaypro’s market share plunged from 6% to less than 1% of what is now a $50-billion industry, Thompson said. Regular layoffs over the past few years have left the company with fewer than 60 employees, down from a peak in better days of about 750.
With IBM, Apple Computer and Compaq Computer Corp. now holding 50% of the personal-computer market, Kaypro is one of an estimated 450 smaller firms clamoring for the remaining share, Thompson said.
Kaypro “just became generally eclipsed by quicker-growing vendors like Compaq,” Thompson said. “New companies were able to come in with newer, more technologically advanced product lines, and they didn’t have to worry about servicing older product lines.”
Those 450 vendors face an industrywide sales slump in the personal-computer market, according to Stella Kelly, an industry analyst at InfoCorp, a Santa Clara-based market research firm that tracks the industry. Last August, InfoCorp revised its growth estimates to a more conservative 12% for the coming year, Kelly said.
“The market in 1989 did not grow to the extent we originally anticipated earlier in the year,” Kelly said. “The market is simply more mature than it was in the early 1980s.”
Indeed, even market leader Apple has been hit with slower sales. On Wednesday, Apple announced it was laying off 400 workers, or 3% of its work force, to bring growth in line with the slower market.
Before joining Kaypro, Salisbury was managing director of Massachusetts-based FCSGroup, which he described as a business consulting and management service firm whose clients included some computer companies. His previous business experience included setting up a logging company and two travel agencies.
Although he has a limited background in the computer industry and expects to rely on computer experts for some aspects of the job, Salisbury said he brings “finance and administrative skills to restructure Kaypro as a corporation.”
Salisbury’s strategic plan may include layoffs at the already lean company. He also suggested that Kaypro will increase sales through dealership incentives.
To further cut costs, Kaypro will shift more of its production to a wholly owned subsidiary in Holland, Salisbury said. At the same time, the company is intent on expanding into Eastern European and Latin American markets, he said.
Although Kaypro has not been able to secure directors and officers insurance--which protects executives and board members against lawsuits--Salisbury said he is confident he will be able to fill three top management posts with qualified outsiders.
Although Kaypro has tried to keep pace with the never-ending wave of technological advances--it recently introduced a state-of-the-art computer featuring a quicker microprocessor--analysts wonder if the company will remain afloat.
“If they really want to stay in business and are committed to turning the company around, they have to do something dramatic,” Thompson said. “They need to rebuild all the presence, brand recognition, they’ve lost in the last three years. There’s some value in a name.
“But, in a crowded market, it’s going to take not only good products but telling people that they exist,” Thompson said. “The deck is stacked against them at this point.”
Kaypro has traded at about $.125 in recent months. Its stock traded at $10 when the company went public in 1983.
