ALR Plans Stock Offering Despite a Weak Market : Personal computers: The offering is the first in the nation by a computer company this year and comes at a time of widespread pessimism about the prospects of the industry.
Advanced Logic Research Inc., the fast-growing manufacturer of high-performance personal computers, said Monday that it hopes to raise more than $30 million by--for the first time--selling stock to the public in April.
ALR, which has been planning an initial public stock offering for more than a year, said in a statement that it will offer 2.65 million shares at $11 to $13 each.
The offering is the first in the nation by a computer company this year and comes at a time of widespread pessimism about the prospects of the PC industry. It also comes at a time of generally bearish sentiment on Wall Street.
The stock sale would involve about 20% of ALR’s shares outstanding. Wearnes Bros. Ltd., ALR’s majority owner with a 60% stake, would see its position in the company reduced to about 40%, although the Singapore-based conglomerate doesn’t plan to sell any shares.
Gene Lu, ALR founder and president who owns 25% of the firm, will be selling about 180,000 shares, according to James T. Richardson, chief financial officer. The offering, being handled by PaineWebber Inc. and Prudential-Bache Capital Funding, is scheduled to become effective April 10.
Founded in 1984, Irvine-based ALR has rocketed to prominence on its ability to get very fast personal computers, based on the latest microchip technology from Intel Corp., to market faster than many of its competitors.
Positioning itself as an alternative to Compaq Computer Corp. in the high-performance PC arena, ALR earned $2.8 million on revenue of $73 million for its fiscal year ended Sept. 30. For its first quarter ended Dec. 31, the firm earned $3 million on revenue of $39.5 million.
Analysts consider the PC market to be very weak at the moment and say that the atmosphere for initial public offerings is clouded by the general skittishness of the stock markets. Still, most analysts were optimistic about the firm’s prospects.
“They are in the right part of the personal computer business--the high-end, high-performance part,” said Michael Murphy, editor of California Technology Stock Letter. “It’s an interesting-enough story that people will probably be willing to buy--if they don’t price it too high.”
A price of up to 10 times pretax earnings would be reasonable, he said. Based on ALR’s first-quarter pretax earnings of $5.2 million and 9 million shares outstanding, the $11 to $13 offering price is within that range.
Murphy said the company would be attractive to people looking for “a fast-growing alternative to Compaq.” Because the company is not well-known, he said, ALR will have to actively take its story to investors to stir up interest in the stock sale. Richardson said ALR officials are planning a two-week road trip in early April to meet with European and U.S. investors.
David Korus, an analyst with Kidder Peabody, said the fundamentals of the personal computer business remain poor but that ALR seems to be “a company that has good products, does well in certain niches and does it at a good price.” The recent upswing in the stock market, he noted, has been accompanied by a general improvement in the technology stock area, which should help ALR’s prospects.
But Bruce Lupatkin, an analyst with Hambrecht & Quist in San Francisco, said: “It’s not going to be easy to do a deal for another (IBM PC) clone company that bases its business on trying to be first to market.” The initial public offerings of other clone makers, such as Dell Computer Corp., have not gone well, he noted.
Bruce Stephen, an analyst with International Data Corp. in Framingham, Mass., said that the PC market is “definitely slowing down” but that ALR “continues to play in the high-growth segments.”
He predicts that the firm’s frantic growth will soon begin to slow. “They’ve gone through this tremendous spurt, and now they’ll have to start shoring up their infrastructure, their marketing strategy and their product vision,” Stephen said.
ALR AT A GLANCE
Here are performance figures for Advanced Logic Research for the fiscal year ending Sept. 30, 1989, and the first quarter of fiscal 1990.
(Dollar amounts in millions)
Fiscal 1989 1st Qtr. 1990 Revenues $73.0 $39.5 Earnings $2.8 $3.0
Location: Irvine.
Founded: 1984.
President: Gene Lu.
Principal Shareholder: Wearnes Bros. Ltd. of Singapore holds 60%.
Employees: 338 in the United States, 39 in Singapore.
Products: High-speed personal computers based on the Intel 286, 386, and 486 microprocessors.
