Beleagured CCT OKs Union With Sunward Technologies

Throwing in the towel as an independent company after a disastrous five-year string of bad luck and losses, Computer & Communications Technology Corp. of San Diego said Friday that it has agreed to merge the publicly held company with Sunward Technologies, a closely held concern also based in San Diego.

CCT also announced that it expects to report losses totaling $17.3 million for the 1989 fiscal year on sharply reduced revenue of $61.5 million. That compares with 1988’s loss of $15.9 million on $107.8 million in revenue. For the fourth quarter alone, the company said, its net loss will come in at $12.4 million on sales of $17.6 million.

Both Sunward Technologies, which reported revenue last year of about $42.1 million, and CCT manufacture recording heads used in computer disk drives, a kind of data storage device.

CCT has been awash in red ink for five years. Since the beginning of fiscal 1985, losses totaling $62 million have left it severely weakened. As a result, CCT is now in technical default of its bank loans. Although the banks have not waived the defaults, CCT said in a statement Friday that it expects them to approve the merger.

“The merger will result in increased sales volume and a broader customer base . . . and with the addition of Sunward’s $6.5 million in cash, a significant strengthening of the combined company’s balance sheet,” CCT Chairman E. T. Bahre said in the statement.

The deal calls for Sunward Technologies to assume control of the merged entity, with its shareholders receiving about 13.5 million in newly issued CCT shares. That would give them a 55% majority of the 25 million CCT shares that would then be outstanding, Bahre said.

If shareholders of both companies approve the deal as required, the merger would be completed by June. Sunward Technologies Chairman Greg Reyes would assume operational control of the new company, to be called Sunward Technologies and to remain a publicly held company, Bahre said.

Layoffs of CCT personnel are expected as a result of the merger but Bahre would not say how many. Once the merger is complete, Bahre will relinquish his operational role at the company but retain a board seat. In a statement, Sunward Technologies’ Reyes said the merger will allow the company to reduce costs through consolidation of “administrative functions in one location in San Diego.”

The losses are only part of the CCT hard-luck story. In late 1989, two of its largest customers, disc drive makers Miniscribe and Priam, declared bankruptcy. The customers’ problems were a prime factor in the drop-off of CCT’s revenue last year. Also, CCT was forced to write down the value of inventory destined for shipment to the two companies, a contributing factor in the fourth quarter 1989 loss.

Early last year, CCT laid off more than 100 workers at its San Diego facility and shut down its Tijuana manufacturing plant altogether, laying off 1,600 there.

CCT has also suffered in recent years from severe manufacturing and labor problems at its South Korea manufacturing plant, said Dennis Waid, president of Peripheral Research, a Santa Barbara-based market research company. As a result, CCT has lost customers and seen its share of the $885-million recording-head market slip drastically, he said.

In 1986, CCT was forced to call off an all-cash sale of its Zeta Laboratories subsidiary to Whittaker Corp. after Zeta was accused of overcharging the government on defense contracts.