AST to Establish Subsidiary in Canada

In an apparent challenge to its cross-town rival, computer maker AST Research Inc. said Monday that it will establish a separate Canadian subsidiary in an effort to boost sales in that market.

The move means that AST and up-and-coming competitor Advanced Logic Research Inc. will be battling for position in the Canadian market. In the past year, ALR has made inroads into the Canadian market with sales of its low-priced personal computer systems.

For the fiscal year ended Sept. 30, Canadian sales accounted for about $17 million--roughly 10%--of ALR’s sales. Company officials at AST, which has had sales offices in Canada since 1986, estimated that its revenues in Canada are about double that of its rival.

“ALR has been a target for AST to shoot at and vice versa,” said Steve Lair, a vice president at Dataquest Inc., a San Jose market research firm. “I think that’s true in Canada as well as in the United States.”

Tom Yuen, AST co-chairman and chief operating officer, downplayed the competition with ALR, saying the company believes that it has a greater opportunity to sell computers in Canada because of its rapid growth and a free-trade agreement between the United States and Canada.

“AST is establishing a full Canadian subsidiary to firmly plant our roots in the Canadian marketplace,” Yuen said. “The market is significantly larger than we’ve been doing in it.”

AST has sales offices in Montreal and Vancouver. It will open a 21,000-square-foot warehouse in Mississauga, Ontario, near Toronto, and add 25 to 30 people to expand its sales and technical support for Canadian customers.

The new subsidiary means AST will put greater emphasis on direct sales to PC buyers rather than sales through computer distributors such as Ingram Micro in Santa Ana, Merisel in Torrance, and Tech Data Corp. in Florida, Yuen said. He said the strategy will improve the delivery of AST products and create greater awareness of the company.

AST’s strategy differs from ALR’s since ALR sells its computers only through distributors so that it does not compete with its distribution customers.

“They know we’re there,” said Dave Kirkey, vice president of international marketing for ALR. “We’re taking an aggressive position in Canada, and we’re focusing on market share.”