SCIENCE/TECHNOLOGY : AST Research Stock Falls to Yearly Low as Competition Increases

AST Research Inc., one of Wall Street’s favorite technology stocks for much of 1991, has taken some lumps in the last month, losing 25% of its value during the past month and hitting a 1991 low of $16.50 a share Monday.

Analysts say that renewed competition from struggling Compaq Computer Corp. is giving investors jitters about the Irvine personal computer company.

Compaq in the past month fired its chief executive and switched its strategy to focus on low prices and markets that to date have been dominated by so-called clone makers such as AST and Advanced Logic Research Inc. ALR, also based in Irvine, warned Wall Street two weeks ago that its earnings and sales could be below last year’s levels for the quarter ending Dec. 31.

And last week, Melinda Reach, an analyst at Merrill Lynch & Co., cut her second-quarter earnings estimates for AST to 40 cents a share, compared to 56 cents for the year-earlier quarter.

Reach said recent price cuts on the company’s portable notebook computers have failed to stimulate demand for the product. Sales of AST notebooks at Circuit City consumer electronics stores have been slow.

AST also lost its bid for a $1-billion contract to sell computers to the Defense Department to update the Pentagon’s computer technology. This summer, AST established a federal systems division in hopes of nabbing the contract and other government orders.

But Tom Yuen, AST’s co-chairman, said Friday that he isn’t concerned about Compaq’s moves or the lost federal contract. He expects AST to meet its second-quarter growth plans.

The loss of the defense contract was a disappointment, Yuen said, but it won’t prompt any layoffs at the company since the unit will seek sales from other government entities.

“Things are looking quite on track for us,” he said. “Generally, the industry is soft on notebook products. But . . . we see steady sales of desktop computers. We don’t share the downbeat forecasts from other manufacturers.”

As for Compaq, Yuen said the changes have yet to affect AST’s markets. “At this stage, based on current conditions, we expect sales and earnings to increase” for the current quarter.