Irvine-Based CMS Enhancements Inc. Reports Loss : Computers: The company reported fourth-quarter layoffs and said it closed the fiscal year with a loss of $8.5 million.
Plagued for much of the year by layoff costs and intense competition in the computer industry, CMS Enhancements Inc. on Tuesday reported its second annual loss in a row.
CMS also reported that it laid off dozens of employees during its fourth fiscal quarter, which ended June 30. That reduced the company’s worldwide employment to 215, contrasted with more than 500 at the beginning of the calendar year.
Stephen G. Holmes, chief financial officer, revealed Tuesday that in June the company also ended a joint venture to market computers made by TriGem Corp. in South Korea. The joint venture, CMS’s attempt to find new sales in the long term, was a victim of industrywide price wars, Holmes said.
CMS will still sell computers made by third-party manufacturers, Holmes said, but will focus on selling computer storage equipment.
“We have had to make some hard decisions in the past few months,” said Jim Farooquee, president of CMS.
The computer products manufacturer and distributor, based in Irvine, said it closed the fiscal year with a loss of $8.5 million, or $2.92 a share, compared to a loss of $8.5 million, or $2.89 a share, for the previous 12 months. Most of the latest annual loss was because of a $4.5-million write-off in the second quarter in anticipation of layoff costs. No additional write-offs were recorded in the third and fourth quarters, Holmes said.
The company’s annual sales dropped 13.4% to $112.7 million from $130.1 million for the previous year as prices of components dropped dramatically throughout the computer industry.
The slide in sales steepened in the latest quarter. The company reported that sales fell 22% to $24.8 million from $31.9 million for the same period a year earlier.
Because of poor sales of computer systems during the latest quarter, Holmes said, the company reported a loss of $971,000, or 33 cents a share. That contrasted with a loss of $7.3 million, or $2.52 a share, for the fourth quarter a year earlier.
CMS struggled for 18 months to launch a line of computers manufactured by TriGem Corp. But the company’s products, analysts said, failed to stand out from the crowd of other manufacturers.
Farooquee acknowledged that the computer joint venture was a mistake. Reconciling the different corporate cultures of the South Korean company and CMS proved to be difficult, he said.
“We learned a few lessons. . . . Fortunately, I think most of those problems are behind us, and we can focus our resources on our core business.”
About 30% of CMS’s 500 employees were laid off during the second fiscal quarter, which ended Dec. 31. More cutbacks took place during the third and fourth fiscal quarters, the company said Tuesday.
Holmes said that the company has been trimmed to be a more competitive entity and that it hopes to benefit from the recent rebound in sales of computer disk drives and from cost savings from the job reductions.
