Shares of AST Hit a 52-Week High
Shares of AST Research Inc. hit a 52-week high Thursday as the company reported sales and earnings that exceeded Wall Street’s expectations and reflected a surge in overall demand for personal computers.
The Irvine-based PC manufacturer reported net income of $17.9 million for the second fiscal quarter ended Jan. 1, up 23% from $14.6 million a year earlier. Earnings per share were 54 cents for the quarter, compared to 46 cents a year earlier.
“The consumer market is becoming a bigger part of our market, and so a bigger portion of our sales is coming from Christmas purchases,” said Safi Qureshey, chairman and chief executive of AST.
After rising to a 52-week peak of $29.50 Thursday afternoon, AST shares fell back to $29.12, up 17.6% in heavy Nasdaq trading.
Sales bounded 95% to $677 million from $346 million a year earlier, thanks in large part to strong holiday sales and added revenue from AST’s $105-million acquisition of the computer manufacturing assets of Tandy Corp. in Fort Worth last July. The acquisition made AST into the fourth-largest PC maker in the United States.
“They had a great quarter, with sales and earnings above expectations. It seems as if they are doing the right things toward integrating the two companies together,” said Todd Bakar, analyst at Hambrecht & Quist, an investment bank in San Francisco. “They’re fortunate that the overall demand in the industry is strong.”
Bakar noted that AST’s net profit margin was 2.6% of sales for the quarter, down from 4.2% a year ago but significantly improved from the first fiscal quarter of 1.6%.
The industry price war has subsided because of growing demand for new products such as portable computers and multimedia computers, those that combine the features of computers, compact disc players and TVs, Bakar said. AST’s North American sales rose 123% to $451 million in the quarter.
“There is no desire to sell a $295 computer in our industry,” Qureshey said. “But we are trying to pack the most functionality into a computer at key prices like $995 or $1,995.”
He also said that AST and other large players such as IBM and Compaq are taking market share from smaller companies because customers are choosing brand names as there is little difference in price between them and the so-called clones.
AST said it shipped 420,000 PCs in the second fiscal quarter, a 116% increase over a year ago. The total included more than 72,000 notebook systems, or portable computers.
However, Qureshey said he was frustrated that the company’s long-awaited sub-notebook computer, one that weighs under five pounds, has been delayed at least one quarter until mid-1994 because of component shortages.
AST is in the process of laying off 650 employees in Orange County and shifting production of some computers to the newly acquired Tandy plants in Texas. Qureshey declined to comment on trade news reports that AST had landed a deal to use its Fountain Valley plant to produce portable computers for Austin-based Dell Computer Corp., which scrapped its product line last year.
