Despite Wall St. Hammering, AST Research Still Has Plenty of Fans

Though AST Research Inc.’s stock took a beating this week after it disclosed that it would post a loss in the current quarter, the computer maker is poised for growth and profitability in coming months, analysts and AST officials said Friday.

The Irvine-based company, the world’s fifth-largest manufacturer of personal computers, is banking on several soon-to-be-unveiled models to revive profits. The company has also overhauled its manufacturing operations and is bolstering its management staff and internal quality controls to overcome delays that cost it dearly last month.

The new models, analysts and AST executives say, should carry prices high enough to help the company avoid some of the cutthroat discounting that has hurt the industry in general and AST in particular. “If you are there with the right product, you can charge a lot; whoever misses the boat goes down,” said Jeff Kilpatrick, president of brokerage Newport Securities Corp. in Newport Beach.

AST’s stock, which lost 27% of its value Thursday after the company said it expects to post a loss for the current quarter, crept up 18.75 cents Friday to close at $13.25 a share on the Nasdaq.

Wall Street has been knocking down AST all year as the company failed to meet earlier earnings projections. Investors also worried about the depth of the problems at the company and its ability to reorganize its manufacturing operations and top management. In addition, several nagging lawsuits, including a patent infringement case, are pending against the firm.

However, analysts tend to agree with James T. Schraith, the company’s president, that AST will recover and continue to be one of the top five computer manufacturers worldwide.

“The problems are primarily internal, and we believe we have a handle on them,” Schraith said.

Only a month ago, AST was confident about its prospects as it completed its consolidation of overseas manufacturing operations and promoted Schraith to the top operations position, just under Chairman and co-founder Safi U. Qureshey. But an unusual confluence of new-product delays, parts shortages and atypically lower profit margins crippled the company in a month. Among them:

* Two models of its Ascentia notebook computer and Advantage desktop model were late to market because of supply problems. One supplier sent a batch of faulty floppy disk drives, and AST needed time to work out the bugs. Another supplier cut short a shipment of microprocessors, and AST had to pay more for replacement chips.

An AST spokeswoman said executives are putting together a new strategy for managing supplies, and new executives are being hired to oversee that operation.

* The debut of the company’s Bravo MS desktop computer was delayed by technical problems with the computer’s motherboard, a basic computer component. To avoid similar problems in the future, Schraith plans to integrate the engineering and design groups with the manufacturing group.

In the next few months, AST will offer a host of new computer products, from simple computer models for beginners to sophisticated mainframe machines. The company hopes the new products will help restore its profitability during the first three months of 1995.

Still, some analysts worry that AST’s position is more precarious than the public knows. The company has reported disappointing earnings all year, prompting earlier drops in its stock price from its high of $33 a share this year.

In early March, AST’s stock price fell $8 a share in two days, from $31.50 to $23.50, after it said it couldn’t live up to earlier earnings projections. In July, the stock fell $2.25 a share when fiscal fourth-quarter earnings were short of Wall Street expectations.