AST Research Inc., which had planned to begin selling subnotebook computers this month, said Tuesday it has decided not to enter that market after all.
Subnotebooks are personal computers that weigh less than 4.5 pounds. In August, AST said it would begin shipping a subnotebook model this month, but none were sent out from the AST factory in Taiwan where the machines were to have been made. Company officials said Tuesday that development delays and competition in the personal computer industry caused the company to rethink its strategy.
"The combination of the recent price cuts and slow subnotebook market growth prohibits us from competing in this market," said Jim Schraith, AST's president and chief operating officer.
William Milton, an analyst with investment company Brown Bros. Harriman in New York, said AST's move reflects an overall lack of growth in demand for subnotebooks, which typically lack full-size keyboards, monitors and other features offered with larger machines.
Like most subnotebooks, the model that AST had planned did not include a floppy disk drive, discouraging home users and others who don't already own another computer.
"It's disappointing for everybody, but the market's just not there," Milton said of worldwide subnotebook sales. "Potential users have just found that there are too many compromises."
Todd Bakar, an analyst at the San Francisco investment bank Hambrecht & Quist Inc., said he thinks AST will now focus on its notebook computers, which are more powerful. "They're not selling the subnotebook yet, so it's not like they're losing a revenue stream they were getting," Bakar said.
Whether subnotebook sales take off will depend on how soon manufacturers can incorporate the features of desktop personal computers, Bakar said.
"Long term, you will see a growth in the subnotebook market. But I think AST probably has some time before it needs to be there selling its machines," he said.
Worldwide demand for subnotebook computers is likely to grow eventually, said Mike McGuire, an analyst with market research firm Dataquest in San Jose. And personal computer makers who neglect that segment of the market will do so at their own risk, he said. Dataquest projects that 1.1 million subnotebooks will be shipped worldwide this year, 2 million in 1995, 3.9 million in 1996 and 5.9 million in 1997.
AST said earlier this month that product delays, parts shortages and lower profit margins will cause the company to post a loss for the current quarter.
In Tuesday's Nasdaq trading, AST's stock fell 31.25 cents a share to close at $13.44.