AST Suffers $22.3-Million Quarterly Loss : Technology: Computer maker’s stock falls on worse results than Wall Street had expected. Analysts say firm has trouble coordinating operations.
AST Research Inc. on Thursday reported another disappointing quarter, posting a loss of $22.3 million on a 5% decrease in revenue.
The loss, which came to 69 cents a share, was worse than analysts had expected and drove the price of the personal computer maker’s stock down 7%.
Analysts said the poor results suggest that the company, the world’s sixth-largest PC maker, continues to have trouble coordinating operations at its manufacturing plants in Texas, Ireland and Asia with demand for its products.
“The loss by itself isn’t that much of a negative, but it does put pressure on the balance sheet,” said James Poyner, an analyst at Oppenheimer & Co. in New York. “They’re burning a lot of cash.”
The shortfall for the company’s second fiscal quarter, which ended Dec. 31, contrasted with a profit of $17.9 million, or 54 cents a share, for the same period a year earlier. Revenue fell to $640.1 million from $677 million.
For the first six months of its fiscal year, AST lost $62.2 million, or $1.92 a share, contrasted with a profit of $26.2 million, or 81 cents a share, for the same period a year earlier. Six-month revenue slid 5% to $1.14 billion from $1.19 billion.
In a conference call with analysts Thursday morning, Bruce Edwards, the company’s chief financial officer, said it will cut its losses by at least half by the end of the current quarter.
That did not reassure Wall Street, however. In Thursday’s Nasdaq trading, AST’s stock fell $1.125 a share to close at $14.625.
AST joined the ranks of the nation’s biggest PC makers in 1993, when it bought the computer manufacturing operations of Tandy Corp. in Ft. Worth. Since then, though, AST has had trouble matching fierce price cutting by competitors and tailoring its products to shifting customer demand.
“They keep talking about having the right product at the right price, but I’m not sure that’s enough here,” said William Gurley, an analyst with investment bank CS First Boston in New York. “Differentiation is the key, and I don’t know what AST does that’s different. Most companies with high margins are doing something different than their competitors.”
Although unit shipments for the latest quarter rose 29% and overseas sales were strong, late deliveries to some areas meant that AST had to lower prices to compete.
The company is also in the process of shifting its notebook computer production to Taiwan, which will mean closing its Fountain Valley factory on Feb. 1 and laying off 440 employees there.
In a recent filing with the Securities and Exchange Commission, AST also revealed these other difficulties:
* That the SEC has requested documents related to the restructuring charge the company took after it bought the Ft. Worth plant.
* That a worsening trade climate in China could cut into the company’s strong sales there.
* That a consortium of its lenders has decreased its line of credit.
Safi Qureshey, chairman and chief executive officer, said Thursday that AST will continue to work on smoothing its internal operations and has completed managerial changes and other shifts that will ensure profitability by the start of the next fiscal year.
Analysts say that the company must complete its turnaround quickly if it is to survive in an industry in which technological changes are coming increasingly quickly.
Richard Chu, a Boston-based analyst for investment bank Cowen & Co., said that AST is running out of time. “If it continues like this for any length of time, there’s going to be some urgency to their get-well program,” Chu said.
With the tightened credit line raising the possibility of a cash shortage, AST is reportedly negotiating to sell a part of itself to another PC or components maker.
Qureshey said Thursday that he could not answer specific questions about ongoing negotiations. The company has “strategic supply relationships” with Intel, Samsung, Texas Instruments and Motorola, he said, “and sometimes those have a potential of developing further.”
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AST Reports Quarterly Loss
AST Research Inc. said Thursday it lost $22.3 million for the latest three months. The Irvine-based computer manufacturer’s revenue also dropped, slipping 5% to $640.1 million. The company attributed the loss to continued restructuring efforts. Figures in thousands of dollars, except data per share:
2nd qtr 2nd qtr 6 months 6 months 1994 1993 1994 1993 Revenue $640,150 $677,011 $1,135,605 $1,191,420 Net income (loss) (22,315) 17,933 (62,203) 26,165 Per share (loss) (0.69) 0.54 (1.92) 0.79
AST vs. Its Rivals
AST’s stock has had its ups and downs in the past year, but the trend has been generally lower. AST’s average monthly stock price compared to those of competitors Compaq Computer Corp. and Apple Computer Inc.:
Jan. 95: $14.63
Jan. 95: $37.13
Jan. 95: $39.50
Source: Bloomberg Business News; Researched by VALERIE WILLIAMS-SANCHEZ / Los Angeles Times