MAI Systems’ Profits Leap, but the Stock Takes a Dive
Executives at MAI Systems Corp. were left scratching their heads Wednesday after they reported a strong earnings rebound for the third quarter, then watched the company’s stock dive 25% before recovering slightly in heavy trading on the American Stock Exchange.
Richard Ressler, chief executive of the computer software company, apologized to investors during a conference call the company hastily scheduled after the stock price dropped.
“We’re all sorry about the crazy volatility in the stock,” Ressler said. “We don’t like to see our shareholders suffer from volatility that we don’t understand.”
The company’s stock closed at $7.875 per share, down nearly 14% from $9.125. Earlier in the day, the stock had fallen to $6.875. By day’s end, 158,700 shares changed hands, more than quadruple the average daily volume.
The stock price plunge came after the company reported a third quarter profit of $2.43 million, or 10 cents per share, contrasted with a $1.23-million loss, or 17 cents per share, in the corresponding period a year earlier. Revenue climbed 4% to $16.5 million from $15.8 million a year earlier.
Several onetime gains, including the sale of subsidiaries and a tax settlement, boosted quarterly income. On an operating basis, the company’s quarterly profit was $1.41 million, compared to a $1.48-million loss in the third quarter of 1994.
Executives were at a loss to explain the stock price tumble, and noted that principal shareholders, including Wall Street financier Bennett S. LeBow, who owns 30% of the company’s stock, were not involved in the selloff.
They also said that no analysts follow the company, meaning there were no quarterly projections MAI failed to meet.
“We were quite puffed up about how well things were going,” Ressler said.
For its nine-month period, MAI posted a profit of $7.98 million, or 78 cents per share, on revenue of $49.3 million, compared to a year-earlier profit of $203,000, or 3 cents per share, on revenue of $44.4 million.
The company attributed the improved results partly to growing sales of its software systems used by managers of hotels and casinos.
In February, 1994, MAI bought Las Vegas-based Gaming Systems International, a company that makes software used by casino managers to keep track of betting activity. This software was still in development when MAI bought the company, but accounted for $3.2 million in revenue in the third quarter this year, executives said.
MAI has had a checkered history in Orange County. The company was a high-flying computer hardware manufacturer in the 1980s with about 4,000 employees, but crashed into bankruptcy in 1993.
After that, the company re-created itself as a maker of computer software for the hotel and casino gambling industries. Today, the company has about 600 employees, including 200 at its headquarters in Irvine.
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MAI Stock Takes a Tumble
MAI Systems Corp.’s stock traded in the $5-$9 range over the counter, but jumped into the $10 range after moving to the American Stock Exchange on Aug. 29. Company executives were at a loss to explain why the price fell sharply Wednesday after a favorable quarterly earnings report. Weekly closing prices (in line chart): Wednesday’s close: $7.88
Source: Dow Jones
