Sales at AST Off 35%; Firm Will Lay Off 1,000 Workers
Beleaguered computer maker AST Research Inc. reported one of the most disappointing quarters in its corporate history Monday, and said it will lay off about 1,000 employees--one-quarter of its work force--in a desperate attempt to cut costs.
AST’s sales plummeted to $347 million in the first quarter, down 35% from $530 million in the comparable period a year earlier. The Irvine-based company also reported a quarterly loss of $110 million, or $1.90 per share, after a loss of $116 million, or $2.59 per share, a year earlier.
The dismal results, which marked AST’s 12th consecutive quarterly loss, came less than a week after the company announced it had agreed to be acquired by Samsung Electronics Co., a South Korean company that already owns about 49% of AST.
AST employs 4,100 people worldwide, including 650 in Irvine. Company executives would not say when or where the layoffs will occur.
“Our turnaround efforts require more aggressive actions than in the past due to lower than anticipated performance,” said Y.S. Kim, AST’s chief executive.
The company attributed the latest results partly to price-slashing by competitors and a slowdown in the market as customers wait for the next generation of processors to arrive.
Industry analysts said the traditional first-quarter lull in the PC business was compounded this year by corporate buyers delaying purchases until new Pentium II processors are introduced.
But Dan Sheppard, AST vice president of marketing, said the company was also affected by customer uncertainty created by the deal with Samsung. He said customers wondered what would happen to the AST name and whether AST would continue to focus on the corporate market, given that Samsung is a consumer electronics company.
Now that Samsung and AST have announced a deal, some of those doubts have been erased, said Scott Miller, an analyst at Dataquest in San Jose. But AST’s market share has slipped so far that a turnaround is no sure bet, even with Samsung’s deep pockets.
“Cutting jobs doesn’t fix that problem,” Miller said.
AST has outlined a plan to focus its efforts on small to mid-size businesses, which would move the company away from battles with more powerful companies such as Compaq Computer Corp. for sales to larger companies.
But Monday’s announcement left some analysts voicing skepticism even about that plan.
AST was one of the fastest- growing high-tech companies in the world during the 1980s, but it has stumbled badly in recent years. Samsung rescued AST with a $378-million cash infusion in 1995 and has since taken control of AST’s board of directors and installed Samsung-affiliated executives in top positions.
Last week, Samsung agreed to buy all of the AST shares it does not already own for $5.40 per share.
AST stock closed unchanged at $5.156 per share Monday on Nasdaq.
