Sale of AST Comes Just as Firm Ends Losing Streak

Samsung Electronics’ decision to sell off the brand and patent rights of its AST Research subsidiary comes as the unit was breaking even and will result in the layoff of about 100 of its Irvine employees, company officials said.

After sinking hundreds of millions into AST Research, which has lost money for seven straight years, Samsung pulled the plug, selling its brand name and patents for $12.5 million to a group of investors led by Beny Alagem, the former chairman of Packard Bell NEC Inc.

Over two years beginning in 1995, Samsung paid more than $900 million to acquire the company, which lost $350 million in 1997. But last year, AST began to turn around. “We were breaking even toward the beginning of the fourth quarter in 1998,” said Tom Scott, senior vice president of marketing and sales.

Having already lost so much, Samsung was unwilling to make the investment needed for a major marketing push to resuscitate the once-formidable brand, Scott said.

“We were reaching a lot of the financial objectives, but we had to take a realistic stand on the cost of scaling in this market,” Scott said.

At one time, AST had between 1,500 and 2,000 employees in Irvine and 6,500 employees worldwide. Over the next month, the company will let go of 100 of its 150 employees in Irvine and half of its 400 employees in Fort Worth, Texas.

The remaining workers will provide customer service and support to people who have bought AST computer products, Scott said. Over time, that work force will diminish as the warranties for those products expire or the computers go out of use.

At this time, none of the current employees of AST Research are slated to join the company begun by Alagem. It will be called AST Computers and headquartered in Los Angeles, Scott said.

Alagem hopes to sell computers under the AST brand but contract out the actual manufacturing. Samsung will still retain a 35% stake in the company.