Eagle Computer to Transfer 80% of Manufacturing to Korea

In an effort to survive the ongoing shakeout among personal computer makers, Eagle Computer Inc. said Monday it will begin transferring up to 80% of its manufacturing operations to Korea to take advantage of lower labor costs.

“The only way to differentiate yourself these days is by offering a low price,” explained Frank Weikel, a spokesman for the Garden Grove company, which has been teetering on the brink of bankruptcy for more than a year. “And the only way we can offer a low price is to have low costs.”

Weikel said the move will result in “some reduction” in the 85-member work force at Eagle’s headquarters, but he cautioned that exact numbers and timetables had not been determined.

The move to foreign manufacturing follows a path well worn by high-technology companies throughout the nation that have been looking for ways to cut the cost of assembly line operations.

For Eagle, however, the move offshore manufacturing represents, as well, a major effort to survive the treacherous and persistent shakeout among personal computer makers.

Founded in 1981, Eagle quickly soared from relative oblivion to a spot near the top of personal computer makers. But by late 1984, the company was in near shambles and launched a restructuring that will decide whether Eagle, too, will become a victim of the industry’s winnowing process.

In its last full fiscal year, Eagle lost $26.4 million on sales of $48 million. In its most recently reported quarter, ended Dec. 29, the company lost $1.8 million on sales of $5.8 million. Results for the quarter ended March 31 are expected to be released within the month.

Eagle’s survival strategy, Weikel said Monday, depends on offering lower-priced computers than its competitors. Currently, its models range in price from $1,500 to $4,000. Weikel said that by dropping prices even further, Eagle could generate new sales, and, hence, its ability to stay alive.

The offshore manufacturing agreement calls for Aceco Electronics Co. Ltd. of Seoul to make the majority of Eagle’s current line of personal computers. A new model, called the SST, initially will be made at Eagle’s Garden Grove plant.

Eagle estimated that it would send Aceco about $30-million worth of manufacturing business in the first two years of its contract. The agreement also calls for Aceco to purchase a portion of Eagle’s existing inventory, a move that would give Eagle some much-needed cash.

“This is a major milestone in Eagle’s return to profitability and growth,” said Gary Kappenman, Eagle’s president and chief executive. “It supports our aggressive strategy of offering outstanding products at highly competitive prices.”