MAI Changes Firm’s Thrust to Reselling : Computers: The Tustin company leaves the minicomputer manufacturing business and instead will focus on value-added operations.
TUSTIN — Eight months after failing to take over a larger computer maker, MAI Basic Four said Friday it is exiting the minicomputer manufacturing business and instead will focus on systems integration and computer reselling.
The change means MAI will write software for other manufacturers’ standard products instead of producing its own proprietary computers. As a value-added reseller, it will repackage the computers for use in specific industries by adding its own hardware and software applications.
“We are no longer a computer manufacturer,” said Fred D. Anderson Jr., president and chief operating officer, in an exclusive interview. “We’re making and marketing systems and software for standard industry computer products.”
The Tustin-based company, which had $397 million in sales last year, will keep supporting its own business computer systems and will assemble computers made by other companies that can accommodate both MAI software and that made for other systems, he said.
Company officials said the shift in strategy should help MAI adapt more quickly to marketplace changes and escape the slump in the minicomputer industry. They said the firm, which lost $39.9 million last year, hopes to regain profitability in fiscal 1990, which ends Sept. 30. After two losing quarters, the company reported net income of $2.4 million in the first quarter ended Dec. 31.
Minicomputer makers, such as Wang Laboratories in Lowell, Mass., are being squeezed by competition as personal computers become increasingly sophisticated and small mainframe computers become more affordable.
Unlike other computer makers, MAI made its name by concentrating on creating proprietary business systems for niche markets, such as manufacturers, wholesalers, garment makers, retailers, hotels, hospitals, and construction and property managers.
Anderson said the shift toward systems integration and value-added reselling will have no effect on employment. Its 300 manufacturing employees will continue to assemble, or customize, other manufacturer’s computers and repair existing MAI computers.
“By repositioning ourselves this way, we’ve become a big fish in the VAR (value-added reseller) market when we were a small fish in the minicomputer pond,” said William Weksel, MAI’s chairman and chief executive officer.
MAI will now vie with the smaller VARs. Such resellers usually focus on a single industry while MAI, as a “super VAR,” will be spread among seven industries, Anderson said.
Though the company’s stock closed at 3 1/8 on Friday, far below its peak of $20 a share before the bidding for Prime, analysts generally are impressed with the company’s rebound from the disastrous bid. Robert Johnson, analyst with Rotan Mosle in Houston, said MAI has been shifting emphasis from hardware manufacturing to software for several years.
He said the company is still shipping new lines of multi-user business computers--assembled by MAI but produced by other manufacturers--that are compatible with both MAI’s proprietary business software and the UNIX operating system, which has become the universal system of choice for software users and makers.
Weksel said the company would build upon its market share in existing markets and would pursue acquisitions when appropriate. MAI, which acquired 14 companies in the past 2 1/2 years, has already completed one VAR buyout. On Wednesday, MAI acquired one of its software vendors servicing the hospitality industry, Computerized Logic Systems in Long Beach.
Terms of the deal were not disclosed. Anderson said the acquisition of Computerized Logic, which had revenue of about $22 million last year, would add 250 employees to MAI’s 3,500 employees worldwide.
In January, MAI created an alliance to design software for one major computer manufacturer, NCR, and on Monday it plans to announce another alliance with a computer manufacturer that will specialize in creating applications for manufacturers, Anderson said.
The failed hostile bid to acquire much larger Prime Computer last year--which stretched over 10 months--made customers nervous about buying MAI products and contributed to big losses in its third and fourth fiscal quarters last year.
The company responded by reorganizing its divisions into separate profit-oriented business units, cut 400 employees and reduced costs by $27 million in the fourth quarter. Anderson said the restructuring enabled MAI to break into profitability for its first quarter.
He said he expected 1990 to be a profitable year, with MAI growing above the 5%-to-7% industry growth rate. Johnson said he estimated net income would be about $11 million for fiscal 1990.
Weksel said the move away from computer manufacturing was not driven by the failed attempt to take over Prime.
Anderson said: “The only thing good that came out of (the failed takeover bid) was that it has been much easier to implement a major reorganization for a $400-million company than it would have been to restructure a $2-billion company.”
