AST to Cut 1,000 Jobs as Income, Sales Plunge
Beleaguered 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, or 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, following 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 has 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 officials 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 that 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, vice president of marketing at AST, said the company also was affected by customer uncertainty created by the deal with Samsung.
Sheppard 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.
“When purchasers are getting ready to make a decision, if they feel uncomfortable, they walk away,” Sheppard said.
Now that the 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 on selling to small- to mid-size businesses, a niche that moves the company away from battles with more powerful companies such as Compaq Computer Corp. for sales among larger companies.
But Monday’s announcement left some analysts voicing skepticism even about that latest plan.
AST was one of the fastest-growing high-tech companies in the world during the 1980s, but has stumbled badly in recent years following a troubled acquisition, manufacturing problems and a series of executive changes.
Samsung rescued AST with a $378-million cash infusion in 1995, and has since taken control of the company’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. The tender offer for that stock began Monday and is scheduled to expire May 19.
AST’s stock price finished at $5.156 per share Monday, unchanged in trading on the Nasdaq market.
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Sinking Feeling
AST Research reported first-quarter sales of $347 million, down 35% from a year ago. The quarter also marked the firm’s 12th consecutive quarterly loss. Calendar year quarterly sales and net income/loss, in millions:
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Sales Net income/loss 1994 1st qtr. $13.2 1997 1st qtr. $347.0 -$110.0
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Source: AST Research
Researched by JANICE L. JONES / Los Angeles Times
