AST Reports Big First Quarter; ALR Is Hopeful

IRVINE â€”  Staving off the recession with strong sales of its popular notebook computers, AST Research Inc. reported that its first-quarter earnings rose 44% to $16.5 million.

AST also said Thursday that it will begin selling a 7-pound, color notebook computer in January and would cut prices on its existing line of notebook computers by 30%.

Another Irvine computer maker, Advanced Logic Research Inc., said in a preliminary financial report that it expects sales of $65 million for the fourth quarter ended Sept. 30, up 30% from the prior year’s quarter. Final results will be released in mid-November.

Despite AST’s strong earnings performance, the company’s stock plunged 12%, or $4 per share, to $28 in over-the-counter trading. The decline was attributed, in part, to investors’ concerns that the price cuts could squeeze profits. But computer stocks were generally lower Thursday on news that International Business Machines Corp. was also slashing prices on its personal computers.

Bucking the industry trend, ALR’s shares rose 16%, or $2 per share, to $14.25.

AST shipped more than 25,000 notebook computers during the three months ended Sept. 30, accounting for 30% of quarterly sales. That compares to 30,000 units shipped in the previous six months.

“We have captured a sizable share of the notebook market,� said Tom Yuen, co-chairman of AST. “Lower prices are the No. 1 thing people are looking for.�

Notebook sales helped the company generate earnings of 52 cents a share, compared to $11.4 million, or 37 cents a share, in the year-earlier period. Revenue rose 45% to $197.1 million, up from $136.3 million a year earlier.

Sales of servers--which function as storage centers for personal computer networks--accounted for 21% of AST’s sales in the first quarter. Combined, sales of notebook computers and servers made up 51% of sales, contrasted with only 7% a year earlier.

Government sales accounted for 4% of total revenue during the quarter as AST opened a sales office in Washington and formed a division to focus on sales to official agencies, Yuen said.

Yuen said the cuts in notebook prices could affect earnings, although the company believes that its growing market share and a stable economic recovery will minimize any impact on profits.

He added: “We are financially strong, and we are putting more pressure on the rest of the industry to bring prices down.�

Yuen said AST’s new color notebook will be based on so-called passive matrix technology, which does not produce as sharp an image as color desktop computers but is more affordable.

The AST color notebook is one of several being announced at the Comdex show in Las Vegas next week, which is the computer industry’s biggest trade show. The computer will be available in January. At $5,000, the color version will cost about $1,700 more than a comparable black-and-white AST model.

Competing color notebooks based on active-matrix technology, which feature far better color contrast but are expensive and consume more battery power, will also be introduced by rivals next week.

ALR said it expects its fiscal-year revenue to reach $227 million, up 32% from $172 million a year earlier. The company said 28% of its revenue came from sales to major computer-store chains such as Computerland, up from 7% a year earlier.