500 Jobs to Be Lost in AST Purchase of Tandy Unit : Computers: Workers at Tandy plants in Texas, Europe will suffer most. Transaction OKd by both company boards.
IRVINE — About 500 jobs will be eliminated as a result of AST Research Inc.’s $175-million purchase of Tandy Corp.’s personal computer manufacturing assets. Tandy workers in Texas and Europe would suffer the greatest job cuts.
AST signed a definitive agreement Thursday to buy the personal computer manufacturing assets of Ft. Worth-based Tandy, which is shifting its focus from manufacturing to retail business. AST, which is headquartered in Irvine, has agreed to pay up to $175 million--either in cash or with cash and three-year notes--depending on the result of an audit.
The companies said both boards have approved the transaction, which is expected to be completed by the middle of the month.
The deal, first announced in May, will transform AST into one of the heavyweights of the computer industry and marks one of the largest consolidations to date in the fiercely competitive PC business. It also marks the passing of one of the industry’s pioneers in personal computer technology. Tandy’s Radio Shack chain carried some of the industry’s most innovative and quirky machines, such as the first portable computer, the TRS-100.
Safi Qureshey, chief executive of AST, said the original Tandy portable computer, which was one of the first to adopt a system based on an Intel Corp. processor, had a big influence on him when he was a young engineer. He said he hoped that the combination of the two companies would result in new computer technologies.
“This acquisition will give AST a lot of strength, and it is just one more example of a chain reaction of consolidations in the industry,†said Eric Zimits, analyst at Volpe, Welty & Co., an investment bank in San Francisco.
The purchase could give AST 6.2% of the domestic PC market, up from about 2.8%, according to 1992 data from International Data Corp., a market researcher in Framingham, Mass. Combined sales could reach about $1.7 billion, nearly double AST’s fiscal 1992 revenue of $944 million.
Worldwide, AST’s market share is expected to nearly double from 2.2% to 4.1%. That would move AST from the world’s ninth-largest computer maker to sixth largest. As the industry matures, large brand-name companies are regaining dominance over upstart clone companies.
AST said it will buy three Tandy manufacturing plants in Texas and one in Scotland. AST also negotiated a three-year deal to supply personal computers under the Tandy name to Tandy’s Radio Shack, Computer City and Incredible Universe computer and electronics retail chains.
AST also picks up new technology and more than 60 computer-related patents. It will acquire Tandy’s pen-based and multimedia personal computer technologies, which feature enhanced sound and graphics capabilities. AST will have the right to sell Tandy’s Zoomer hand-held computer, which can store information input from a penlike device, but it did not buy the technology itself.
Altogether, the deal will add 2,000 employees from Tandy and its GRiD Systems portable computer subsidiary to AST’s head count of 4,000. Of the 500 Tandy employees who will lose their jobs, about 180 are in Europe, 170 in Texas and the remainder scattered nationwide.
“We had to integrate the Tandy people into the AST organization, and that was one of the major decisions we had to make in this process and it is now behind us,†Qureshey said.
Bill Bosquette, chief executive of Tandy’s TE Electronics subsidiary, said AST did not purchase Tandy’s circuit board manufacturing business nor its furniture manufacturing business. Tandy plans to sell those separately.
AST also did not pick up Tandy’s accounts receivables or unshipped computers that Tandy has sold but hasn’t been paid for. AST will assume an unspecified amount of liabilities, such as accounts payable, but none of Tandy’s debt on the divisions it is buying.
Tandy took a $70-million write-off in the quarter ended June 30 for costs of disposing of its TE Electronics manufacturing businesses. Tandy’s computer business had revenue of about $700 million and was losing money.
Qureshey said he did not know whether the 500 layoffs would turn the Tandy PC business into a profitable operation.
“That is our goal,†he said, “to make it profitable from the start.â€
