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Micro D Suffers First Annual Loss: $3.1 Million

February 22, 1986|BRUCE HOROVITZ | Times Staff Writer

Just seven months after its founders left the company, Micro D Inc. on Friday reported the first annual loss and the largest-ever quarterly loss in the company's six-year history.

The Santa Ana-based distributor of microcomputer equipment posted a net loss of $3.1 million for 1985, contrasted with a net profit of $431,000 during fiscal 1984. Revenues for the year were up just 5% to $119.8 million, from $113.7 million in 1984.

For the fourth quarter, the company reported a net loss of $1.8 million, contrasted with a net loss of $733,000 during the year-earlier period. It marks the fifth consecutive quarter that Micro D has posted losses. Net revenues for the fourth quarter, however, were up 42% to $44.6 million, from $31.4 million during the year-ago quarter.

But the sharp jump in fourth-quarter sales was not enough to overcome massive write-downs of nearly $1.6 million, including a $600,000 loss the company took on outdated inventory it expects to sell at a discount and a $350,000 loss taken on overdue payments from customers who have gone bankrupt--a direct result of the prolonged slump in the personal computer industry.

Profits Projected

Other write-downs included a $270,000 loss on the sale of what the company described as "idled fixed assets"; a $200,000 write-down of an investment in Softyme Inc., a San Francisco-based designer of electronic distribution systems, and $175,000 in legal, accounting and other fees paid last year to support negotiations during the unsuccessful attempt to merge Micro D and First Software Inc. of Lawrence, Mass.

Linwood A. Lacy Jr., Micro D chairman and chief executive officer, blamed the poor showing on "my decision to strengthen our balance sheet" with the large write-downs. He projected that the company will be profitable this year, "beginning in the first quarter."

Lacy took the chief executive's post in July when Lorraine Mecca and Geza Csige--the husband-and-wife team that founded the company--left Micro D to pursue new business ventures in Hawaii. The company had already posted a string of quarterly losses when Lacy, a former marketing vice president of Best Products, took the helm.

Management Faces Test

But the new management team at Micro D must be held accountable for some of the losses, said Richard J. Matlack, president of InfoCorp., a Cupertino-based market research company. "When there's a change in management, there's always a period of adjustment" that sometimes results in new or additional losses, he said.

Matlack said the the next few quarters will test the strength of Micro D's new management. "The market seems to be firming up for the personal computer industry. The whole issue now is: Are the company's new managers good enough?"

Godfred P. Otuteye, senior vice president and chief financial officer, said that sales have actually improved since the management transition. Micro D did 37% of its annual sales in the fourth quarter. And sales doubled in January, 1986, contrasted with January, 1985, Lacy said.

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