Intel Corp., the largest shareholder in Computer Memories for more than four years, plans to sell its stake in the shrunken Chatsworth company.
The giant semiconductor concern's stance is expected to increase pressure on Computer Memories, once a thriving manufacturer of computer disk drives, to find a buyer.
Computer Memories, crippled since IBM decided a year ago not to renew its contract, announced in July that it stopped making computer memory equipment and was selling its assets.
The company, which disclosed Intel's plans in a filing with the Securities and Exchange Commission, has said it would either seek a buyer or use the $30 million in cash that it has accumulated to acquire another concern, possibly one outside the electronics business.
Buy-Out Drive Expected
But industry sources said Santa Clara-based Intel would push for a buy-out of Computer Memories because that would be the easiest way for Intel to liquidate its stake. They said Intel probably won't sell its stock in the open market because its shares aren't registered with the SEC.
Under SEC rules, Intel could sell only a limited number of those unregistered shares in the open market each quarter unless it elected to go through a time-consuming registration.
But Irwin Rubin, chairman of Computer Memories, said the sale of Computer Memories is not inevitable. He said "all sorts of possibilities" remain available, including the sale of Intel's stake to a private party.
Intel owns 1.73 million shares, or 15.6%, of Computer Memories' stock. It acquired that stake, plus an option and a warrant that gave it the right to more than double its holding, for $4.6 million in 1982.
Holdings Worth $3.9 Million
Based on Monday's closing price of $2.25 for Computer Memories' stock, Intel's holding is worth about $3.9 million. In mid-1983, however, Intel's investment was worth roughly $50 million when Computer Memories' stock price peaked at more than $30.
According to Computer Memories' SEC filing, Intel said it "originally invested in the company to have a meaningful stake in an emerging disk drive manufacturer." The filing states that Intel said it will liquidate its investment "at an appropriate time," now that Computer Memories is getting out of the business.
Rubin said Intel hasn't specified a date by which it wants to sell its shares. Intel declined to comment.
IBM Departure Costly
Computer Memories' fortunes have fallen rapidly since IBM, which accounted for 79% of the company's $116.2 million in revenue for the year ended March 31, stopped buying its hard disk drives for the IBM PC AT personal computer. Analysts said IBM believed that Computer Memories was responsible for problems it encountered with the drives, which record and retrieve data.
Last week, Computer Memories reported that it made an $11,000 profit in the first fiscal quarter ended June 30 despite posting an operating loss of $477,000. Its revenue was $4.2 million, down from $50.5 million during the same period a year before.