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Kaypro to Bow Out of 'Transportable' PCs; Loss Posted

November 18, 1987|CHRIS KRAUL | San Diego County Business Editor

SOLANA BEACH — Hit by shrinking margins and increased competition, personal computer manufacturer Kaypro Corp. announced a $10.9-million fourth-quarter loss and said it is discontinuing the "transportable" line of PCs that made it famous in the early 1980s.

Along with now-defunct Osborne Computer Corp., Kaypro popularized personal computers that were light enough to be carried from one site to another. The market success of the 26-pound Kaypro II, introduced in 1982, helped boost Kaypro's 1984 sales to $119.6 million, a high point that Kaypro has been unable to reach since.

The company has since revamped its product line, replacing the transportable computers with a line of IBM-compatible desk-top PCs and a laptop computer called the Kaypro 2000.

Peter Teige, a computer industry analyst with Dataquest Inc. of San Jose, said Kaypro has suffered along with other manufacturers from the ever-increasing number of computer vendors, particularly those from Asian countries where manufacturing costs are lower. U.S. computer unit sales may grow to 8.7 million in 1987, up 20% from last year, but profit margins are under pressure, Teige said.

"Even though there are 350 significant vendors in the market, and more keep coming in, there is quite a bit of shakeout going on in the IBM-compatible market," Teige said. Dataquest estimates that Kaypro will sell about 88,000 computers this year, a 1.2% market share, Teige said.

Growing Competition

Kaypro's transportable, or "luggable," computers have also been hit by competition from the growing array of powerful laptop computers that weigh 15 pounds or less, said Joe Ann Stahel, vice president of Store Board Inc., a Dallas firm that tracks computer retail sales.

Kaypro's quarterly loss, which brought its full-year deficit to $9.6 million, reflects $7.6 million in special charges in addition to a $3.3-million operating loss. Most of the charges were inventory reserves and write-downs related to the discontinuance of the transportable computer line and to correcting "manufacturing inefficiencies" in switching over production to the Kaypro 2000 laptop model.

The company also set aside a $2.1-million reserve for an overdue account receivable the company said it may not be able to collect. Controller Robert Gorski declined to identify the customer. The company also suffered from the quarter's lower-than-expected revenue of $20.5 million, down from $22.7 million in the same three-month period last year.

Shareholder Equity Down

Kaypro's losses have reduced its shareholders' equity to $15 million, but Gorski said the company is in no danger of running short of capital. Kaypro plans to reduce overhead by trimming the number of its available computer models to lower the cost of product support. (The company said it will continue to offer technical support and spare parts for the transportable line.)

No layoffs are planned, but Gorski said the company is in the process of reducing advertising, promotion and inventory costs.

Kaypro revenue for fiscal 1987 was $105.6 million, up from $77.9 million in 1986. This year's losses contrast with fourth-quarter 1986 net income of $944,000 and fiscal 1986 net income of $39,000.

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