AST Research Completes Acquisition of Tandy Corp. PC Manufacturing Operations
IRVINE, Calif. — July 14, 1993 — Effectively becoming the nation's fourth-largest personal computer company, AST Research Inc. Wednesday announced it has completed the acquisition of the personal computer manufacturing operations of Tandy Corp.
AST has purchased Tandy's PC manufacturing operations and the GRiD North American and European sales divisions, excluding Tandy/GRiD France, for $15 million cash, with the balance not expected to exceed $160 million to be paid with a three-year promissory note. The final price will be determined based upon an audit.
The company intends to purchase certain assets of Tandy/GRiD France in a transaction that is expected to close in September.
"Combining Tandy's computer manufacturing operations and GRiD's sales operations into AST's existing business results in a tier-one company with significant worldwide market share," said Safi Qureshey, AST president and chief executive officer.
"The acquired production capabilities, product technologies and marketing and sales organizations represent important enhancements to AST's growth strategy. In addition, we are pleased to combine the many talents and resources of the Tandy and GRiD employees with those of the AST team and become a valued supplier of PC products to the Tandy retail operations.
"With the acquisition complete, we will continue our focus to provide AST and GRiD customers with timely deliveries of high- quality PC solutions. The agreement bolsters AST's manufacturing resources and purchasing leverage, and transfers Tandy and GRiD's highly acclaimed multimedia and pen-based technologies to AST."
To streamline operations, achieve maximum efficiencies and provide uninterrupted customer satisfaction, AST has begun integrating the Tandy PC manufacturing and engineering operations and GRiD's North America and Europe sales and marketing operations into its own business model.
To accomplish this integration, AST will take a pre-tax charge of up to $125 million, which will be reflected in the company's fourth fiscal quarter ended July 3, 1993. This charge is expected to cause a loss in AST's fourth quarter, as well as a loss for the overall 1993 fiscal year.
The charge reflects estimated expenses to combine and restructure AST's manufacturing, marketing, engineering, distribution and sales and service operations. It also covers inventory adjustments to reflect the realignment of product lines, as well as estimated charges to integrate management information systems.
Under terms of the agreement, AST has acquired and assumed:
o Four manufacturing facilities — including three in Fort Worth, Texas, and one in East Kilbride, Scotland — effectively doubling AST's manufacturing capacity;
o A three-year supply agreement with Tandy to provide personal computers to Tandy's Radio Shack, Computer City and Incredible Universe retail operations;
o Two research and development groups, relating to Tandy's pen-based and multimedia PC technologies, and more than 110 computer patents;
o GRiD's sales operations and all product trademarks including the GRiD and Victor brand names; and
o Employment of approximately 2,200 former Tandy/GRiD employees worldwide.
Increased Purchasing Leverage, Manufacturing Capacity
The acquisition includes inventory, four manufacturing facilities, property and equipment and certain other current assets and liabilities.
In addition to greater manufacturing capacity, AST has greatly enhanced its position with component suppliers due to a substantial increase in volume. This increased purchasing power will allow AST to offer even greater value to its customers.
AST's newly acquired manufacturing facilities will utilize approximately 1,800 former Tandy/GRiD employees in production-related positions to build products for Tandy and AST.
With this increased manufacturing capacity, AST will realign its worldwide manufacturing operations. While continuing to build Tandy and GRiD systems, AST will begin retooling and retrofitting the new production lines to enable building of AST products.
Work processes and other manufacturing-related activities will be reviewed and adjusted, along with equipment purchases, to incorporate the newly-acquired facilities into AST's existing ISO-9000 certification program. Broad Product Lines, New Technologies
AST will continue to market its award-winning PCs under the Premmia, Bravo, Manhattan SMP, Premium SE, PowerExec and Advantage! brands.
The GRiD product line will join existing AST brands, backed by full product marketing, product development and engineering resources. The company will offer customers the award-winning pen-based and notebook technologies and expertise through the GRiD line, including the GRiD Convertible, PalmPad and GRiDPad.
AST will also continue pen-based software development with GRiD's PenRight! group. Of the 130 former Tandy/GRiD engineers joining AST's development organization, approximately one-half will focus on pen-based and portable technologies, while the balance will concentrate on multimedia and other desktop technologies.
AST will market the Victor line of desktop computers in various European countries. In addition, the company is studying various alternatives relating to Victor-branded PCs in other parts of the world.
New and existing technologies acquired from Tandy and GRiD, including more than 110 computer-related patents, will be utilized in future product development efforts. AST purchased the intellectual property of Tandy's personal computer business, including all patents, copyrights and trademarks (excluding "Tandy" and certain other related trademarks).
The acquisition of extensive multimedia hardware and software technologies enable AST to manufacture the successful Sensation! multimedia PCs and WinMate software sold by Tandy through its retail network.
While the trademarks of "Tandy," "Sensation!" and "WinMate" remain with Tandy, AST owns the underlying hardware and software technologies and intends to utilize these features in future AST products. Enhanced Product Marketing, Sales and Customer Service Groups
To streamline operations and maximize efficiencies, AST will realign its product marketing, sales and service and support groups. The company will employ approximately 270 former GRiD sales, marketing, and administrative employees.
Product marketing groups will be organized along brand lines. Working closely with customers and AST's sales force, each group will be responsible to develop overall product strategy for specific product lines within each brand. The new structure will allow AST to more quickly respond to customer needs, while leveraging the company's engineering and manufacturing resources.
AST's sales organization will be realigned into four major geographic areas: The Americas, which includes the United States, Canada and Latin America; Europe; Asia/Pacific; and the rest of the world.
Distribution of AST, GRiD and Victor products will continue to be supported through existing channels worldwide, as well as by a separate group focused on pen and display solutions. These GRiD sales and technical support personnel are being integrated into the company's worldwide sales model. Customer service and support organizations are also being integrated on a worldwide basis. Company Background
Ranked No. 367 on the 1992 Fortune 500 list of America's largest industrial companies, AST Research is a prominent market share holder in desktop, file server and notebook computers. The company is represented in 100 countries and operates 41 international subsidiaries and sales offices.
According to International Data Corp., a Framingham, Mass.-based market research company, AST ranked seventh in U.S. personal computer market share with 2.8 percent during calendar year 1992, while Tandy/GRiD ranked eighth with a U.S. market share of 2.7 percent. Using this data, the combined unit volumes would have positioned AST as the fourth-largest U.S. personal computer company.
The company's award-winning product lines include AST-branded desktop, file server and notebook computers, in addition to desktop, notebook and pen-enabled systems that carry the GRiD and Victor brand names. AST's customers have one of the broadest product lines to choose from, covering the full-range of price, performance and service and support options.
AST's corporate headquarters is located at 16215 Alton Parkway, P.O. Box 57005, Irvine, Calif. 92619-7005. Telephone: 714/727-4141, 800/876-4278. Fax: 714/727-9355.
CONTACT:
AST Research Inc., Irvine
Emory Epperson, 714/727-7958 (media)
Al Melrose, 714/727-7780 (analysts)
Misty Ohmart, 714/727-7728 (analysts)