Recession, Sharp Competition Send ALR Profit Down by 77%

IRVINE —  Under pressure from increasing competition in the midst of a recession, computer maker Advanced Logic Research Inc. said Wednesday that its net income fell 77% for the second fiscal quarter ended March 31.

ALR reported net income of $933,000, or 8 cents a share, contrasted with earnings of $4 million, or 40 cents a share, a year earlier.

Sales for the second period fell 6.5% to $56.4 million from $60.3 million a year earlier, the company said.

The results indicate that the pressure continues to mount in the computer industry because of the recession and price cuts launched by mail-order competitors such as Dell Computer Corp. in Austin, Tex.

“We’ve hit some rough waters recently,” said Gene Lu, chief executive of ALR.

Despite the lower earnings and sales, Lu said he was encouraged by a warm reception for the company’s newest products and by slightly higher profit margins during the month of March.

He said ALR has moved to stay competitive by launching a series of nine computers in the last month, including two aimed at capturing a piece of the market for multimedia computers, which are enhanced with improved video and sound capabilities.

In a step to keep customers who might otherwise be lost to competitors, the company also said it will change its past sales strategy and launch a direct sales division. The new unit will sell ALR computers at list price and avoid competing against the company’s network of third-party dealers, said Gene Lu, chief executive.

“You’ve seen the growth of mail-order companies” which sell direct to consumers, Lu said. “Customers who are looking to buy their second PC are comfortable buying direct from a manufacturer. We’re going after the people we would otherwise lose.”

James Richardson, chief financial officer, said the company would add a “modest” number of employees to its 500-person work force in the United States as a result of the new direct sales effort.

For the six months ended March 31, the company reported net income of $1.4 million, or 12 cents a share, compared to net earnings of $7.1 million, or 71 cents a share a year earlier. Sales for the six months fell 4% to $105.7 million from $110.2 million a year earlier.