AST plans to lay off 37%

Struggling computer maker AST plans to announce that it is adopting a new corporate strategy and cutting more than a third of its workforce.

Struggling computer maker AST plans to announce tomorrow that it is adopting a new corporate strategy and cutting 37 percent of its workforce.

The company said it will issue a release tomorrow at 6 a.m. PT. Sources said it will reduce its workforce by 1,110 employees from its current size of 3,000 worldwide.

"We will announce a reorganization," said Camerone Welch-Thorson, a company spokeswoman who declined to elaborate on the layoffs. Last April, AST cut 25 percent, or roughly 1,000 positions, from its workforce, which at the time was made up of 4,100 employees.

"We will announce some strategies and organizational changes, such as markets that we'll focus on and areas we'll expand," she said. "We've developed a very solid strategy to maintain a nimble place in the marketplace."

Sources said that no product lines will be axed as a result of the reorganization, and maintained that the company is not looking to abandon the enterprise market.

AST, which up until six months ago focused on the consumer market, is now largely focused on the small- to medium-sized business market, and, to a lesser degree, large corporations.

But the company has been battling losses and losing market share for some time.

AST had been hit with a string of losses before its largest shareholder, Samsung, bought out the remaining stake in the company last August for $477 million in cash and debt assumption. AST, a wholly owned subsidiary of Samsung, reported a net loss of $110 million on revenues of $347 million in April, when it was still an independent company.

Meanwhile, AST's worldwide market share of PC shipments dropped to .8 percent during the third quarter, down from 1.8 percent a year ago. Unit shipments in the third quarter fell by half, to 153,088, down from 302,411 a year ago, according to IDC Research.

AST was once a high-flying hardware manufacturer, but the company has been battered in recent years as customers have consolidated their purchasing around a few brands, namely Compaq Computer (CPQ), Hewlett-Packard (HWP), Dell Computer (DELL), and IBM (IBM). These companies have been gaining market share in recent years, primarily at the expense of vendors like AST.

Moreover, many of these companies have instituted "just-in-time" or "build-to-order" manufacturing techniques, which have lowered their costs and, subsequently, their retail prices. This, in turn, has made the outlook for second-tier manufacturers such as AST even more bleak.

Ironically, AST was the first company to release a sub-$1,000 computer in 1996. Since that time, the sub-$1,000 market has become a hot one in the consumer space. At the time, though, AST's effort in this area failed to catch fire.

Meanwhile, as Asia is rocked by economic turmoil, questions have arisen about the level of commitment AST's South Korea-based parent, Samsung, is willing to invest in the troubled company.

"I think its getting harder every day for [Samsung] to justify it," said Dataquest analyst Scott Miller. "Subsidizing sales is not a good long-term proposition, but to stay with the leaders, it's an investment decision for Samsung."

Bruce Stephen, an IDC analyst, said Samsung does indeed view AST as an important part of its global PC strategy.

"Outside of Korea, AST is the biggest part of their PC pie. Our estimate is that Samsung is committed and will be around for the mid term," he said. "Our indication is that they won't pull the plug out in a year or so. It's a long-term view they're taking, not a Wall Street view."