Alpha Microsystems reports first quarter results.

SANTA ANA, Calif.--(BUSINESS WIRE)--July 3, 1996--Alpha Microsystems (NASDAQ/NM:ALMI) Wednesday reported net sales of $7.1 million for the first quarter ended May 26, 1996, with a net loss of $344,000 or $0.05 loss per share, compared to net sales of $8.5 million with net income of $51,000 or $0.01 per share for the first quarter of the previous year.

Last year's first quarter net income included a one-time gain of $211,000 related to the sale of certain businesses. The year- to-year decline in net sales was due primarily to divestitures in the early part of last year, and the expected continued erosion in sales of the company's older proprietary product lines.

According to Alpha Microsystems President and CEO Douglas J. Tullio, Alpha Microsystems made significant strides during the quarter in executing its strategy to focus its resources on software and services, the segments of the company's business that it believes hold the greatest promise for the future.

"We took an important strategic step in the development of our software business on April 3 of this year with the introduction of AlphaCONNECT(tm), the first product in a new and expanding family of Internet/Intranet software," Tullio said.

"On May 14, late in the first quarter, we also called for the redemption of our outstanding public warrants, successfully closing the redemption of these warrants on June 17, early in the second quarter, with approximately 98.5 percent of the warrants exercised."

When combined with the exercise of certain other warrants, the warrant exercise yielded gross proceeds to the company of approximately $10.1 million. Most of the proceeds received by the company are being recorded during the second quarter. Total shares issued from the exercise of all warrants were just over 4,100,000.

In addition, the company continued to focus on the expansion of its Alpha Microsystems Service Operation (AMSO) during the first quarter by proceeding to invest in marketing and sales programs designed to capture additional revenue opportunities within its existing customer base and to further expand AMSO's revenue in the open systems market.

Tullio added, "We have just started to implement the marketing programs needed to promote AlphaCONNECT on a national basis, and we are beginning to build the multi-channel distribution programs required to achieve the commercial success of AlphaCONNECT and the software products that will follow.

"For the remainder of this fiscal year, revenue growth should not be the primary yardstick by which the success of these new products is measured. In fact, no material revenue from AlphaCONNECT was received during the first quarter. Our initial investments will aim at priorities and milestones for AlphaCONNECT centered around building distribution channels, programs to increase product awareness and market share, and expanding the product line."

According to Vice President and CFO Michael J. Lowell, the company reduced SG&A expense in the quarter approximately 14 percent from last year's first quarter, while still investing in the launch of AlphaCONNECT and the expansion of sales and marketing programs in AMSO. R&D expense for the first quarter increased by 5 percent over the same period last year as the company continued to shift most of its development resources into new products and services for the Internet and Intranet markets.

"Our first quarter balance sheet was much improved with cash of approximately $1.7 million, up from about $500,000 at the end of fiscal 1996," Lowell said.

"The current ratio at quarter-end was 1.35-to-1, and net accounts receivable declined to $4.3 million from $5.2 million at the end of last year, due mostly to improved collections in Europe. Our stringent inventory control measures continued to be effective with inventory decreasing modestly during the quarter to $854,000 from $943,000 at fiscal 1996 year-end."

Alpha Microsystems serves the Internet and Intranet markets through its software, services and technologies. The company has been in business for over 18 years and today has 46 Alpha Microsystems locations, as well as third party distribution channels worldwide.

The company also provides products and services such as consulting, maintenance, software, hardware and networking, both directly and through value-added resellers and distributors. For information, contact the company's Web site at http://www.alphamicro.com

                         Alpha Microsystems
                Consolidated Statements of Operations

                (in thousands, except per share data)

                                    Three Months Ended
                                    May 26,     May 28,
                                       1996        1995

Net sales:
Product                              $2,798      $3,919
  Service                             4,278       4,626
    Total Net Sales                   7,076       8,545

Cost and expenses:
  Cost of sales                       4,729       5,468

    Selling, general and
      administrative expense          2,199       2,751
    Research and development
      expense                           557         531

    Other (income), net                 (70)       (256)

    Total cost and expenses           7,415       8,494

Income (loss) from operations
  before taxes                        $(339)        $51
Provision (benefit)
  for income taxes                        5           0

Net income (loss)                     $(344)        $51

Net income (loss) per share          $(0.05)      $0.01

Number of shares used to compute
  per share data                      6,869       6,579

CONTACT: Allen & Caron Inc/South Coast Communications

Kent Broussard (investor relations), 212/698-1360

Owen Daley (media), 714/252-8440