Alpha Microsystems reports third quarter, nine-month results.

SANTA ANA, Calif.--(BUSINESS WIRE)--Dec. 21, 1995--Alpha Microsystems (NASDAQ/NM:ALMI) reported sales of $8.3 million for the third quarter ended Nov. 26, 1995, with a net loss of $597,000 or $0.09 loss per share, versus sales of $9.8 million with a net loss of $196,000 or $0.03 loss per share for the third quarter of the previous fiscal year.

Last year's results include sales revenue from certain hardware and other operations that have since been divested.

According to the announcement by President & CEO Douglas J. Tullio, the company experienced an unexpectedly steep decline in the sale of certain of its older, hardware-based products during the quarter. Largely as a result, overall gross profit margins dropped to approximately 31 percent, versus approximately 36 percent in the third quarter of the previous year.

This decline in margins and in the sale of its older products coincided with a necessary and planned increase in product introduction and marketing expense associated with the company's newer, software-based vertical-niche products.

Tullio said that when hardware sales failed to spike upward as expected late in the quarter, the company acted to reduce expense and consolidate operations related to the older product lines.

As a result, the company reduced its Santa Ana work force by approximately 16 percent early in December, and combined its system integration operations into a smaller and more cost-efficient unit associated with the company's services arm, AMSO (Alpha Micro Services Operation). He noted that no positive effect of these actions is likely in the fourth quarter ending Feb. 25, 1996, due to severance and termination costs.

Tullio commented, "During the third quarter, older products transitioned downward and newer products with greater growth potential incurred introduction expense without advancing immediately in sales. We were pleased with the favorable reactions to our introduction of the new Alpha 2000 software for dental practices at three major trade shows in San Francisco, Las Vegas and New York.

Unfortunately, due to the timing of the trade shows and the required sales cycles and in-office product demonstrations, orders for Alpha 2000 did not begin to ramp up during the quarter to offset the added expense." Tullio said that the company had anticipated the negative impact of the incremental marketing expense, which was noted in the company's Oct. 5 announcement of its second-quarter results.

CFO Michael J. Lowell said that the company's working capital declined during the period to $3.8 million, with shareholders' equity of $9.5 million, or approximately $1.45 per share. The current ratio was 1.2-to-1. Lowell said that the company obtained waivers from its bank with regard to certain financial covenants that were not met by the quarter's results.

For the nine-month period ended Nov. 26, 1995, sales were $25.4 million with a net loss of $504,000 or $0.08 loss per share, versus sales of $29.7 million with a net loss of $928,000 or $0.14 loss per share for the nine months of the previous year. The previous year's results include sales revenue from certain hardware and other operations that have since been divested.

Alpha Microsystems is an information technology products and services provider concentrating on vertical market niches, served both directly and through value-added resellers and distributors. The company also provides consulting, networking, software support and maintenance services, with approximately 50 locations in North America and the United Kingdom.

                      Alpha Microsystems
             Consolidated Statements of Operation
             (in thousands, except per share data)
                          (Unaudited)

                        Three Months Ended       Nine Months Ended
                        Nov 26,    Nov 27,       Nov 26,    Nov 27,
                           1995       1994          1995       1994
Net Sales:
Product                  $3,666     $4,772       $11,490    $14,325
Service                   4,602      5,077        13,928     15,351
  Total net sales         8,268      9,849        25,418     29,676

Cost and Expenses:
Cost of sales             5,690      6,348        16,410     19,041
Selling, general and
 administrative expense   2,716      3,205         8,277      9,925
Research and development
 expense                    489        488         1,559      1,694
Other (income)
 expense, net               (30)         4         (324)       (61)

    Total costs
  and expenses             8,865    10,045        25,922     30,599

Income (loss) from
 operations before
 taxes                     ($597)   ($196)        ($504)     ($923)
Provision (benefit)
 for income taxes              0        0             0          5

Net income (loss)           ($597)   ($196)        ($504)     ($928)

Net income (loss) per
share                      ($0.09)  ($0.03)       ($0.08)    ($0.14)

Number of shares used
in the computation
of per share data           6,565    6,557         6,561      6,548

CONTACT: South Coast Communications

Kent Broussard, 714/252-8440