Happy Holidays for AST Because of PC Sales Gains

Computer industry analysts are still trying to sort out whether the 1996 holiday shopping season was a boom or a bust. But officials at AST Research Inc. in Irvine are already smiling.

Mike Hong, vice president of U.S. sales for AST’s consumer product lines, said sales of the company’s home computers rose 70% in the fourth quarter compared to a year earlier. “For us,” he said, “the fourth quarter was a very good one.”

The Christmas shopping season is a critical time of year for computer makers, typically accounting for about one-third of the year’s home PC sales.

But most manufacturers entered the 1996 holiday season with trepidation. All year long, sales failed to keep pace with the breakneck growth of 1995. And as 1996 came to a close, there was no compelling new reason for consumers to buy new machines, unlike a year earlier when the launch of Microsoft’s Windows 95 operating system fueled demand.

AST has been losing market share in recent years and has posted 10 consecutive quarterly losses. But officials said AST gained back some ground in the fourth quarter, largely because of the success of low-priced models sold at stores such as Wal-Mart, Best Buy and Computer City.

“A lot was driven by price,” said Terry Baker, director of worldwide marketing at AST.

Two AST models--one priced at $999 and the other at $1,499--accounted for about half of the company’s fourth-quarter consumer sales. The models have slower processors and smaller hard drives than more expensive units, but were enough to lure first-time buyers, Baker said.

“That’s the main focus,” Baker said, “delivering performance at an affordable price so that when those consumers are ready to make the next jump, they’ll stick with AST.”

Such a strategy does pose some risks, analysts said. Low-end units are often not as profitable as high-end models. And repeat sales aren’t guaranteed.

“Consumers might associate AST with inexpensive machines and go buy a Compaq when they want to trade up,” said Scott Miller, an analyst at Dataquest. “AST needs to look at how to retain those customers.”

AST’s year-to-year gains are also inflated by the fact that the company’s fourth quarter in 1995 was relatively weak. At that time, AST had just reentered the consumer market after shifting focus to corporate accounts, and the company’s marketing efforts were tepid at best.

But Hong said AST now has momentum headed into 1997. “My feeling is volume is going to go up,” he said.

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Greg Miller covers high technology for The Times. He can be reached at (714) 966-7830 and at [email protected].