Kaypro Decline
Events listed as best as possible in chronological order:
1984
The Kaypro Corporation said yesterday that it is investigating the possibility that millions of dollars in computer parts are missing from a circus tent and big trucks where Kaypro stored them.
As accountants sought to determine if the loss was a bookkeeping error, speculation mounted that many parts had been stolen.
Kaypro, based in Solana Beach, Calif., outside San Diego, is the maker of the Kaypro II - a $1,295 portable personal computer that last year was one of the nation's top-selling machines. The Kaypro II has been so successful, in fact, that Kaypro was forced to stockpile parts for it and other models in trucks, in bags strewn on its lawn and under a giant, billowing circus tent on a bluff overlooking the Pacific Ocean.
Security, Accounting Called Lax
But security and accounting for the parts has been lax, people close to Kaypro say. Now, according to an analyst who asked not to be identified, a preliminary review of inventory by Kaypro's auditors, Peat Marwick, is indicating huge shortfalls of chips, screens, disk drives, circuit boards and other components for Kaypro computers.
Although the accountants' work is not finished, reports circulating in the computer industry suggested that Kaypro's loss could approach $6 million. As of June 30, Kaypro's inventory totaled about $60 million, according to the company.
The Peat Marwick partner in charge of the case would not answer calls.
Nobody knows how much the loss is because Kaypro's accounting is so bad, said Kenneth T. Lim, an industry analyst at Dataquest, a San Jose, Calif., market researcher.
Late yesterday, Kaypro was reluctant to discuss in detail its apparent loss. In a statement, the company said it lacked sufficient information to assess damage. But responding to news reports of an impending write- down of several million dollars, the company said, Although there is the possibility that the amount of the loss, if any, when determined could prove less than this amount, it is possible that it may reach or exceed such levels.
It was not immediately clear what part of the apparent loss could be attributed to theft and what part to bookkeeping problems. Kaypro has not filed any theft reports with the local sheriff.
Previous Thefts Hinted
In particular, Andrew Kay, Kaypro's chairman and founder, has hinted to reporters in the past that people have taken parts and computers from the company's manufacturing plant without authorization. A secretary at the company said Mr. Kay was not available yesterday.
But David Kay, who is Andrew Kay's son and Kaypro's vice president for marketing, said in a telephone interview that the tent, which contained boxes of tiny electronic parts, was "not very secure; all it takes is a pocket knife to cut it." A company spokesman noted, however, that the entire Kaypro complex is surrounded by a fence and is guarded around the clock.
A good deal of Kaypro's inventory problems may be related to faulty accounting, however.
Sources close to the company said yesterday that Kaypro may have failed to note all its defective parts. The result would be that the company would include on its books components that had been discarded.
Kaypro has also suffered from a large number of problems in the hard disk memory system of its Kaypro 10 model. Dealers are supposed to return faulty memory devices to Kaypro for credit but have not always done so. Kaypro, aware of that, may have been counting as returned parts that were not returned, these sources said.
Suits Possible
Kaypro could face stockholder or Government suits, if it can be shown that the company violated generally accepted accounting principles.
The apparent losses are part of broader problems at Kaypro. Although the company's 26-pound Kaypro II continues to be popular, helping push Kaypro's sales from $5 million in 1982, to an estimated $100 million in the year ended Aug. 31, revenue growth has fallen off recently. The company has also been shaken by management turmoil.
Moreover, Kaypro, a hot new issue last year in the over-the-counter market, has since fallen from Wall Street's grace. Its stock price has dropped from an initial bid of 10, to 3 7/8 yesterday.
(New York Times, September 13, 1984)
1988
Kaypro Corp. yesterday announced the layoff of 35 workers, or about 10 percent of its work force. In addition, a company spokesman noted that demand for its planned new generation IBM clone may be falling short of expectations.
The Solana Beach personal computer firm blamed the current layoff, which affected mostly workers in manufacturing, on slower sales caused by "seasonal factors and the recent shortage of semiconductor" parts, along with other factors.
The reductions leave the company with about 310 employees. Earlier this year, the company employed as many as 438 employees. As sales fell by about 30 percent, however, it announced a series of layoffs and recorded financial losses. In 1984, Kaypro employed as many as 700 people.
Interest may also be focused on comments from the company regarding its plans to introduce computers compatible with IBM new Personal System/2 computers. Such machines, which would include the so-called Micro Channel architecture, had been seen by some analysts as holding promise to revive the company's fortunes, because they would open a potentially large clone market with as yet few competitors.
As recently as late July, David Kay, president of the company, had insisted that Kaypro would introduce its IBM PS/2 compatible computer in September and would begin volume shipment of the machines by October.
Yesterday, John Hentrich, the company's general counsel, said that while Kaypro's design for such a machine is nearly complete, the demand for such machines has been disappointing.
"IBM Micro Channel sales have been less than expected by the industry," said Hentrich. "The introduction date of Kaypro's PS/2 Model 50 compatible will depend on the market demand for this architecture. A number of companies that have announced Micro Channel compatible computers, such as Dell Computer, have delayed their product offerings until next year."
Hentrich added that he could not provide an introduction date for the PS/2 compatibles.
For the first nine months of the current fiscal year, Kaypro reported a net loss of $4.4 million, or 12 cents per share, compared to net earnings of $1.3 million, or 4 cents per share for the comparable period last year. Revenues for the period plummeted to $58.9 million from $85.1 million for the first three quarters of last year.
(Clipping, Craig D Rose Staff Writer)
1989
April 5:
Last week's land deal may solve some financial problems for Kaypro Corp., but the local computer maker still faces a dispute over software.
Kaypro officials sealed the long-awaited deal last Wednesday, selling about 8 acres of its Stevens Avenue manufacturing site - land and buildings - to the Signature Group of Los Angeles for $6 million.
Leasing the property back for $60,000 per month, Kaypro retains a five-year option to repurchase the site.
"That's a pretty low price, but the important part of it is that it gets us off dead center," Joseph Marcello, Kaypro senior vice president and chief financial officer, said Monday. "It's a reversible process, which we like."
The bulk of cash raised in the land sale/lease arrangement will go toward repaying the firm's $5 million outstanding loan with its major lender, Commonwealth Financial Corp. of Walnut Creek.
Another $5 million is owed - mainly to a number of computer parts suppliers - but Marcello said he has been negotiating to convert most of those debts into long-term notes.
However, one supplier apparently has backed away from the negotiations table and has moved to federal court to seek payment from Kaypro.
Microsoft Corp., a leading software manufacturer, filed suit March 20 in San Diego U.S. District Court, claiming that Kaypro failed to pay about $750,000 in software royalties under separate contracts in 1987 and 1988.
(Del Mar Citizen, April 5, 1989)
1990
March 2:
Employees of Kaypro Corp. were finally paid Wednesday — nearly a week after workers were forced to skip a payday when the company was unable to meet payroll.
In the latest indication of its deepening financial problems, Kaypro told its 65 employees last Friday that it was unable to pay them because of cash flow problems. Nancy Casey, a Kaypro spokeswoman, said the company failed to meet the payroll because certain sales had not yet come in. However, the sales have since come in, allowing the Solana Beach-based microcomputer manufacturer to pay its employees Wednesday, said Casey.
Casey said that, as far as she knew, last week was the first time in its history Kaypro had failed to meet the payroll.
She also attempted to downplay the significance of the missed payday, saying "it happens fairly regularly at other, smaller companies. It's not unusual."
"We're trying to turn around the corporation. We're trying to be as positive as possible," she added. Recently, Kaypro reported that it suffered a net loss of $19.4 million, or 52 cents per share, on sales of $21.8 million for the year ending last Aug. 31. A few weeks ago, the company was forced to lay off several senior-level engineers, according to Joseph Marcello, a high-ranking Kaypro official who recently left the company, saying he was asked to work for no compensation.
Struggling to regain its financial footing, the company last week named Roy Salisbury as its new president and chief executive officer. David Kay, who had briefly returned to Kaypro as president and CEO after an 18-month hiatus from the company, appointed Salisbury to replace himself as president.
During David Kay's absence from the company, Del Mar resident Andrew Kay, David's father, had served as CEO. Casey said that Salisbury, who previously headed the FCSGroup, a Massachusetts management consulting firm, was brought in by Kaypro because "his specialty is turning companies around." "(Salisbury) says sales are improving," added the spokeswoman. "There's been nothing major lately, but several (sales) are on the horizon."
(Del Mar Citizen, March 2, 1990)