Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Tseng Lab on the move? -- Ignore unavailable to you. Want to Upgrade?

To: Bobb who wrote (104)	2/12/1998 10:26:00 PM
From: Bobb	Respond to of 251

From The Business section of the Philadelphia Inquirer of 2/12/98: Tseng Labs, with staff cut to 7, ponders revival Once a leader in graphics accelerators, it sold its core business. It hopes an acquisition will spur a recovery. By Leslie J. Nicholson INQUIRER STAFF WRITER A year ago, Tseng Labs Inc. was a struggling graphics-chip manufacturer with 96 employees working out of a 34,000-square-foot plant in Newtown. Today, two months after selling the core of its business, Tseng is seven people working out of a 1,500-square-foot office in Norristown. Their principal task: finding an acquisition that will revive the company, once a leader in the business of making graphics accelerators, chips that enhance a computer's graphics and video capabilities. Rather than getting its money from selling products, the 15-year-old company now operates off interest income, plus the rent coming in from its Newtown plant, which it leased to ATI Technologies Inc. in December. "Tseng Labs is essentially a public shell with a lot of cash," said chief executive John J. Gibbons. He quipped: "What we are now is sort of an IPO [ initial public offering ] that's happened, but we haven't found the company that we took public yet." Last year was one of major changes for Tseng, which had been a pioneer in designing and manufacturing graphics components for computers. It was a year in which sales plummeted from $26.2 million to $8 million, according to an earnings report issued yesterday, and in which the company posted its 10th consecutive quarterly loss. In the fourth quarter of 1997, the company took charges of $5.7 million against earnings, leaving it with a net loss of $6 million for the quarter and $11.4 million for the year. The company's slide started a few years ago, when it was hit hard by competition from graphics accelerators designed for Intel's popular 64-bit Pentium microprocessor; Tseng's 32-bit accelerators worked with the older, 486 microprocessor. Tseng fought back with the introduction of an advanced, 128-bit chip called ET6000 in 1995, but again was hurt by intense competition and price pressure. The company then pinned its hopes for a turnaround -- and its resources -- on a new 3D graphics accelerator called the ET6300. But last October, shortly after saying it had "serious concerns" about the potential for marketing the ET6300, and about the product's ability to return the company to profitability, Tseng announced it would stop making graphics chips altogether. It cut its staff to 50 people, and said it would use its $28 million in cash to make acquisitions. A few weeks later, founder Jack Tseng resigned as chairman, chief executive and president and was replaced by cofounder Gibbons. In December, Tseng Labs sold its graphics design assets to ATI Technologies for $3 million and leased the plant. ATI is an Ontario multimedia company. That same month, Tseng Labs bought back and retired 4 million of the Tseng family's 5.4 million shares, leaving 15 million shares outstanding. All that done, Tseng's strategy now is to find a big acquisition. Gibbons said the company had looked into 40 potential acquisition targets, and had found two that appear interested in a deal. He declined to name those companies, saying only that both were domestic firms, one in the aerospace industry and the other in telecommunications. Three of the seven people left at Tseng are closing down the graphics chip operation. That is expected to be complete by early in the second quarter, and the three will be let go, Gibbons said.