It was a little disconcerting when the US Defense Advanced Projects Research Agency picked Micropolis Corp to lead the national effort to develop a 1Gb 1.8 disk drive (CI No 2,535) with $10m of taxpayers’ money because it had been so long since the company had turned a profit – so much so that it had pulled back from the volume market and was seeking to build a business creating video servers around its drives. The decision was called further into question late last week when Micropolis announced that it expects to report a loss from operations of between $30m and $35m, $1.96 and $2.29 a share, on turnover of between $40m and $45m for the current quarter, before one-time charges for cutting its workforce by 11%. This time last year it lost 65 cents a share on sales of $83m, and it blames sharply lower orders for 4Gb and 9Gb drives. Making no bones about it, the company describes its problems as severe, and says revenues are not likely to be sufficient to generate second quarter profit, and it has retained Salomon Brothers to help it review its operational and financial options. Because of the loss, its cash reserves will fall to about $40m from the $63.2m at December 31, and it hopes to save $2.5m a quarter with its cost-cutting measures. It warns it may be forced to seek new financing should second quarter revenues not meet forecasts, although CIT Group/Business Credit agreed to extend for two years Micropolis’s two-year asset-based credit line.
