Super-ambitious adolescent mail order personal computer manufacturer and marketer Northgate Computer Systems Inc has outgrown its strength. The Eden Prairie, Minnesota company, which has ambitions to diversify into the desktop Unix workstation market with Sparc-based machines, has reported to the Securities & Exchange Commission that it is in violation of covenants on its bank debt and that its chief executive has resigned. The $1.9m loss the company reported in the third quarter has reduced its net worth below the level demanded by the covenant, and it is also in violation of working capital, cash flow and shareholders’ equity requirements of the covenant. It has been relying mainly on the $15m of revolving credit to finance operations, but expects a new agreement this week that lifts the violations. The firm, which has sacked 150 peo ple including its entire direct sales force (CI No 1,553), since September, reckons it has cut $1m a month from its operating expenses. The new chief executive is Gary Held, who joined two years ago and previously ran the Connecting Point dealer chain: he and the other two top officers have taken 50% pay cuts. Northgate had forecast sales of $240m this yeab, up from $110m last and earlier this year it was making eyes at struggling CPT Corp.
