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April 5, 1987


By CBR Staff Writer

Orchid Technology Inc, the Fremont, California add-on board maker, has managed to calm the nerves of UK institutional investors and completed its overdue UK flotation at the second time of asking (CI No 646). It placed 4.245m shares at 106 pence per share, valuing the company at UKP26.9m. The placing represents just 16.71% of the total company. Despite the failure to manage the placing at the first attempt in January, Orchid was confident of its future and its future profitability in the wake of IBM’s mammoth Personal System/2 bonanza announcements Thursday. It has had models of all the IBM machines ahead of time, picked up from US dealers supplied ahead of announcement, and says there is nothing in there to frighten it. It has pototype memory boards for the new machines already working and says new products across its range for the new machines are just a matter of bringing in some new gate arrays. Orchid chairman Le Bui, 34-year-old Vietnamese immigrant, pointed to the lack of board slots in some of the new machines – just three 8-bit slots on the Model 30, only three 16-bit slots on the desk-top 80286-based Model 50 – which creates a whole new series of opportunities for board makers who can manage to combine different functions into one smaller board. And he hinted at one major Orchid product, which will be a combination of laser printer controller, accelerator board, and will also carry extra memory. This product, expected later this year, should allow the add-on maker a chance to get in on the exploding desk-top publishing market. Le Bui reckons that up to now no desk-top publishing system on the market works on an XT, all requiring the speed of an AT or better, but his product will allow the 10m or so installed XTs access to desk-top publishing for the first time. Le Bui also suggested at a combination accelerator/graphics board could be in the pipeline. Orchid will spend the UKP4.5m for new product development, expansion in Europe through direct sales operations, and increased working capital.

Apple add-on acquisition?

Orchid would like to have cash handy in case the right acquisition comes along, but has no plans as yet. One area Le Bui is keen for an acquisition in is the Apple add-on market. Orchid is already planning to attack this market with a network product and an 80386 accelerator during 1987 following Apple’s recent adoption of the open architecture approach, with encouragement of expansion boards for its new machines. When pushed about the aborted January placing, brokers Phillips and Drew had to admit that it had failed to drum up sufficient interest among uncomprehending and incurious institutions in time for the placing, and referred dejectedly to Borland’s problems at the time as part of the problem. But in fairness Orchid came back to the market with solid profit projections for this year of $6m, on turnover of over $25m. Orchid backs this up with a set of audited figures for ist fiscal first half to December, which show over $3m pre-tax profit on sales of $11m. Orchid decided to raise money in the UK simply because it is cheaper and less demanding in terms of reporting. It also feels that it wants to do everything it can to win itself a higher profile in Europe, where it looks for much of its medium-term growth. Trading in the shares starts this Friday, April 10.

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