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September 7, 1988

ORCHID TECHNOLOGY SEEKS TO BOLSTER ITS BOMBED OUT SHARES WITH BETTER SECOND HALF

By CBR Staff Writer

The mixed financial track record of Orchid Technology Inc, the Fremont, California add-on board maker quoted on London’s Unlisted Securities Market, continued yesterday, amidst claims that the past 12 months have fallen into two halves of contrasting fortunes. In the year to June 30, 1988 net profit fell to $820,000 from $3.3m, on sales up just 10% at $27m. Performance, however, did improve in the second half: $1.26m of the $1.64m net operating profit was accumulated in the second six months, and turnover grew 40%. Chairman and president Le Bui, forecasting that profits would remain at 9% to 11% of turnover, accounted for the poorer results by reference to the October market crash, as well as greater investment in sales and marketing – $5.7m this time, up from $4.5m in 1987, and product development – $2.2m against $1.2m. Aborting its planned flotation in the US also cost $400,000. Meltdown Monday also got the blame for the shares plummeting to 155 pence now from their high of 355 pence last year. Falling gross margins could be attributed to a broadening of the product mix: Orchid is increasingly emphasising the memory and graphics markets that have lower margins, rather than the accelerators and networks the company had specialised in until 1988. Two graphic products based on IBM’s Video Graphic Array standard – and two enhanced memory boards for PS/2s were introduced in the last fiscal year. Product development will incorporate memory, accelerators, graphics and AT Systems boards for IBM machines, fax+modem boards and accelerators for Apple Macintosh, and add-on memory for Compaq. Orchid, whose delayed flotation eventually went through in April, 1987, (CI No 656), also hopes to reassure investors with claims of rapid market acceptance of its memory and graphics products, a stronger cash reserve base of $1m – acquisitions are hinted at – as well as and greater penetration of the European market, where sales now account for between 20% and 25% of the company’s total turnover.

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