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August 17, 1988

SALES POOR, SO PRIME BATTENS HATCHES, SETS HIRING FREEZE

By CBR Staff Writer

Prime Computer Inc had analysts scurrying to downgrade their forecasts for all minicomputer manufacturers after it came out with a shock warning that its third quarter figures would be at least 20% worse than the consensus forecast on Wall Street, on sales down 2% to 5% compared with the $408m of the second quarter. The warning was issued after the market closed, but caused Prime shares to tumble $1.375 to $12.50 in early trading in New York yesterday. Prime’s guidance implies net of $10.8m at the very best, against $15.9m for the third quarter a year ago. The company accompanied the announcement with several other indications of strain, saying that it had instituted a worldwide hiring freeze which is not to be lifted until the turnover outlook becomes more favourable, and is examining operating expenses for possible delays or cancellations of projects. The company has already abandoned its marketing of the Cydrome minisupercomputer, and last week dumped the orginal – and hardly venerable 16MHz model in its EXL 80386-based line of low-end Unix machines. It also felt constrained to slash prices on the faster two models, with the base price for the 20MHz EXL-320 tumbling by a substantial 31% to $17,900 and the EXL-825 falling 15.25% to $38,900. The factors blamed by the Natick minimaker for its deteriorating outlook include the impact of the shake-up in its worldwide sales force in wake of the Computervision acquisition; a much stronger dependence on non-US business, which is historicalli weak during the summer months; the continuing recovery of the US dol lar; and the persistent sluggish ness of the US minicomputer market. The weakness is occurring in both its General Markets and Computervi sion divisions, although by no means uniformly across the world.

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