A Case Study on Miniscribe Corporation

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A Case Study on MiniScribe Corporation for BA 219 - Corporate Financial Reporting Submitted to: Dr. Helen S. Valderrama by ARELLANO, Alyssa Loren ASADON, Rovin Vincent BLANCO, Melissa CHU, Goodwealth DE GUZMAN, Cla PRELLIGERA, Chriss Jan July 9, 2013 Master in Business Administration University of the Philippines Diliman, Quezon City EXECUTIVE SUMMARY In October 1988, Paula Perry, a research analyst for the brokerage firm Alexander and Ferris, was tasked to analyse the financial condition and performance of MiniScribe Corporation. The latter was a manufacturer of disk-drives for personal computers, and was rumoured to be experiencing cash flow and inventory problems. The objective of Paula’s analysis is to…show more content…
The company was profitable once again by the third quarter of 1985. To maintain market share, the company invested heavily in research and development in 1987 and was ranked by a leading trade journal, Electronic Business, as second in R&D spending, based on a 131.7% increase from 1986 to 1987. The company’s share price bounced back from a low $1 in 1985 to $13 in July 1988. With all these developments, it seemed that the company had indeed made a comeback and was on its way to becoming a billion-dollar company. The Industry: Seagate Technology dominated the disk-drive industry in 1988 with sales of over $1.3 billion. Other competitors like Computer Memories, Micropolis, Maxtor, Quantum and Priam were minor industry players with combined sales of less than $1 billion. There were other new competitors who entered the industry in 1987 and 1988. The industry was frequently embroiled in heated price wars because competition for sales was intense. This resulted in over supply, and the average cost of a megabyte of memory dropped roughly 25% during the first 10 months of 1988. Research firm Data Quest estimated the over capacity at over 17 million disk drives. Out of this lot, only an estimated 14 million would be purchased in 1988. Because of this, it was expected that write-off of inventories would be high. The market’s preference was changing

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