AST Computers and AST Research

AST Research was a high-flying brand in the early 1990s, but faded in the second half, making it a somewhat obscure 1990s computer brand. Their computers had a good following in the first half of the decade and they were generally high quality. But financial problems sunk the company in 1999 and an effort to revive the brand failed in 2001.

AST Research shifted from making add-on cards in the 1980s to making entire PCs in the 1990s, but as PCs shifted to commodity parts under price pressure, AST failed to adapt. This led to a rapid decline in market share and the once-popular mass market PC brand disappeared from store shelves.

Founding and meaning

AST Computer
AST’s computers in the early and mid 1990s were good quality and a good value, but by mid-decade, other companies were undercutting its prices.

AST Research was founded in 1980 in Irvine, California. The name AST comes from the first initials of its three founders, Albert Wong, Safi Qureshey, and Thomas Yuen. Wong and Yuen had been college classmates and roommates, while Qureshey and Yuen had worked together at minicomputer maker Computer Automation, Inc.

The trio founded AST as a consulting firm, but soon were manufacturing printed circuit boards for the fledgling computer market.

AST Research’s early years

During the 1980s, AST Research produced multifunction add-on boards for IBM and Apple computers. While an Apple II had 8 slots, as did an IBM PC/XT or AT, that didn’t leave enough room for everything you’d ever want, at least in theory. And the IBM PC only had five slots. AST combined the functionality of 3-6 cards on a single card. This was a lifesaver on the IBM PC, and relieved a lot of pressure even if you had eight slots to work with.

AST also made an IBM compatibility add-on card for Apple’s Macintosh line. It sold the product line to Orange Micro, but this gave a hint of AST’s future. It was a small step to go from making an IBM compatibility card to a full PC.

In my experience, these AST multi function cards were popular. It was very rare for me to open up an IBM PC/AT and not find an AST Six Pack inside. And in the 1990s, when I set aside some parts in case I might ever want to restore an AT-class machine someday, I saved an AST Six Pack. I have one in my slightly hotrodded IBM 5170.

But by 1985, the gravy train of multifunction cards was slowing. PC manufacturers started integrating the functionality that had been on AST’s cards onto the motherboards themselves. It saved space and made things convenient, and once some time had passed, it saved money too.

AST recognized the threat that IBM’s PS/2 line and Microchannel architecture posed to its business model, so it participated in the Gang of Nine who developed the rival EISA bus. IBM had already sued AST for advertising and selling what it called PS/2 memory boards. The two companies settled out of court.

AST Computers

AST introduced its first PCs in October 1986, and rounded out its line in 1987, with 286-based PCs at the low end of its line and 486-based PC at the top of its line by October. By 1988, it was the third-largest PC maker in terms of market share, but struggled to hold its place. By early 1993, it was the seventh-largest manufacturer of computers in a very crowded market. Its 1993 purchase of Tandy’s computer division solidified its position as the third largest PC maker in the world, with 6.1% of the market. Its market share placed it ahead of Dell and behind Compaq.

AST was a mid-tier brand in the 1990s. Its computers tended to be slightly less expensive than Compaq or Dell, but comparable in quality. When I sold computers at retail in 1994 and 1995, customers would sometimes come in and tell me their friend said AST was the brand to get, because it was cheaper than a Compaq and better than an Acer. The store where I worked, Best Buy, didn’t sell AST, but did carry Compaq and Acer. It was my job to try to talk them into a Compaq or an Acer, and in those years it wasn’t easy.

I bought a Compaq with my employee discount, but one of my friends had an AST. Overall, his was a better computer. It didn’t use its own silly proprietary drive rails to mount a CD-ROM drive, and it was more configurable. My Compaq had a few jumpers on the motherboard to disable things or change processor settings, but his AST had a better selection of them. Some might argue Compaq had a slight edge on quality, but both of us used our PCs far longer than their original warranty period.

Profitability

AST’s revenue peaked in 1994, and it remained a $2 billion company in 1995, but its profits were uneven. It always sold PCs through storefronts, which made it vulnerable to Dell’s just-in-time model. While Dell didn’t carry much of anything that wasn’t already bought and paid for, AST sometimes miscalculated the market, and ended up holding too much obsolete inventory. This resulted in uneven profits and infighting between its founders. Albert Wong left the company in 1988, as the popularity of 386-based computers left AST with a glut of slow-moving 286 models. Thomas Yuen was the second to leave the company, in 1992. Safi Qureshey remained as CEO, leaving the company in 1997.

Losses piled up in 1996 as its competitors cut prices. Historically, pricing itself slightly below other leading brands had been an AST selling point, but as Compaq cut prices to better compete with Dell and Gateway, AST lost both profits and market share. At this stage, Gateway and Dell were selling PCs made of commodity parts like Intel motherboards, essentially outsourcing most of their engineering expenses. AST’s internal engineering was a major point of pride, but Intel could bring new technology to market faster than AST could, and Dell and Gateway could buy Intel boards for less than AST could build them. And as revenue dropped and AST cut costs, the quality went with it, so AST’s internal engineering became a liability.

By 1997, AST had gone from being a $2 billion company to an acquisition target. Samsung had started investing in AST in 1995, and in 1997, Samsung bought the rest of the company.

AST Computers’ swan song under Samsung

Samsung was interested in increasing its market share of computers in the United States, but thought it could do better using AST’s brand recognition rather than its own. AST computers, especially laptops, made in 1997 or later were just relabeled Samsung products made overseas.Samsung was capable of delivering a quality computer at a competitive price, restoring the strategy that AST rode to prominence a few years before.

But the Asian stock market crash of 1997 caused its currency values to also crash. Suddenly, the money Samsung intended to inject into AST to keep it afloat was worth 80% less than it had been at the start of Samsung’s ownership. Samsung expected it to take three years to turn AST around, but its budget to support AST for three years didn’t last a year at 1998 exchange rates. A year in, Samsung was out of money.

In January 1999, Samsung sold the AST brand name to Beny Alagem, the businessman who had revived Packard Bell in the 1980s. Alagem paid $200 million, approximately 1/5 what Samsung had sunk into AST over the past four years. Alagem’s AST quickly failed and disappeared from the market in 2001.

Why AST Computers failed

There was no single factor that sunk AST, but rather, a combination of factors occurred within a short period to cause AST’s dramatic fall. It seems odd that a company can go from being the #3 PC maker to being out of business in just five years. But in the fast-changing PC market of the mid 1990s, that’s exactly what happened to AST.

Sales channel problems

AST’s first problem was its sales channel. Former AST employee David Murray, who runs the Youtube channel the 8-bit guy, tells stories of AST salespeople making deals with retailers. A retailer would want 500,000 units. The salesperson would offer a million units at a lower price. If the retailer couldn’t sell a million units, the sales rep could offer rebates and incentives on whatever inventory remained after some number of months. The sales rep then collected a commission on a million units, while AST ended up losing money on the deal. Murray recalled a deal with Wal-Mart, where AST sold large numbers of machines, but lost $200 on each one.

I briefly worked in sales for a computer security company, and I didn’t have anywhere near that kind of levity. Any discount required CEO approval, and he was known to pocket veto discounts by just letting them sit on his desk forever. That cost us some business, so I think my former employer took things too far. But AST took things way too far in the other direction. At least the company that didn’t let me offer any discounts was profitable both years I worked for them.

Competing with the direct model

AST had its own engineering team and designed its own motherboards, for the most part. Since it did its own design and production, this increased overhead. Dell and Gateway essentially outsourced all that work to Intel. Furthermore, they didn’t really have to pay anything up front. AST had to spend millions of dollars on chips and other components, then assemble computers and sell them. Dell and Gateway didn’t have to order anything until the computer was bought and paid for. Then they ordered the parts, assembled and shipped them.

Arguably AST had an edge on quality. For a while at least.

Domestic manufacturing

AST built its computers in California and Texas, and used a lot of domestic components. This was great for US jobs, but it meant anyone willing to assemble overseas could undercut their price. And there was a time when using, say, genuine Creative Labs chips gave an advantage in compatibility and perhaps reliability. But by 1995, that advantage was fading.

You’d think that red-blooded patriots would flock to the idea of buying computers made in Texas from as many domestic components as possible. But when I worked in retail during AST’s heyday, about one customer a month asked me where the computer was actually made. It seems to be different for cars, but when it came to computers, almost no one cared where they were made, they just wanted the cheapest computer that would last three years.

AST did well when they could price themselves between Compaq and Acer, offering Compaq-like quality for $100 less than Compaq charged. Once Compaq started producing machines overseas to position itself between AST and Acer’s prices, AST couldn’t do much.

Quality

AST rose on providing a good combination of price and quality. As prices fell, AST compromised on quality, and the whole strategy fell apart quickly after that. And the problem with poor quality is that if the machine fails during the warranty period, it gets expensive to honor all those warranty claims. AST’s laptops were especially prone to quality issues. There was no reason to pay a Compaq price to get Packard Bell quality. There were lots of better options, and people figured that out quickly.

It didn’t help that one of AST’s biggest retailers was Circuit City. Where Best Buy had a policy of not saying anything bad about any brand it sold, Circuit City was happy to pit its brands against each other. Circuit City could use AST computers to make other brands look like a better deal, then use AST’s incentives to liquidate the inventory just as it got stale. This eventually caught up with Circuit City, but not before it sunk AST.

Samsung’s takeover of AST and selling its own Korean-made laptops under the AST brand solved the quality issue, as well as the pricing issues. But it was too little, too late. Samsung’s own problems in the late 1990s caused it to cut the cord. Samsung saved itself, but couldn’t save AST along with it.

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