Executive Summary

Topics: Hard disk drive, Digital audio player, Solid-state drive Pages: 7 (2334 words) Published: September 22, 2014
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 help her manager decide if MiniScribe Corporation should remain in Alexander and Ferris’ ‘Buy’ recommendation list or not. The case was therefore analysed from Paula Perry’s viewpoint as a research analyst who must make a recommendation.

The group made a background check of MiniScribe and the disk-drive industry, and took note of all the important events and developments which have led to the company’s current financial condition. Next, the group prepared the Income Statement, Balance Sheet and Statement of Cash Flows. The group then proceeded to calculate financial ratios and cash flow availability to extract more quantitative information. From the assessment of the MiniScribe’s liquidity, solvency, profitability, stability and efficiency ratios, the group has come up with a strong basis for a recommendation.

Based on the available information, the group recommends that MiniScribe be removed from Alexander and Ferris’ ‘Buy’ recommendation list because of the firm’s liquidity, stability and profitability issues. These issues and other aggravating factors led the group to seriously question MiniScribe’s capacity to continue as a going concern.

MiniScribe
From Wikipedia, the free encyclopedia

A 44 MB, 5.25-inch full-height MiniScribe hard disk, shown with a more recent 2 GB Compact Flash memory card for size comparison. MiniScribe was a manufacturer of disk storage products, founded in Longmont, Colorado in 1980. MiniScribe designed and soldstepper motor-based hard disk drives with a large amount of onboard intelligence for the time. They eventually moved into higher-profile voice coil motor designs, at which time, Terry G. Johnson retired and sold the company. The company then went bankrupt in 1990, and their assets, sans liabilities, were subsequently purchased by Maxtor of San Jose, California. MiniScribe’s failure centered on one of the first major accounting scandals in the computer industry; after losing a supply contract with IBM's PC division in 1985, MiniScribe falsified its sales records for several years before being discovered in 1989. The primary scandal erupted in the final weeks of 1989, when after failing to procure short-term financing, the company executives decided to embark upon a fraudulent course of action to bring in the financing unwittingly from their customers. As each unit sold was tracked via serial numbers and also sat uninspected for some weeks inside warehouses in Singapore awaiting use in production, the decision was made to ship pieces of masonry inside the boxes that would normally contain hard drives. After receiving payment, MiniScribe then planned to issue a recall of all the affected serial numbers and then ship actual hard drive units as replacements, using the money received to meet financial obligations in the short term. However, MiniScribe embarked upon a round of layoffs just before their Christmas shutdown, including several of the employees that were involved in the packaging and shipping of the masonry. These people immediately called the Denver area newspapers, which broke the story during the holiday season. Following immediate investigations in Singapore and in Colorado the fraud was confirmed. MiniScribe lawyers filed for bankruptcy within minutes of the start of business on January 2, 1990. Founder Terry Johnson died piloting his small plane near Norman Wells, NT, Canada July 24, 2010.

MiniScribe
From Wikipedia, the free encyclopedia

A 44 MB, 5.25-inch full-height MiniScribe hard disk, shown with a more recent 2 GB Compact Flash memory card for size comparison....
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