SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              _____________________

                                    FORM 10-K
                                        
       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934
                                        
       FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
                                        
       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
       SECURITIES EXCHANGE ACT OF 1934

       FOR THE TRANSITION PERIOD FROM         TO

                         COMMISSION FILE NUMBER 0-13941
                           __________________________


                               AST RESEARCH, INC.
             (Exact name of registrant as specified in its charter)
                                        
                      DELAWARE                         95-3525565
          (STATE OR OTHER JURISDICTION OF              (IRS EMPLOYER
            INCORPORATION OR ORGANIZATION)             IDENTIFICATION NO.)
                                        
                               16215 ALTON PARKWAY
                            IRVINE, CALIFORNIA 92718
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
                                        
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 727-4141
                                        
                           __________________________


        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                              TITLE OF EACH CLASS
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                           __________________________
                                        
  
  
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X  No _

      Indicate by check mark if disclosure of delinquent filers pursuant to
Item  405  of  Regulation  S-K is not contained herein,  and  will  not  be
contained,  to the best of the registrant's knowledge, in definitive  proxy
or  information statements incorporated by reference in  Part III  of  this
Form 10-K or any amendment to this Form 10-K.  [X]

      The  aggregate market value of the registrant's voting  Common  Stock
held  by  non-affiliates  of the registrant was approximately  $138,684,525
(computed  using  the closing price of $4.75 per share of Common  Stock  on
February  21,  1997  as reported by NASDAQ, based on  the  assumption  that
directors  and  officers  and more than 10% shareholders  are  affiliates).
There  were 57,964,830 shares of the registrant's Common Stock,  par  value
$.01 per share, outstanding on February 21, 1997.
__________________________

       This   Annual  Report  on  Form  10-K  includes  certain  forward-looking
statements,  the  realization  of which may be  impacted  by  certain  important
factors discussed in "Additional Factors That May Affect Future Results."  under
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations."


PART I

ITEM 1.   BUSINESS

GENERAL

  AST Research, Inc. ("AST" or "Company") was incorporated in California on July
25,  1980  and reincorporated as a Delaware corporation effective July 1,  1987.
The  Company designs, manufactures, markets, services and supports a broad  line
of  personal  computers including desktop, notebook and server computer  systems
marketed  under  the Advantage!(R), BravoTM, AscentiaTM, and  ManhattanTM  brand
names.   The  Company's  products feature advanced design characteristics  while
remaining compatible with established industry standards.  The Company currently
markets  its  products  through an extensive worldwide distribution  network  of
retail   computer  dealers,  consumer  retailers,  international  and   regional
distributors,  value added dealers ("VADs") and value added resellers  ("VARs").
See  further discussions under Item 7, "Management's Discussion and Analysis  of
Financial Condition and Results of Operations" and "Additional Factors That  May
Affect Future Results" therein.

      On  October 26, 1995, the Company announced its change of fiscal year-end
from the Saturday closest to June 30 to the Saturday closest to December 31.
The change in fiscal year-end was effective for the six months ended December
30, 1995 ("transition period" or "transition period 1995").

SIGNIFICANT BUSINESS DEVELOPMENTS

   In the second quarter of fiscal 1996, the Company implemented a restructuring
plan designed to restructure its worldwide operations into three regional
operating groups and to transfer its notebook manufacturing to third party
original equipment manufacturers ("OEMs").  In connection with this  plan, the
Company recorded a restructuring charge of $6.5 million.

   On  July  11, 1996, the Company paid the $90 million promissory note  due  to
Tandy Corporation ("Tandy") related to the Company's 1993 acquisition of Tandy's
personal  computer  manufacturing  operations.   Payment  was  in  the  form  of
4,498,594 shares of the Company's common stock, then valued at $30 million,  and
$60  million  in cash.  Subsequent to the issuance of shares to Tandy,  also  on
July  11,  1996,  the  Company issued 8,499,336 shares of its  common  stock  to
Samsung  Electronics Co., Ltd. ("Samsung") in exchange for $60 million in cash
that was used to fund the cash payment to Tandy.

  On December 13, 1996, the Company signed a Second Additional Support Agreement
with Samsung that provided the Company with additional credit guarantees of $200
million  through  December  31,  1998.  As consideration  for  this  new  credit
guarantee,  the Company issued 500,000 shares of non-voting preferred  stock  to
Samsung.   This  second  guarantee is in addition to the existing  $200  million
credit  guarantee, provided pursuant to an Additional Support Agreement  between
the Company and Samsung, dated December 21, 1995.  The Second Additional Support
Agreement also includes a one-year extension of the original guarantee  provided
under  the  Additional Support Agreement, which results in  guarantees  totaling
$400 million expiring on December 31, 1998.

   On  December 18, 1996, the Company established a new $100 million bank credit
line  with  three banks.  In addition, on December 26, 1996 the Company  renewed
its  existing  $200  million credit line, provided through a consortium  of  ten
financial institutions.  As a result of these transactions, the Company has $300
million  in  credit  facilities, all made available  through  credit  guarantees
provided by Samsung.  See further discussion included in "Liquidity and  Capital
Resources"  under  Item  7, "Management's Discussion and Analysis  of  Financial
Condition and Results of Operations."

     On January 30, 1997 the Company announced that Samsung proposed to commence
negotiations  to acquire all of the outstanding shares of common  stock  of  the
Company not currently owned by Samsung or its affiliates at a price of $5.10 per
share  (the  "Samsung  Proposal").  Pursuant  to  the  terms  of  a  Stockholder
Agreement between the Company and Samsung, Samsung's ability to purchase  shares
and  engage  in  other  transactions with the  Company  is  subject  to  certain
restrictions,  including approval of the Independent Directors, (as  defined  in
the  Stockholder  Agreement).  The Company's Board of  Directors  has  formed  a
special  committee,  consisting of the Independent Directors,  to  evaluate  the
Samsung  Proposal, and to consider other options that may be available  to  AST.
There is no assurance that any transaction will ultimately occur.

INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION

      The Company operates in one industry segment: the manufacture and sale  of
personal  computers, including desktop, notebook, and server  computer  systems.
The  Company  currently  markets its products through retail  computer  dealers,
consumer retailers, international and regional distributors, VADs and  VARs.   A
summary  of  the  Company's operations by geographic area including  net  sales,
operating  income  (loss)  and identifiable assets  is  incorporated  herein  by
reference to Note 12 of the Notes to Consolidated Financial Statements.

BUSINESS STRATEGY AND MARKET

      The  Company's business strategy is to focus on being among the  first  to
bring  leading-edge personal computer technology to market within  the  indirect
sales  channel, thereby positioning the Company's products to gain a competitive
advantage.   By  concentrating its efforts on bringing new  products  to  market
first,  the  Company  will also utilize its technological  expertise,  worldwide
manufacturing capabilities, brand name recognition and distribution channels  to
offer  its customers a variety of personal computers to meet diverse user needs.
In  support  of this goal, the Company is also focusing its efforts on  creating
and  maintaining  short and flexible supply lines to become  the  most  reliable
supplier  to the indirect sales channel.  The Company believes that the  success
of  this  strategy  depends upon its ability to identify  products  and  product
features  required by customers and to design and bring to market ahead  of  its
competitors high quality, innovative products compatible with industry standards
at competitive prices.

      As  new technologies, including more powerful microprocessors, have become
available,  the  Company is concentrating its efforts on  working  closely  with
various industry-leading component suppliers, including Samsung, to enable it to
achieve its goal of being first to deliver new products to the indirect channel.
These  efforts  include  working  together on  technology  issues,  as  well  as
shortening  supply lines to improve flexibility of related supply  arrangements.
See  "Additional  Factors  That  May  Affect  Future  Results"  under  Item   7,
"Management's  Discussion  and Analysis of Financial Condition  and  Results  of
Operations."

      The  Company's business strategy is focused on serving the indirect  sales
channel worldwide, since the Company believes that the indirect sales channel is
the method by which the majority of users choose to purchase personal computers.
The  Company  also believes that the indirect sales channel offers  the  highest
level  of service and support to the purchaser and will continue to play  a  key
role  in  expanding  the use of computers throughout the world.   The  foregoing
forward-looking  statements  involve risks and uncertainties  that  could  cause
actual  results to differ materially from anticipated results.  See  "Additional
Factors  That May Affect Future Results" under Item 7, "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."

      The Company's business strategy also focuses on the continued introduction
of  new  products  that  are  aggressively priced to  highlight  the  price  and
performance  advantages  of  the  Company's  products.   The  personal  computer
industry  is characterized by intense price competition and the Company believes
that  the price and performance features of its products are key factors in  the
purchase  decisions of its customers.  The Company intends for its  products  to
offer  a price/performance advantage, and therefore generally adjusts its prices
as needed.

      In  pursuing its business strategy, the Company has maintained its  multi-
channel  and  multi-brand distribution approach to target  a  variety  of  price
points  and user requirements, including the Advantage! computer product  lines,
which  are  designed  for the consumer retail market; the value  oriented  Bravo
desktop  lines;  the Manhattan server line; and the Ascentia  line  of  notebook
computers.   Within  these brands, the Company offers  a  variety  of  products,
including high-end Pentium(R) and Pentium(R) Pro processor-based desktop systems
and  servers, and color notebooks.  The Company's personal computers incorporate
either  Industry  Standard  Architecture  ("ISA"),  Extended  Industry  Standard
Architecture  ("EISA"),  or  Peripheral  Component  Interconnect   ("PCI")   Bus
Architecture  and are compatible with major industry standard operating  systems
including  MS-DOS(R),  UNIX/XENIX,  SCO UNIX,  Novell  NetWare(R),  OS/2(R)  and
Windows  NTTM.  The Company continues to pursue a strategy whereby its  products
retain  their  compatibility  with new major  industry  standards  as  they  are
developed.

     The Company believes that its strategy of establishing a worldwide presence
in  countries  with  established markets and those with developing  markets  for
computer  products  and of providing products that meet  local  needs,  such  as
customized  systems  and local language documentation, has provided  significant
opportunity  for  revenue growth in these international markets.   International
revenues contributed 45%, 55%, 44% and 35% of total revenues in the fiscal  year
ended December 28, 1996 ("fiscal year 1996"), transition period 1995, and in the
fiscal  years ended July 1, 1995 ("fiscal year 1995") and July 2, 1994  ("fiscal
year 1994"), respectively.

PRODUCTS

      The  Company's business strategy is to be among the first to  market  with
leading-edge  technologies,  which allows the Company's  computer  reseller  and
dealer customers to provide attractive, profitable alternatives to the Company's
indirect  channel  competitors, as well as direct market competitors,  including
mail  order  companies.  The Company's products include desktop systems,  mobile
systems,  and file servers under the Advantage!, Adventure, Bravo, Ascentia  and
Manhattan  brand  names.  Products within these families are  designed  to  meet
multiple  performance levels and price points and have received multiple  awards
for ingenuity and performance from leading trade publications.

      During  fiscal year 1997, the Company intends to continue to  enhance  its
desktop  computer  product  lines  with faster  processing  power  and  enhanced
features  to satisfy the complex needs of the home, small-business and corporate
user.  The Company also plans to expand its mobile computing solutions with high
-performance,  leading-edge notebook solutions and value-based consumer oriented
models.   In  addition, the Company intends to continue to introduce new  server
products, technologies and computing solutions for the network environment.  The
foregoing forward-looking statements involve risks and uncertainties that  could
cause  actual  results  to  differ materially  from  anticipated  results.   See
"Additional  Factors That May Affect Future Results" under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Advantage!/Adventure!

    Designed  for  home  and  home office users, the  Company's  Advantage!  and
Adventure!  PCs  are sold through consumer retail locations and include  popular
educational and entertainment multimedia software titles, as well as the  latest
in  hardware  technologies, including Intel Pentium(R) MMX and Intel  Pentium(R)
Pro micro-processors.  Systems are configured for ease of use, complete with  CD
stereo,  full-motion  video, telephone answering and voice mail  systems,  high-
speed  fax/data  modems,  and  a  selection of  pre-installed  software  titles,
including on-line services.

Bravo

      The  Bravo  desktop  line  is the Company's value-based  price/performance
leader  providing entry-level to high-performance systems which are designed  to
handle  today's  increasingly  demanding business  applications  including  word
processing,  electronic  mail,  database management,  spreadsheet  calculations,
Computer  Aided  Design  ("CAD"), graphics, and financial/statistical  analysis.
Bravo  systems  are affordably priced and offer users a choice of super-powerful
processors, PCI-based graphics, the expansion power and flexibility of a PCI bus
and support for future upgrades via Plug-n-Play and DMI standards.

Ascentia

      The  Company's  line  of  Ascentia notebook computers  provides  traveling
professionals,  home  office users and students with a wide  variety  of  mobile
computing solutions.  Features include the latest technologies such as  powerful
Intel  Pentium(R) micro-processors, full-size keyboards, large display  screens,
CD-ROMs,  multimedia  support with 16-bit Sound Blaster audio  and  dual  stereo
speakers,  wireless communications, and long-lasting batteries with  intelligent
power management capabilities.

Manhattan

      The  Company's Manhattan server products are designed to provide solutions
tailored  to  a variety of user needs, with scaleable power to offer  enterprise
networks  optimum  flexibility and dedicated Internet and/or  Intranet  service.
They  include  critical networking software to simplify network  management  and
enhance  ease-of-use.  Designed to meet current and future  multi-user  and  LAN
operating  systems  standards,  including Novell NetWare  and  the  increasingly
popular  Windows(R) NT and Intel Pentium(R) Pro combinations, Manhattan  servers
also  are  bundled  with  free training courseware  to  quickly  integrate  into
corporate and small business environments.

ASTVision

     ASTVision monitors offers personal computer users who operate with graphic-
intensive  Windows(R)  software applications a choice of high  quality  displays
available  in  various  popular  sizes.  The  product  line  includes  the  low-
radiation, multi-sync color ASTVisionTM 4I, 5L, 5M, 5V, 7L and 20H models, which
feature anti-glare/anti-static glass.  Each is designed to conform to VESA  DPMS
(Display  Power  Management Signaling) and NUTEK standards and most  models  are
Plug-n-Play ready.

PRODUCT DEVELOPMENT

   Due  to  the  rapid  pace  of advances in personal computer  technology,  the
Company's success depends on, among other things, the timely introduction of new
products  that  are accepted in the marketplace.  Accordingly,  the  Company  is
actively  engaged  in  the  design  and development  of  new  products  and  the
enhancement  of  existing products.  During fiscal year  1996,  transition  year
1995,  fiscal  year  1995, and fiscal year 1994, the Company's  engineering  and
development  expenses were $40,702,000, $19,608,000, $36,383,000 and $38,858,000
respectively.    The   Company  plans  to  increase  its   product   development
capabilities  and  resources during fiscal year 1997.   The  foregoing  forward-
looking  statements  involve risks and uncertainties  that  could  cause  actual
results  to  differ materially.  See "Additional Factors That May Affect  Future
Results"  under  Item  7,  "Management's Discussion and  Analysis  of  Financial
Condition and Results of Operations."

   The  Company's long-standing relationships with major hardware  and  software
developers  such  as Intel Corporation, Microsoft Corporation  and  Novell  Inc.
assist the Company in quickly bringing new technologies to the marketplace.  The
Company  also  works  with  these developers to test the  compatibility  of  new
hardware  and  software  and to design software support  programs  enabling  the
Company to introduce products incorporating the latest hardware technology  that
are capable of operating the most current software available in the marketplace.

      The Company maintains its firm commitment to the establishment of industry
standards and actively participates in their development.  The Company  was  one
of  the  nine  original  high  technology companies which  participated  in  the
development of EISA and also played a key role as a steering committee member in
the  development  of the Desktop Management Interface (DMI) specification.   The
Company  has also incorporated some of industry's latest technologies, including
the  Pentium(R)  and Pentium(R) Pro processors and PCI bus, across  all  product
lines.

      The  Company believes that its technical expertise is a key factor in  its
development  of  new and innovative products.  The Company's  engineering  staff
uses  the  latest tools to assist in the development of new products and  enable
faster  adaptation of the latest technologies within the manufacturing  process.
In addition, the Company continues to utilize third-party printed circuit boards
in  the  majority of its product lines in order to support its first  to  market
business strategy.

MANUFACTURING

      The  Company's manufacturing operations include procurement and inspection
of  components  and assembly, testing and packaging of finished  products.   The
Company's  manufacturing and warehouse facilities include  over  955,000  square
feet  of  capacity and are located in Fort Worth, Texas, Hong Kong, the People's
Republic of China ("PRC") and Limerick, Ireland.

      During fiscal year 1996,  the Company continued to modify its worldwide 
manufacturing strategies in order to continue to improve its manufacturing 
efficiencies.   The Company  completed  the closure of its Taiwan manufacturing 
facility  in  fiscal year  1996  and outsourced the sub-assembly of its mobile 
computers to Taiwanese and  Korean  strategic partners.  The Company's desktop 
and server products are manufactured  in facilities located in Texas, Ireland 
and the  PRC.   The  final assembly for the Company's mobile products occur in 
both Texas and Ireland.  The Company's  three regional manufacturing sites 
provide an efficient manufacturing model for desktop, server and mobile products
and offer closer proximity to the Company's customers, thereby improving the 
Company's ability to deliver product to the market on a timely basis.

   In  support  of  its  worldwide strategy, in fiscal  year  1996  the  Company
completed  the closure of its printed circuit board ("PCB") assembly  operations
in  the PRC.  Concurrent with the closure of its PCB operations, the Company has
developed strategic alliances with key suppliers to manufacture PCB assemblies.

   Despite these changes in fiscal year 1996, the Company intends to continue to
assess its worldwide manufacturing capacity in an effort to continue to increase
efficiencies, reduce costs and improve product deliveries.

     The Company currently procures all of its components from outside suppliers
including Samsung and its related companies.  The Company's factory sites are in
close  proximity  to  many key international vendors.   Source  inspections  are
conducted at the plants of selected strategic suppliers, while some other  parts
are   sampled  for  inspection  upon  receipt  at  the  Company's  manufacturing
facilities.

      Increases  in  demand  for personal computers have created  industry  wide
shortages  of  components, which at times have resulted in premium prices  being
paid   for   key   components,  such  as  flat  panel  video  display   screens,
microprocessors, CD-ROM drives and monitors.  These shortages have  occasionally
resulted  in  the Company's inability to procure these components in  sufficient
quantities  to  meet  demand for its products.  In addition,  a  number  of  the
Company's  products  include certain components, such as microprocessors,  video
chips,  core  logic, lithium ion batteries, modems, Static Random Access  Memory
chips and Application Specific Integrated Circuits, that are currently purchased
from single sources due to availability, price, quality or other considerations.
These  single source component suppliers vary over time.  The Company  purchases
components pursuant to purchase orders placed in the ordinary course of business
and  has  no  guaranteed  supply  arrangements  with  single  source  suppliers.
Reliance  on  suppliers generally involves risks, including the  possibility  of
defective  parts, a shortage of components, an increase in component  costs  and
disruptions in delivery of components.  Should delays, defects or shortages  re-
occur  or  component costs significantly increase, the Company's net  sales  and
profitability  could  be adversely affected.  The Company attempts  to  mitigate
these  potential risks by working closely with major suppliers on product  plans
and coordinated product introductions.  Although no assurances can be given, the
strategic  relationship  formed  with Samsung  could  further  reduce  the  risk
associated  with  the  procurement of some of these components.   The  foregoing
forward-looking  statements  involve risks and uncertainties  that  could  cause
actual  results to differ materially from anticipated results.  See  "Additional
Factors  That May Affect Future Results" under Item 7, "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."

      The  Company's  notebook  products are  manufactured  by  outside  vendors
including  Quanta Computer, Inc. and Compal Electronics, Inc. in Taiwan.   These
OEMs  are  subject  to  the  risks  inherent in notebook  computing  technology,
development and manufacturing.  As a result, the Company's ability to bring  its
notebook products to market is highly dependent upon the ability of these third-
party  vendors  to effectively design, develop and manufacture  these  products.
Should  these  companies  not  be able to design,  develop  or  manufacture  the
Company's  products in a timely manner, the Company's net sales, cash flows  and
profitability  could be adversely affected.  See "Additional  Factors  That  May
Affect  Future Results" under Item 7, "Management's Discussion and  Analysis  of
Financial Condition and Results of Operations."

      The PRC, in which the Company has manufacturing capacity, has a history of
political  instability.  The Company also  utilizes  various  notebook  and  PCB
assembly  subcontractors  in Taiwan.  Political tensions  between  the  PRC  and
Taiwan  could  adversely  affect  the  Company's  operations,  particularly  its
notebook production.

      Quality  and  reliability are emphasized in the  development,  design  and
manufacture  of the Company's products.  The Company continues to focus  on  new
product introductions through a process of concurrent product and process design
efforts,  which attempt to simplify and streamline the manufacturing process  in
the  earliest stages of product design.  Products undergo quality inspection and
testing   throughout   the  manufacturing  process.   Additional   manufacturing
verification  and  testing  programs include root cause  analysis,  as  well  as
customer audit programs that consist of extended diagnostic, software and  early
life  reliability testing of products randomly taken from finished  goods.   The
Company's  goal  is  to  continuously enhance its  manufacturing  procedures  to
include comprehensive quality management processes.

      In  fiscal year 1996, the Company achieved and/or maintained certification
and  registration under ISO 9000, section 9001 or 9002, for the quality  systems
used  in  its  service  center  in  the United  Kingdom  and  its  manufacturing
operations  in  Limerick, Ireland, Fort Worth, Texas and the PRC.   All  of  the
Company's manufacturing operations have ISO certification and registration.

MARKETING AND SALES

      The  Company  employs  a  worldwide  multi-channel  indirect  distribution
strategy  which allows it to reach a variety of customers in most  major  market
segments.  Each channel provides the Company with access to specific market  and
customer  segments.   The  Company's strategy is to  differentiate  itself  from
others  by  being more responsive to customers and by being the first  to  bring
leading-edge  products to market through indirect channels via  its  established
network  of  authorized dealers and resellers.  The Company  believes  that  its
success in building its network of dealers and resellers is largely due  to  the
Company's product line breadth, the quality and reliability of its products, its
dedication  to the channel, the responsiveness of its employees,  and  the  high
level  of service and support provided by the Company. The Company continues  to
focus  on selectively broadening its distribution channels and enhancing channel
relationships  to further its growth objectives.  If the Company  is  unable  to
deliver  leading edge products to this channel on a timely basis, its net  sales
and profitability will be adversely affected.

      The  Company's worldwide sales organization is organized into three  major
geographical groups:  the Americas, which includes the United States and Canada;
Europe;  and Asia Pacific, which includes Asia, the Pacific Rim and  the  Middle
East.

Americas Distribution

      The  Company's Americas indirect distribution channels include  authorized
independent resellers and dealers, national reseller organizations, national and
regional   distributors  and  aggregators,  systems  integrators  and   consumer
retailers.   The Company sells directly and indirectly to large  VADs  and  VARs
that  typically  purchase  personal  computers  and  add  enhancement  hardware,
software  and service to provide the total system solution, which are then  sold
in  a  variety  of  vertical  and horizontal markets.   The  Company's  national
reseller  organization  accounts include customers  such  as  CompuCom  Systems,
MicroAge,  and  ENTEX  Information Services, Inc.  The Company  also  sells  its
products  to  smaller dealers and resellers through major national  distributors
including Ingram Micro, Merisel and Tech Data Corporation.

     The Company's Advantage! line is designed for small office and home use and
is  marketed  primarily  by  consumer  retail  chains  including  Computer  City
Supercenters; Price/Costco Wholesale Club Stores; Sam's Wholesale Club and  Wal-
Mart Stores.

International Distribution

     The Company operates internationally through subsidiaries and sales offices
in  44  locations  worldwide.  In countries where  the  Company  does  not  have
subsidiary  operations,  products are sold to retail dealers  and  distributors.
The  Company plans to continue to expand its international business  within  the
Europe  and  the Asia Pacific regions during fiscal year 1997.  The Company  may
also  pursue  limited  expansion plans within certain  developing  countries  as
opportunities arise.

      Success  and profitability of international operations could be  adversely
affected by conditions that may not impact the Americas region, including  local
economic conditions, political instability, tax laws and changes in the value of
the U.S. dollar.  See Item 7, "Management's Discussion and Analysis of Financial
Condition  and  Results of Operations" and "Additional Factors That  May  Affect
Future Results" therein.

Service and  Support

      The  Company  believes  that customer support, service  and  training  are
crucial  to maintaining strong relationships with its customers and attempts  to
provide  a high level of service and support in order to differentiate  it  from
other  manufacturers in the personal computer industry.  The Company provides  a
comprehensive  collection  of services for its products  through  its  "Customer
Care" program.  AST Customer Care offers technical support to resellers, dealers
and  end-users  through  access to toll-free telephone lines;  AST-Lifeline,  an
interactive  technical  support system that incorporates  Radish  Communications
Systems VoiceView(R) TALK SHOPTM integrated voice and data protocol with  custom
AST  technical  support  software; AST On-Line!, a 24-hour  electronic  bulletin
board  system;  AST  Info-Fax,  which allows access  to  a  broad  selection  of
technical support documentation via facsimile 24-hours a day; AST Pronto! Pro, a
CD-ROM  based  reference utility program; and a technical support alliance  with
leading  network and operating system suppliers for one-stop support  in  multi-
vendor  networked environments.  In addition, the AST On-Line! service has  been
expanded  to  be  available through the CompuServe(R), Prodigy(R),  and  America
OnLine(R) information services, and through an AST bulletin board system,  which
includes Remote Imaging Protocol (RIPscrip).  The Company's support services are
further  augmented by AST InfoLINE, an interactive voice response  system  which
includes  automated  problem  diagnostics  as  well  as  automated  fax-response
diagnostics.

      Parts  and labor warranties on the Company's computers range from  one  to
three  years in length, depending on product type.  Service is provided  by  AST
authorized dealers, third-party maintenance organizations and the Company's  in-
house  service  and  support  organization.   Trained  service  technicians  are
available  in  more than 1,200 AST authorized service centers.   Included  among
these  service centers are more than 800 Authorized Service Centers (ASC),  over
250  Advanced  System  Support  Centers (ASSC)  and  at  least  200  third-party
maintenance locations.  In addition, international customers can be serviced  on
a  carry-in basis by any of the authorized AST Service Providers located in more
than   30   countries  around  the  world.   AST  Customer  Care  also  provides
comprehensive  protection for notebook users through the ExeCare PlusSM  service
program.   Expedited repair of any AST notebook product anywhere in  the  United
States  is  available under the ExeCare PlusSM service program. As an additional
upgrade  AST  offers  ExpressONESM, which provides overnight  notebook  exchange
anywhere  in  the  continental United States. The Company offers  the  AST  Self
Maintainer Support program to end-users who have a large installed base  of  AST
computers and internal information centers providing service and support  within
the organization.

      Many  of the Customer Care services provided in the U.S. are open  to  and
used  by  the  Company's  customers from around the  world.   In  addition,  the
Company's international subsidiaries have developed service and support programs
adapted  to the specific needs of local markets. The Company maintains  AST  On-
Line!  bulletin boards in many countries in both the Europe region and the  Asia
Pacific  region  ensuring  ease  of access to  software  drivers  and  technical
bulletins  as  well  as  providing  a  forum  for  distributing  more  localized
information.  With a significant installed base of system products and growth in
sales  throughout  the Europe region, the Company has supplemented  these  local
initiatives by establishing a centralized service and support capability  within
its  European Operations Center in Limerick, Ireland.  The European Call  Center
provides  multi-lingual help line services and technical support  to  resellers,
service  providers  and  end-users  in  mainland  Europe  and  the  UK  and   is
supplemented  by  separate specialist Call Centers supporting customers  in  the
Nordic  area and in the UK Consumer market.  The Company's network of  over  500
ASCs  and  Independent Service Providers in Europe provides warranty repair  and
enhanced  systems  support  services  for  end-users.   European  Resellers  and
Authorized  Service  Providers  are required  to  participate  in  Training  and
Certification  programs delivered through local subsidiaries and can  also  take
advantage  of the high level product and customer support resources  of  Systems
and  Field Engineers based in the subsidiaries.  Spare parts and repairs for the
Company's  Service  Channel  are provided by the  Company's  European  Logistics
Center  in  Limerick,  which  utilizes  express  courier  and  freight  handling
companies to ensure prompt delivery of replacement parts throughout the region.

      Within  the  Asia  Pacific region, service is provided by  AST  authorized
dealers,  third-party  maintenance  organizations  and  the  Company's  in-house
service  and  support organization.  Trained service technicians  are  available
throughout  the  Asia Pacific region in more than 160 ASCs  and  AST  authorized
dealers,  over  40  of  which are inside the PRC.  Express courier  and  freight
handling companies are also utilized in the Asia Pacific region to ensure prompt
delivery of replacement parts throughout the region.  In addition, Asia  Pacific
customers  can  be  serviced on a carry-in basis by any of  the  authorized  AST
Service  Providers  located in more than 30 countries  around  the  world.   AST
Customer  Care in the Asia Pacific region also provides comprehensive protection
for notebook users through the ExeCare service program.

Advertising

      The  Company  advertises its product domestically and  internationally  in
selected  computer trade, business and consumer publications  and  via  selected
broadcast  and  display  mediums throughout the world.   Through  the  Company's
cooperative advertising programs, the Company encourages its channel partners to
advertise  and  promote the Company's products by funding  a  portion  of  joint
advertising  and  promotion  efforts.  The Company also  participates  in  major
computer and business trade shows and field seminars around the world.

      Beginning  in  fiscal year 1996, the Company embarked on  more  aggressive
marketing  initiatives  to  increase demand for  the  Company's  products.   The
Company will continue to market aggressively in fiscal year 1997 to promote  its
products  and services and, to that effect, has recently hired a new advertising
agency.    The   foregoing   forward-looking  statements   involve   risks   and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
anticipated  results.  See "Additional Factors That May Affect  Future  Results"
under  Item 7, "Management's Discussion and Analysis of Financial Condition  and
Results of Operations."

Major Customers

      During fiscal year 1996, no single customer accounted for more than 10% of
the Company's net sales.

BACKLOG

      The  Company  orders raw materials and components to manufacture  products
according  to  its  forecast of near-term demand and  maintains  inventories  of
finished  products  in advance of receipt of orders from its customers.   Orders
from  retail  accounts are usually placed by the customer on an as-needed  basis
and  are usually shipped by the Company shortly after receipt.  Unfilled  orders
can  be, and often are, canceled or rescheduled to an earlier or later date with
little  or  no  penalty.   For  these reasons,  the  Company's  backlog  at  any
particular  time is generally not indicative of the future level of  sales.   In
addition,  cancellations  and rescheduling can adversely  impact  the  Company's
revenue and profitability.

PATENTS AND LICENSES

      The  Company  relies  on  a  combination of contract,  patent,  copyright,
trademark  and  trade secret laws to protect its proprietary  interests  in  its
products.   The  Company owns trademark registrations in the United  States  and
other  countries for many of its trademarks.  The Company owns numerous  patents
and  patent applications throughout the world relating to various aspects of its
products.

      The  Company  has  license  agreements  for  various  products,  including
operating  system  software  for its personal computer  systems  with  Microsoft
Corporation  and  IBM  Corporation, for which the Company  makes  payments.   In
addition,  the  Company  has  a  patent  cross-licensing  agreement   with   IBM
Corporation, that extends over the life of the covered patents, which is prepaid
and  is  being  amortized over the useful life of the patented technology.   The
Company has a patent cross-licensing agreement with Texas Instruments Inc., that
expires  December  31,  2000,  for  which the  Company  makes  periodic  royalty
payments.   The  Company  also  has various license agreements  for  application
software  which  it  distributes with its products, many of  which  require  the
Company  to  make  payments to the licensor.  Pursuant to a  Strategic  Alliance
Agreement  with  Samsung,  the  Company  entered  into  a  patent  cross-license
agreement with Samsung that expires on July 31, 2005, for which no payments  are
required.

COMPETITION

      Intense  competition  in the personal computer industry  continued  during
fiscal year 1996 and was characterized by frequent product introductions and  an
extremely aggressive pricing environment.  The Company's primary competitors are
other  computer  companies  that  offer  a  full  range  of  personal  computing
solutions, including IBM, Compaq Computer Corporation, Hewlett-Packard  Company,
Digital  Equipment Corporation, Dell Computer Corporation, Gateway  2000,  Inc.,
NEC/Packard Bell, Sony, and Toshiba.

      The  Company believes that one of its competitive advantages has been  and
continues to be the Company's commitment to its indirect channel partners.  This
indirect  channel focus, in addition to product branding, product  line  breadth
and  service  and  support,  should  enable the  Company's  products  to  remain
competitive  within the highly-competitive personal computer  marketplace.   The
Company's  focus  on  being  among the first to bring leading-edge  products  to
indirect  channel  customers should further strengthen its competitive  position
and  improve  its relationship with the indirect sales channel.   The  foregoing
forward-looking  statements  involve risks and uncertainties  that  could  cause
actual  results to differ materially from anticipated results.  See  "Additional
Factors  That May Affect Future Results" under Item 7, "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."

      The personal computer market continues to be intensely competitive.  As  a
result,  significant  price reductions were required across  all  product  lines
during  fiscal  year  1996, contributing to a decline in gross  profit  margins.
Characteristic  of  the  past  few  years, the  Company  expects  these  pricing
pressures to continue.  The ongoing introduction of new technologies across  all
of  the  Company's product lines is intended to enable the Company to keep  pace
with  rapid  market changes and to minimize the effect of continued  competitive
pricing.   However,  there can be no assurance that the Company  will  have  the
financial resources, marketing and distribution capability, or the technological
knowledge  to  compete  successfully.  In addition,  the  Company's  results  of
operations could be adversely impacted if it is unable to effectively  implement
its  technological  and  marketing  alliances  with  other  companies,  such  as
Microsoft  and Intel, and to manage the competitive risks associated with  these
relationships.

REGULATORY COMPLIANCE

FCC Regulations

      The  Federal Communications Commission ("FCC") in October 1979  and  April
1980  adopted  regulations  imposing  radio frequency  emanation  standards  for
computing  equipment.   The  regulations distinguish between  computing  devices
marketed  for use primarily in a commercial, industrial or business  environment
(designated  class  A) and computing devices marketed for  use  primarily  in  a
residential environment (designated class B).  All of the Company's products are
designed to comply with applicable FCC standards.

European Regulations

      Effective  December  31, 1995, all products entering  the  European  Union
("EU")  or  European Economic Area ("EEA") are required to bear the CE  marking.
This   marking  signifies  compliance  with  the  harmonized   Euro-Norm  ("EN")
standards  that are required for trade within the EU/EEA as adopted by  CENELEC,
the  European  Committee for Electrotechnical Standardization.  On December  31,
1995,   the   Electro-Magnetic  Capability  ("EMC")  directive  for  Information
Technology  Equipment  ("ITE")  became  a  mandatory  standard  and  all   other
conflicting  national standards were withdrawn.  The Company tests all  products
sold  into  the  European community to verify compliance.  The regulations  also
require  the  maintenance  of  a technical construction  file,  which  generally
consists  of  a collection of information describing the products and  how  they
conform  to the European requirements.  The Company maintains this file  in  its
Ireland manufacturing facility.  All required testing for the CE mark program is
performed in-house using a recently enhanced test chamber and testing site.

Effects of Environmental Laws

      Compliance with laws enacted for the protection of the environment to date
has had no material effect upon the Company's capital expenditures, earnings  or
competitive  position.   The  Company has successfully  been  involved  in  such
programs as the Environmental Protection Agency's Energy Star program.  Although
the Company does not anticipate any material adverse effects in the future based
on  the nature of its operations, there can be no assurance that such laws  will
not  have  a  material  adverse effect on the Company.  To  its  knowledge,  the
Company was not named as a defendant in any environmental lawsuits during fiscal
year 1996.

EMPLOYEES

      As  of  December 30, 1996, the Company had 4,151 employees, 1,580 of  whom
were  employed in manufacturing, 278 in engineering and 2,293 in  the  areas  of
general  management, sales, marketing and administration.  Of the  total,  2,176
were  employed in the Company's Americas region, 835 were employed in  the  Asia
Pacific  region  and  1,140  were employed in the Europe  region.   The  Company
believes  its  future  success will depend in part on its continued  ability  to
attract  and  retain highly qualified engineers, technicians and  marketing  and
management  personnel.   To  assist in attracting  qualified  employees  at  all
levels,  the  Company  has  adopted stock option,  performance  based  incentive
compensation, profit sharing and other benefit plans.  There can be no assurance
that  this  strategy will not require significant new grants or be effective  in
any  case, particularly in the event of a prolonged decline in the price of  the
Company's  common  stock.  The Company considers its employee  relations  to  be
good.  No employee of the Company is represented by a union.

      Compared  to December 1995, the Company's total headcount has declined  by
1,855  employees.  The decline is due to significant reductions in the Company's
Asia Pacific manufacturing operations and declines in Europe and in the Americas
as   a  result  of  staffing  reductions  related  to  various  down-sizing  and
restructuring activities.

BUSINESS SEASONALITY

      Although the Company does not consider its business to be highly seasonal,
it  has  historically experienced seasonally higher sales in the consumer retail
channel  in  the quarter ended in December, compared to other quarters,  due  to
strong holiday demand for some of its products.

ITEM 2.   PROPERTIES

   The  Company owns and occupies its worldwide headquarters facility in Irvine,
California.   The  232,000  square  foot  facility  accommodates  the  Company's
executive,  finance  and  administrative functions, the  Americas  region  sales
organization, and the global marketing and product divisions.  The Company  owns
and  occupies a 217,000 square foot manufacturing facility in Fort Worth, Texas,
with  an  adjacent  202  acres  of undeveloped  land.   The  Company  leases  an
additional  291,000  square  feet of manufacturing,  engineering,  and  customer
support  and  warehouse space in the Fort Worth area.  The Company  also  leases
approximately  59,000 square feet for regional sales offices and  95,000  square
feet  for  warehouse and distribution space for its Americas  sales  operations.
The  Company  is  currently obligated under a ten-year  lease  agreement  for  a
246,000  square foot facility in Fountain Valley, California, which  expires  in
1999.   This  facility was closed in February 1995 as part  of  a  restructuring
plan; 229,000 square feet of the facility are currently being subleased.

   The  Company  owns a 340,000 square foot manufacturing facility in  Limerick,
Ireland,  which  supplies  nearly all the desktop requirements  for  the  Europe
region.  In addition, the Company also leases approximately 262,000 square  feet
of  sales,  marketing, administration and warehouse facilities in various  other
countries throughout Europe.

   The Company leases an aggregate of 389,000 square feet of manufacturing space
in the PRC to service the domestic PRC and other Asia Pacific region markets. In
addition,  the  Company  leases approximately 118,000  square  feet  for  sales,
marketing,  and  administration offices and warehouse  facilities  in  the  Asia
Pacific  region.  The Company leases 69,000 and 27,000 square feet for warehouse
and  manufacturing activities and office space, respectively, in Hong Kong.   In
connection with the Company's restructuring of its manufacturing operations, the
Company  plans  to  close  68,000 and 54,000 square feet  of  its  manufacturing
facilities  in  Hong  Kong and in the PRC, respectively, in  fiscal  1997.   The
Company  also  leases 32,000 square feet of warehouse and office  space  in  the
Middle  East  with  an  additional 182,000 square feet  available  for  possible
expansion.

ITEM 3.   LEGAL PROCEEDINGS

   The  Internal  Revenue Service ("IRS") is currently examining  the  Company's
1989,  1990  and  1991  federal income tax returns.  In addition,  the  IRS  has
completed  its  examination of the Company's 1987 and 1988  federal  income  tax
returns  and  has  proposed  adjustments to the  Company's  federal  income  tax
liabilities  for  such  years.  Initially, the IRS had proposed  adjustments  of
approximately $12.6 million, plus accrued interest of $17.2 million.   Following
the  Company's request for an administrative conference to appeal  the  proposed
adjustments, the IRS Appeals Office returned the case to the Examination  Office
for  further  development, because the method used in determining  the  original
proposed  adjustments  was  not  adopted in the final  regulations.   Management
further  believes that any aggregate liability that may result  upon  the  final
resolution  of  the  proposed  adjustments for 1987  and  1988  or  the  current
examinations of 1989, 1990 and 1991 will not have a material adverse  effect  on
the   Company's  consolidated  financial  position  or  results  of  operations.
However,  management is unable to estimate the amount of any loss  that  may  be
realized in the event of an unfavorable outcome.

   The  Company  has been named as a defendant or co-defendant,  generally  with
other  personal computer manufacturers, including such companies as  IBM,  AT&T,
Unisys,  Digital  Equipment  Corporation, NEC,  Olivetti,  NCR,  Panasonic,  and
Matsushita,  in eighteen similar lawsuits, each of which alleges  as  a  factual
basis  the  occurrence of carpal tunnel syndrome or repetitive stress  injuries.
The  suits  naming the Company are just a few of the many lawsuits of this  type
which have been filed, often naming IBM and other major computer companies.  The
claims  against  the  Company total in excess of $100  million  in  compensatory
damages  and  punitive damages and additional unspecified amounts.  The  Company
has  denied or is in the process of denying the claims and intends to vigorously
defend  the  suits. The Company is unable at this time to predict  the  ultimate
outcome  of  these  suits.  Ultimate resolution of the  litigation  against  the
Company  may  depend  on progress in resolving this type of litigation  overall.
The  Company is currently unable to estimate the amount of any loss that may  be
realized  in the event of an unfavorable outcome.  However, before consideration
of  any potential insurance recoveries, the Company believes that the claims  in
the  suits  filed  against it will not have a material impact on  the  Company's
consolidated  financial  position or results of  operations.   The  Company  has
maintained various liability insurance policies during the periods covering  the
claims   above.    While  such  policies  may  limit  coverage   under   certain
circumstances, the Company believes that it is adequately insured.   Should  the
Company  not be successful in defending against such lawsuits or not be able  to
claim compensation under its liability insurance policies, the Company's results
of operations and financial condition may be adversely affected.

  The Company was named, along with twelve other personal computer companies, as
a  defendant in a lawsuit filed on March 27, 1995 in the Superior Court for  the
County  of Merced, California.  The case name for this March 27, 1995 filing  is
People  v. Acer, et al., and the complaint alleged that the Company has  engaged
in deceptive advertising and unlawful business practices in relation to computer
monitor  screen  measurements.  The People v. Acer lawsuit  was  resolved  by  a
Stipulated  Judgment that the Company signed along with representatives  of  all
other  defendants.   The  Company was named, along  with  three  other  personal
computer or monitor companies, as a defendant in a class action lawsuit filed on
May 2, 1995 in the Superior Court for the County of Marin, California.  The case
name  for  this May 2, 1995 filing is Kaplan, et al. v. Viewsonic, et  al.,  and
alleges  that  the  defendants have engaged in unfair business practices,  false
advertising and breach of implied warranty concerning the advertisement  of  the
size  of  computer monitor screens.  The Company was named, along with 37  other
defendants,  in a class action lawsuit, Long v. Packard Bell, et al.,  filed  on
August  21,  1995  in  the Superior Court for the County of Orange,  California,
which alleges certain claims concerning the advertising of the sizes of computer
monitors.  The Company was named, along with nine other defendants, in  a  class
action  lawsuit,  Randy Davis, Ph.D., Inc. v. AST Research,  et  al.,  filed  on
August  23,  1995 in Superior Court for the County of Orange, California,  which
alleges  certain  claims concerning the advertising of  the  sizes  of  computer
monitors.   The Company was named, along with 35 other defendants,  in  a  class
action  lawsuit,  Sutter  v. Acer, et al., filed on September  7,  1995  in  the
Superior  Court for the County of Sacramento, California, which alleges  certain
claims  concerning  the  advertising of the sizes  of  computer  monitors.   The
Company  was  named, along with 41 other defendants, in a class action  lawsuit,
Shapiro  v.  ADI Systems, Inc., et al., filed on August 14, 1995 in Santa  Clara
County,  California, which alleges certain claims concerning the advertising  of
the  sizes  of  computer monitors.  The Company was named, along with  29  other
defendants,  in  a  class action lawsuit, Maizes & Maizes,  et  al.,   v.  Apple
Computer  Inc., et al., filed on December 15, 1995 in Essex County, New  Jersey,
which alleges certain claims concerning the advertising of the sizes of computer
monitors.   The Company is currently unable to estimate the amount of  any  loss
that  may  be realized in the event of an unfavorable outcome of any or  all  of
these  similar  cases.   However, based on preliminary facts  available  to  the
Company,  management  does not believe that the outcome of these  disputes  will
have  a material adverse impact on the Company's consolidated financial position
or results of operations.

      The  Company  has been named, along with Samsung and certain  current  and
former  members  of the Company's Board of Directors, as a defendant  in  twelve
shareholder  class action lawsuits filed on or shortly after January  31,  1997.
Eleven class action complaints were filed in the Court of Chancery in New Castle
County,  Delaware,  under case names Miller v. Kim, et  al;  Tepper  v.  Samsung
Electronics  Co., Ltd., et al.; Kenneth Steiner v. Kim, et al.; William  Steiner
v.  Kim,  et al.; Zeiff v. AST Research, Inc., et al; Schultz v. Choo,  et  al.;
Ungar v. AST Research, Inc. et al.; Schnoll v. AST Research, Inc., et al.;  Krim
v.  AST  Research,  Inc., et al.; Jaroslawicz v. Kim, et  al.;  and  Rattner  v.
Samsung  Electronics Co., Ltd.  A separate class action complaint was filed  but
not  served on January 31, 1996 in the Superior Court for the County of  Orange,
California, under case name Sigler v. AST Research, Inc., et al.  The Plaintiffs
allege  that the defendants have engaged in an unlawful scheme to enable Samsung
to acquire all outstanding shares of the Company's stock not previously owned by
Samsung  for  inadequate  consideration and  in  violation  of  the  defendants'
fiduciary duties.  The plaintiffs seek to enjoin Samsung's proposed purchase  of
the  Company's  outstanding  shares and request  unspecified  monetary  damages,
including  attorney  and  expert fees and costs.   On  February  27,  1997,  the
plaintiffs in the Delaware cases submitted a proposed Order of Consolidation  to
the court, which has not yet been entered.  The litigation is in its preliminary
stages.   The Company is unable at this time to predict the ultimate outcome  of
these lawsuits.

      The  Company  is also subject to other legal proceedings and  claims  that
arise  in the normal course of business.  While the outcome of these proceedings
and  claims cannot be predicted with certainty, management does not believe that
the  outcome of any of these matters will have a material adverse effect on  the
Company's  consolidated  financial  position  or  results  of  operations.   The
foregoing forward-looking statements involve risks and uncertainties that  could
cause  actual  results  to  differ materially  from  anticipated  results.   See
"Additional   Factors  That  May  Affect  Future  Results"  under  "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No  matters were submitted to a vote of security holders during the  three
months ended December 28, 1996.


PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      AST's  common  stock  is  traded  on the over-the-counter  market  (Nasdaq
National Market System) under the symbol ASTA.  Set forth below are the high and
low  closing  sales  prices  for  the Company's common  stock  for  the  periods
indicated.   On  October 26, 1995, the Company changed its fiscal year-end  from
the  Saturday  closest to June 30 to the Saturday closest to December  31.   The
change  in  fiscal year-end was effective for the six months ended December  30,
1995.


                                           HIGH          LOW


          Fiscal year ended December 28, 1996:

          1st Quarter                  $   8 - 7/8    $  4 - 49/64
          2nd Quarter                      8 - 1/4       4 - 3/4
          3rd Quarter                      7 - 1/8       4 - 1/2
          4th Quarter                      5 - 5/8       4


          Six months ended December 30, 1995:

          1st Quarter                  $  16 - 3/8    $ 10
          2nd Quarter                     10 - 1/16      7 - 7/8


          Fiscal year ended July 1, 1995:

          1st Quarter                  $  19 - 1/4   $  12
          2nd Quarter                     16 - 1/4      10 - 3/8
          3rd Quarter                     17            13 - 1/8
          4th Quarter                     19 - 1/8      13 - 1/2


      There were approximately 952 security holders of record as of February 21,
1997.   The Company has not paid dividends to date and intends  to  retain  any
future earnings for use in the business.

ITEM 6.  SELECTED FINANCIAL DATA

      The following data has been derived from consolidated financial statements
that  have  been  audited  by  Ernst & Young  LLP,  independent  auditors.   The
information  set  forth below is not necessarily indicative of  the  results  of
future  operations  and  should  be read in conjunction  with  the  consolidated
financial statements and notes thereto appearing elsewhere in this Annual Report
on Form 10-K.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                As of or for     As of or for
                                 the Fiscal        the Six               As of or for the Fiscal Year Ended
                                 Year Ended      Months Ended      ----------------------------------------------
(In thousands, except           December 28,     December 30,      July 1,       July 2,     July 3,     June 27,
   per share amounts)               1996             1995            1995          1994        1993         1992
---------------------------------------------------------------------------------------------------------------------
<S>                           <C>             <C>             <C>           <C>           <C>          <C>
Net sales                      $  2,068,643    $   1,016,283   $  2,467,783  $  2,367,274  $ 1,412,150  $   944,079
Revenue from related party           35,000                -              -             -            -            -
Total revenue                     2,103,643        1,016,283      2,467,783     2,367,274    1,412,150      944,079
---------------------------------------------------------------------------------------------------------------------

Gross profit (loss)                  24,868          (16,875)       245,675       347,733      285,698      293,260

Operating income (loss)            (385,108) (1)    (215,196) (2)  (105,690)       53,989 (3)  (64,578) (4)  97,526
---------------------------------------------------------------------------------------------------------------------

Net income (loss)                  (417,715)        (225,006)       (99,309)       31,309      (53,738) (6)  68,504
---------------------------------------------------------------------------------------------------------------------
                                                           
Net income (loss) per share (5) $     (8.22)   $       (5.27)   $     (3.07)  $      0.96  $     (1.72)   $    2.16
---------------------------------------------------------------------------------------------------------------------
Shares used in computing net
  income (loss) per share   (5)      50,827           42,721         32,371        32,548       31,289       31,758
=====================================================================================================================

Cash and short-term
  investments                  $     61,063    $     125,387    $    95,825   $   153,118  $   121,600    $ 140,705

Working capital                     (41,049)         223,546        306,872       444,974      301,046 (6)  332,793

Total assets                        831,057        1,056,042      1,021,501     1,005,620      886,159 (6)  580,613
---------------------------------------------------------------------------------------------------------------------

Long-term debt                      131,737          125,540        219,224       215,294       92,258 (6)    2,431

Total shareholders' equity     $     12,140    $     310,882   $    263,238  $    361,762  $   318,806    $  63,267

Shares outstanding at end
  of period                          57,758           44,679         32,413        32,334       31,579       30,787
=====================================================================================================================
</TABLE>

(1)  Includes a pretax restructuring charge of $6.5 million and other pretax
     charges of $26.4 million.  See Notes 2 and 3 of Notes to Consolidated
     Financial Statements.
(2)  Includes a $13 million pretax restructuring charge.  See Note 2 of Notes
     to Consolidated Financial Statements.
(3)  Includes a $12.5 million pretax credit from the reversal of excess
     restructuring charge amounts not utilized.  See Note 2 of Notes to
     Consolidated Financial Statements.
(4)  Includes  a  $125 million pretax restructuring charge.  See Note 2 of
     Notes to Consolidated Financial Statements.
(5)  Fully diluted earnings (loss) per share and shares used in computing
     fully diluted earnings (loss) per share were not materially  different
     from primary earnings (loss) per share and shares used in computing
     primary earnings (loss) per share, except in fiscal year 1994, when such
     amounts were $0.95 and 34,866 shares, respectively.
(6)  Effective June 30, 1993, the Company purchased certain net assets of
     Tandy Corporation's personal computer business.  The Company's 
     Consolidated Statements of Operations do not include the revenues and
     expenses of the acquired business until fiscal year 1994.  See Note 2 of
     Notes to Consolidated Financial Statements.


ITEM  7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

(Amounts in tables in thousands, except per share amounts)

       The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                              Percentage of Total Revenue
                                         ---------------------------------------------------------------------------
                                                          Twelve          Six            Six          Fiscal Year
                                         Fiscal Year      Months         Months         Months          Ended
                                            Ended         Ended          Ended          Ended     ----------------
                                         December 28,  December 30,   December 30,   December 31,  July 1,June 2,
                                             1996          1995          1995            1994        1995   1994
                                                       (Unaudited)                   (Unaudited)
--------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>            <C>            <C>       <C>      <C>
Net sales                                    98.3%        100.0%         100.0%         100.0%     100.0%  100.0%
Revenue from related party                    1.7             -              -              -          -       -
--------------------------------------------------------------------------------------------------------------------
Total revenue                               100.0         100.0          100.0          100.0      100.0   100.0
Cost of sales                                98.8          94.7          101.7           90.9       90.0    85.3
--------------------------------------------------------------------------------------------------------------------
Gross profit (loss)                           1.2           5.3           (1.7)           9.1       10.0    14.7
--------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 16.0          13.9           16.3           13.5       12.8    11.3
Engineering and development expenses          1.9           1.6            1.9            1.6        1.5     1.7
Restructuring charge (credit)                 0.3           0.6            1.3              -          -    (0.5)
Other charges                                 1.3             -              -              -          -       -
--------------------------------------------------------------------------------------------------------------------
Operating income (loss)                     (18.3)        (10.8)         (21.2)          (6.0)      (4.3)    2.2
Financing and other expense, net             (1.6)         (0.8)          (0.9)          (0.5)      (0.7)   (0.3)
--------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes           (19.9)        (11.6)         (22.1)          (6.7)      (5.0)    1.9
Income tax provision (benefit)                 -           (0.4)             -           (1.3)      (1.0)    0.6
--------------------------------------------------------------------------------------------------------------------
Net income (loss)                           (19.9%)       (11.2%)        (22.1%)         (5.4%)     (4.0%)   1.3%
====================================================================================================================
The following table represents selected key asset turnover ratios for the periods indicated:

Days total revenue in accounts receivable    68.5          52.9           69.5            62.6       57.6    49.6
Inventory turnover                           15.0           8.8            8.1             7.2        7.1     6.1
====================================================================================================================
</TABLE>

FISCAL YEAR 1996 AND THE TWELVE MONTHS ENDED DECEMBER 30, 1995

Total Revenue

   Net  sales  decreased 12% to $2.068 billion in fiscal year 1996 from $2.348
billion in the comparable prior-year period.  This decrease was caused primarily
by  a  22%  decline  in  international sales due to  the  extremely  competitive
worldwide selling and pricing environment, the Company's ongoing 
restructuring activities,  which  have  resulted in both the closure and 
downsizing of various  international subsidiaries  during the year, and 
development  delays of certain products.  Also contributing to lower sales 
were the Company's increased fiscal year 1996 sales of consumer desktop 
products, which carry lower average selling prices.  In response to the 
extremely competitive worldwide selling and pricing environment, the Company 
has continued to take aggressive pricing actions within all of its regions.   
The  Company anticipates  that the industry's competitive pricing environment 
will  continue, and  as  a  result,  that future pricing actions may be 
necessary  in  order  to maintain its competitive price and performance
product profile.  However,  there can be no assurance that future pricing 
actions will be effective in maintaining existing unit sales or in 
stimulating unit sales growth.

  The Company's worldwide unit shipments decreased 6% during fiscal year 1996 to
1,297,000  units  from  1,380,000  units in the  comparable  prior-year  period.
Average  selling prices for the Company's products declined during  year  fiscal
1996 due primarily to the introduction of a sub $1,000 multimedia desktop system
made  exclusively for Wal-Mart.  The Company may continue to sell similar $1,000
price-level systems which could continue to impact the Company's overall average
selling  prices.   The foregoing forward-looking statements  involve  risks  and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
anticipated  results.  See "Additional Factors That May Affect  Future  Results"
herein.   The  decrease in fiscal year 1996 sales resulting from decreased  unit
shipments  was partially offset by increased shipments of Pentium(R)  processor-
based  desktop  systems and notebooks, which generally sell  at  higher  average
selling prices than other products.

   Net  sales  from desktop system products decreased 15% to $1.462  billion  in
fiscal  year 1996 from $1.730 billion in the comparable prior-year period.   The
decline  can  primarily  be  attributed to lower  international  sales  and  the
competitive  pricing  environment.   Sales  of  the  Company's  desktop  systems
represented  71% of net sales for fiscal year 1996 as compared  to  74%  of  net
sales for the comparable prior-year period.

  Net sales from notebook computer products for fiscal year 1996 decreased 9% to
$360.3  million  from $397.5 million in the comparable prior-year  period.   The
decrease  resulted primarily from a decrease in fiscal year 1996 unit  shipments
of  8%  to 160,000 units from 173,000 units in the comparable prior-year period.
Net  sales  of the Company's notebook computer products represented 17%  of  net
sales for fiscal year 1996 and the comparable prior-year period.

  Net sales from the Company's Americas region, which includes the United States
and  Canada,  decreased 1% to $1.141 billion in fiscal year  1996,  compared  to
$1.152  billion  in  the  comparable  prior-year  period.   Net  sales  to   the
independent reseller/dealer sales channel decreased 33% in fiscal year 1996 from
the comparable prior-year period, and accounted for 47% of total Americas region
sales  compared  to  68%  in the comparable prior-year  period.   Sales  to  the
consumer  retail sales channel for fiscal year 1996 of $608.8 million  increased
65% over the comparable prior-year period sales of $369.6 million.  The increase
in  the consumer retail channel is primarily the result of comparative low prior
year  retail  channel  activity  and high fiscal  year  1996  shipments  of  the
Company's 486-based low cost multimedia desktop system.

   International  sales, which includes the Company's Europe  and  Asia  Pacific
regions, decreased 22% to $927.8 million in fiscal year 1996 from $1.196 billion
in  the  comparable prior-year period.  International sales represented 45%  and
51% of net sales  fiscal  year  1996 and the  comparable  prior-year  period,
respectively.  Net  sales  from the Company's Europe region  decreased  18%  in
fiscal year 1996 from the comparable prior-year period primarily due  to  lower
demand for the Company's products, a generally slower economic environment,  and
the impact of the Company's decision to restructure its operations, which
involved the closure of certain European sales offices.

  Sales from the Company's Asia Pacific region, which includes Asia, the Pacific
Rim, and the Middle East, declined 32% in fiscal year 1996 from the comparable
prior-year period.  The decrease in net sales was primarily  attributable  to
sales  declines in the PRC, where reduced demand for the Company's products  was
caused by an unexpectedly rapid shift in both availability of and resulting
demand for Pentium(R) processor-based systems in the fiscal year.  Sales  into
the PRC accounted for approximately 3% of the Company's net sales in fiscal year
1996, compared to approximately 6% in the comparable prior-year period.  Also
contributing to the decline in sales into the PRC was a significant increase  in
competitive  pressures  within  the  PRC marketplace,  including  a  significant
increase  in  locally produced, low cost computers.  The Company  believes that
economic  factors  such as competitive pricing and a lower margin  customer  mix
will continue to impact this region's future sales and operating results.

  Although the PRC has historically provided the Company with significant sales,
future  sales  of the Company's products into the PRC are highly dependent  upon
continued favorable trade relations between the United States and the  PRC,  the
general economic  and  political stability of the region and the competitive
position of the Company in the local PRC marketplace.  Economic and political
risks in the countries in this geographical area could have a corresponding
impact on future  sales and operating results.  The foregoing  forward-looking
statements involve risks and uncertainties that could cause actual results  to
differ materially from anticipated results.  See "Additional Factors  That  May
Affect Future Results" herein.

   The results of the Company's international operations are subject to currency
fluctuations.   As the value of the U.S. dollar weakens relative to other
currencies, sales in those currencies convert to more U.S. dollars; conversely,
when the value of the U.S. dollar strengthens relative to other currencies,
sales in those countries convert to fewer U.S. dollars. Fiscal year 1996  net
sales were increased by 0.1%, compared to an increase of 2.2% in the comparable
prior-year period due to fluctuations in the average value of the U.S. dollar
relative to other currencies.

      Total revenue for fiscal year 1996 includes $25.0 million from an
Intellectual  Property Assignment Agreement dated June 27, 1996,  $5.0  million
from a Server Technology Transfer Agreement dated February 22, 1996  and  $5.0
million from a Strategic Consulting Agreement dated February 22, 1996, each  of
which is with Samsung.   The Intellectual Property Assignment Agreement assigns
certain patent applications of the Company to Samsung.   Samsung  purchased
certain  patent applications from the Company for $15 million during the  second
quarter  of  fiscal year 1996, and exercised an option to purchase an additional
group of patent applications for $10 million during the fourth quarter of fiscal
year   1996.   The  Server  Technology  Transfer  Agreement  and  the  Strategic
Consulting Agreement grant Samsung a royalty-free license through July 31,  2000
to use the technical information supplied by the Company  to  produce  server
technology products and to use various marketing and sales  planning  studies
provided  by  the  Company, respectively, in exchange for $5  million  for  each
agreement.  The payments from Samsung are not refundable nor are they contingent
upon  the rendering of future services by the Company.  A total of $35.0 million
related  to these agreements was recorded as revenue from related party  in  the
Consolidated Statements of Operations for fiscal year 1996.

Gross Profit

   The  Company's  gross margin for fiscal year 1996 was 1.2% of  total  revenue
compared  to  a gross margin of 5.3% in the comparable prior-year  period.   The
decrease  in  the Company's gross margin resulted primarily from  the  continued
aggressive  pricing  environment within the personal  computer  marketplace.  In
addition,  fiscal  year 1996 margins were negatively impacted  by  high  channel
inventory  levels  which,  during periods of rapidly declining  average  selling
prices,  resulted  in  additional  price protection  costs.   The  Company  also
encountered  selected internal product development issues in fiscal  year  1996,
which  led  to  temporary delays in the shipment of selected consumer  products.
Gross margins were also negatively impacted in fiscal year 1996 by the Company's
continued aggressive inventory management efforts, which resulted in both  lower
average  selling  prices  and  lower margins  on  certain  products.   Increased
warranty  and  excess and obsolete service inventory provisions also  negatively
impacted margins.  The increase in the warranty provision was due to an increase
in costs associated with increased warranty claims while the increased levels of
service inventory reserves were due to higher average service inventory levels.

   In  the  second  quarter  of  fiscal year  1996,  the  Company  approved  and
implemented a restructuring plan, separate and apart from the restructuring plan
implemented  in  transition period 1995, designed to restructure  its  worldwide
operations into three regional operating groups.  The Company's fiscal year 1996
plans included the consolidation and/or closure of certain regional offices  and
reconfiguration  centers  and  the  suspension  of  its  notebook  manufacturing
operations  in Taiwan, accompanied by the transfer of notebook manufacturing  to
third-party  OEMs.   As  a  result  of the closure  of  the  Company's  notebook
manufacturing  operations,  the  remaining  notebook  production  inventory  was
rendered  obsolete.  In addition, the Company closed a service facility  in  the
United Kingdom, resulting in excess and obsolete service inventory.  The Company
wrote  down  this  excess and obsolete inventory to its  net  realizable  value.
These  write-downs  were  charged to cost of sales, negatively  impacting  gross
margins  by  $2.8 million, which reduced gross margins by 0.1 percentage  points
for  fiscal year 1996.  The Company believes this charge is directly related  to
the restructuring and considers the charge to be non-recurring.

   The Company believes that the personal computer industry will continue to  be
characterized  by  rapid  technological advances and short  product  life-cycles
resulting in continued risk of product obsolescence.  If the Company's  products
become  technically obsolete, the Company's net sales and profitability  may  be
adversely  affected.  During fiscal year 1996, the Company and the  majority  of
its  competitors  continued  to introduce new, lower-priced,  higher-performance
personal  computers resulting in continued pricing pressures  on  both  new  and
older  technology  products.   The  personal  computer  industry  continues   to
experience significant pricing pressures and the Company believes that  industry
consolidation and restructuring will continue to result in an aggressive pricing
environment and continued pressure on the Company's gross profit margins  during
fiscal year 1997.

   The  effect  of  foreign currency fluctuations on sales has  a  corresponding
impact  on  gross profit/(loss), as the Company's production costs are  incurred
primarily in U.S. dollars.  This period-to-period currency fluctuation increased
by gross margins by 0.1 percentage points during fiscal year 1996.

  The Company's gross profit for fiscal year 1996 was improved by $35.0 million,
or  1.7 percentage points as a result of related party revenue transactions with
Samsung, as previously discussed.  The revenue from these transactions, totaling
$35.0  million,  was recorded as revenue from related party in the  accompanying
Consolidated Statements of Operations for fiscal year 1996.

Operating Expenses

   Total  selling, general and administrative expenses for fiscal year  1996  of
$336.4 million increased $9.0 million from the comparable prior-year period  and
represented  16%  of total revenue in fiscal year 1996, versus  13.9%  of  total
revenue  in the comparable prior-year period.  The increase in selling,  general
and  administrative expenses during fiscal year 1996 can be attributed to higher
advertising  and technical support costs, partially offset by lower payroll  and
related  expenses due to lower staffing levels.  Beginning in fiscal year  1996,
the  Company embarked on more aggressive initiatives to increase demand for  the
Company's products.  The Company will continue to market aggressively in  fiscal
year  1997  to promote its products and services.  The foregoing forward-looking
statements  involve risks and uncertainties that could cause actual  results  to
differ  materially from anticipated results.  See "Additional Factors  That  May
Affect Future Results" herein.

      Engineering  and development costs increased $3.3 million in  fiscal  year
1996  to  $40.7 million, compared to $37.4 million in the comparable  prior-year
period.   This  increase  resulted primarily from higher  engineering  materials
expense related to new product introductions.  Throughout fiscal year 1996,  the
Company  introduced  new  products  to each  of  its  product  lines,  including
Advantage!, Bravo, Premmia, Ascentia, and Manhattan.  During fiscal  year  1997,
the  Company  plans to continue to increase its product development capabilities
and  resources.   The  foregoing forward-looking statements  involve  risks  and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
anticipated  results.  See "Additional Factors That May Affect  Future  Results"
herein.

      The  personal  computer industry is characterized  by  increasingly  rapid
product  life  cycles.   Accordingly,  the Company  is  committed  to  continued
investment in research and development and believes that the timely introduction
of  enhanced  products with favorable price/performance features is critical  to
the  Company's  future  growth  and competitive  position  in  the  marketplace.
However,  there  can  be  no  assurance that  the  Company's  products  will  be
commercially successful or sufficiently technically advanced, or that it will be
able to deliver adequate quantities of new products in a timely manner.

   In accordance with the Company's 1996 restructuring plan described above, the
Company  recorded a restructuring charge of approximately $6.5  million  in  the
quarter  ended  June  29,  1996.  Costs included  in  the  restructuring  charge
consisted primarily of employee severance, asset write-downs and provisions  for
lease  obligations.   Approximately $5.8 million was expected  to  involve  cash
disbursements  with  the remaining costs primarily involving asset  write-downs.
The  employee  severance  was expected to involve approximately  240  employees,
across  all  functions  and levels.  In fiscal year 1996, the  Company  incurred
aggregate  cash  expenditures  of $4.1 million  and  non-cash  charges  of  $0.3
million,  consisting  primarily of employee severance,  asset  write-downs,  and
payments  for  lease  obligations.  At December  28,  1996,  approximately  $2.1
million  of  the  restructuring accrual remained on the  Company's  consolidated
balance sheet, consisting primarily of provisions for lease obligations.  As  of
December 28, 1996, 250 employees have been terminated under this plan,  and  the
total  $3.1 accrued for severance payments had been paid.  At December 28, 1996,
the  majority  of the restructuring had been completed, although  certain  lease
obligations  will  continue through fiscal year 2001.   The  foregoing  forward-
looking  statements  involve risks and uncertainties  that  could  cause  actual
results  to differ materially from anticipated results.  See "Additional Factors
That May Affect Future Results" herein.

   In  addition to the Company's $6.5 million restructuring charge taken in  the
second  quarter of fiscal year 1996, the Company incurred other charges of  $4.7
million,  including $1.1 million in asset write-downs directly  associated  with
its  restructuring  activities  in Europe, and other  charges  of  $3.6  million
related  to benefits provided pursuant to the Founder's Agreement with  Safi  U.
Qureshey,  the Company's Chairman Emeritus (discussed below).  The Europe  asset
write-down  charge of approximately $1.1 million was provided  as  a  result  of
management's  decision to dispose of the existing sales facility in  France  and
represents  the  adjustment required to write-down the  carrying  value  of  the
facility  to  its estimated fair value less cost to sell.  The Company  believes
this charge is directly related to the restructuring and considers it to be non-
recurring.

   Effective  July  27,  1993, the Company entered into  a  separate  employment
contract  ("Founder's Agreement") with its founder and former  Chairman  of  the
Board  (now  Chairman Emeritus), Safi U. Qureshey, who was then serving  as  the
Company's  Chief Executive Officer.  The Founder's Agreement provided  for  five
years  of  salary, health and welfare benefits, two years of bonus, acceleration
of  stock options and certain other benefits if active employment was terminated
by the Company or by Mr. Qureshey under specified conditions.  On June 28, 1996,
the  Company  elected Kwang-Ho Kim as Chairman and named Mr.  Qureshey  Chairman
Emeritus,  which  would have resulted in Mr. Qureshey's being entitled  to  such
compensation  and  benefits  had he not agreed to  defer  effectiveness  of  the
Founder's Agreement to some future date of his choice.  As a result, the Company
provided $3.6 million during fiscal year 1996, representing the present value of
the benefits payable to Mr. Qureshey.

      Since  adoption  of Statement of Financial Accounting Standards  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be  Disposed Of", ("SFAS 121"), the Company has evaluated its long-lived  assets
for impairment on a quarterly basis.  As a result of an unexpected deterioration
in the Company's operating results for the third quarter of fiscal year 1996 and
the resulting impact on the Company's future expectations, the Company concluded
that  its  long-lived assets had become impaired.  The decline in the  Company's
revenue  and gross margin during the third quarter resulted primarily  from  the
Company's  inability  to generate sufficient demand for  its  products  and  the
continued aggressive pricing environment within the computer marketplace.  As  a
result, the Company updated its cash flow projections for purposes of evaluating
its  long-lived assets for impairment to reflect a reduced level of sales growth
and to adjust the period of time and rate by which gross margins are expected to
improve.

      In  accordance  with SFAS 121, the impairment loss equals  the  difference
between  the  carrying value of long-lived assets, including goodwill,  and  the
fair  value  of  the  long-lived assets.  Within the third fiscal  quarter,  the
Company  completed an estimate of the fair value of its long-lived assets,  and,
based   on  this  estimate,  the  Company  recorded  an  impairment  charge   of
approximately  $21.6 million.  The impairment charge consisted of the  remaining
net  book  value  of  goodwill acquired in connection with  the  Company's  1993
acquisition  of  Tandy  Corporation's ("Tandy") personal computer  manufacturing
operations.   The Company's estimate of the fair value of tangible  assists  was
based upon independent appraisals.  The Company's SFAS No. 121 analysis for  the
fourth  quarter  of fiscal year 1996, and appraisals, indicated  that  the  fair
value of its long-lived assets presently approximates their net book value.

Other Income and Expense

   In  fiscal  year 1996, the Company had net interest expense of $30.6  million
compared to $15.2 million in the comparable prior year period.  Interest expense
increased  by  $14.2  million,  primarily  as  a  result  of  $17.2  million  of
amortization expense for fiscal year 1996, associated with the cost of obtaining
a $200 million Samsung credit line guarantee in December 1995, and a second $200
million Samsung credit line guarantee in December 1996.

       Of   the  $33.4  million  in  interest  expense  for  fiscal  year  1996,
approximately $23.8 million did not require cash payments.  Approximately  $17.2
million  represented amortization of Samsung credit guarantees and approximately
$6.6  million  represented amortization of the discount and issue costs  on  the
Company's  $315 million par value of Liquid Yield OptionTM Notes ("LYONs")  that
were issued in 1993 and are due December 14, 2013.

      In  fiscal  year  1996, the Company recognized net other expense  of  $2.0
million  compared  to net other expense of $4.6 million in the comparable  prior
year  period.   Other expenses relate primarily to foreign currency  transaction
and  remeasurement gains and losses and the costs associated with the  Company's
foreign  currency  hedging activities.  The Company utilizes a  limited  hedging
strategy  which  is  designed to minimize the effect of  remeasuring  the  local
currency   balance  sheets  of  its  foreign  subsidiaries  on   the   Company's
consolidated  financial  position  and  results  of  operations.   See   further
discussion included under "Liquidity and Capital Resources."

Income Tax Provision (Benefit)

      In  fiscal year 1996 and for the comparable prior year period, the Company
recorded   an  effective  income  tax  provision  (benefit)  of  0%  and   (3%),
respectively.   The decrease in the comparable prior year period  effective  tax
rate  was  attributable to changes in the proportion of income earned or  losses
sustained within various taxing jurisdictions and the tax rates in the locations
in  which  those  earnings or losses were generated, as well  as  the  Company's
inability  to  benefit  from  certain deferred  tax  assets  that  include  loss
carryforwards.  The Company recorded net deferred tax assets of $60.5 and  $63.5
million at December 28, 1996 and December 30, 1995, respectively.

      Realization  of  the deferred tax assets, which primarily  relate  to  net
operating  loss carryforwards, inventory reserves and other accrued liabilities,
is  dependent  on  the Company generating approximately $143 million  of  future
taxable  income.   Although  the Company is primarily  relying  on  certain  tax
planning  strategies to generate such future taxable income, such  income  could
also arise from reversals of existing taxable temporary differences and/or sales
of  new  and  existing products.  The timing and amount of such  future  taxable
income  may be impacted by a number of factors, including those discussed  below
under  "Additional Factors That May Affect Future Results."  To the extent  that
estimates  of future taxable income are reduced or not realized, the  amount  of
the  deferred  tax asset considered realizable could be adversely  affected.  In
addition,  on  January  30,  1997 Samsung proposed to commence  negotiations  to
acquire of all of the outstanding shares not currently owned by Samsung  or  its
affiliates.   Should  the  transaction be completed as proposed,  the  Company's
ability  to realize a benefit from its net deferred tax asset, and a substantial
portion  of  the Company's deferred tax asset from net operating loss carryovers
that have been offset by a  valuation allowance, would be impaired.

Asset Turnover Ratios

   Days  total revenue in accounts receivable for fiscal year 1996 increased  to
68.5  from  52.9  days  in the comparable prior-year period.   The  increase  is
primarily due to increased competitive pressures which have required the Company
to offer  extended payment terms, primarily in the Company's  Europe  and  Asia
Pacific regions.

     Inventory turnover for fiscal year 1996 increased to 15.0 from 8.8 turns 
in  the comparable  prior-year  period.   The increase  is  primarily  due  
to  improved inventory and supply management practices implemented over the 
past year.

SIX MONTHS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1994

Total Revenue

      Net  sales for the six months ended December 30, 1995 ("transition  period
1995")  decreased 11% to $1.016 billion from $1.136 billion for the  six  months
ended  December  31,  1994 ("comparable prior-year period").   The  decrease  in
transition  period  1995 net sales was primarily due to lower 486-based  desktop
and notebook system sales, partially offset by higher Pentium(R) processor-based
desktop systems sales.  In transition period 1995, the Company's worldwide  unit
shipments  decreased  17% to 584,000 from 707,000 in the  comparable  prior-year
period.   The decrease in net sales resulting from decreased unit shipments  was
partially  offset  by increased shipments of Pentium(R) processor-based  desktop
systems,  which  generally  sell at higher average  selling  prices  than  other
products.

      Net  sales  from desktop system products decreased 2% to $753  million  in
transition  period 1995 from $765 million in the comparable prior  year  period.
The decrease can primarily be attributed to lower 486-based desktop system sales
including  the Advantage! and Bravo 486DX and 486SX systems.  Also  contributing
to  the decline was lower sales per unit on older products as the Company sought
to  aggressively sell these products.  These declines were partially  offset  by
higher sales per unit on Pentium(R) processor-based Advantage! and Bravo desktop
systems.   Decreased  sales  of  the  Company's  486-based  desktop  systems  in
transition  period  1995  are consistent with the shift  in  demand  toward  the
Pentium(R)   processor-based desktop systems, which accounted for 78%  of  total
desktop  systems  sales  dollars  and 68%  of  total  desktop  system  units  in
transition period 1995 versus 18% and 9%, respectively, in the comparable prior-
year period.

      Net  sales from the Company's notebook computer products decreased 28%  to
$168 million in transition period 1995 from $235 million in the comparable
prior-year period. The decrease in net sales of notebook computers reflects a 
39% decrease in unit shipments to 70,000 in transition period 1995 from 
115,000 in the comparable prior-year  period. The decline in notebook systems 
sales occurred in the Advantage! and Bravo notebook product lines.  Declines 
in  sales in the Company's 486-based Ascentia notebook computer line were 
generally offset by  increased  sales of Pentium(R) processor-based Ascentia 
notebook  computers, which  have  higher average selling prices per unit.  The 
39% decrease  in  unit shipments  was  partially offset by higher revenue per 
unit  on  the  Pentium(R) processor-based Ascentia notebook computer line, 
leading to the overall  decline in  net  sales  from  notebook products of 
28%.  Net sales  from  the  Company's notebook  computer products represented 
17% and 21% of net sales for  transition period 1995 and the comparable 
prior-year period, respectively.

     Net sales from the Company's Americas region, decreased 34% to $453 million
in transition period 1995, compared to $688 million in the comparable prior-year
period.  Sales to the independent reseller/dealer channel for transition  period
1995  decreased 24% compared to the comparable prior year period, and  accounted
for  73%  of total Americas region sales.  Sales to the consumer retail  channel
decreased 51% compared with the comparable prior-year period due to lower  Tandy
branded  system  sales  and the Company's decision to temporarily  reassess  its
position within the consumer retail channel.

     International sales increased 26% to $563 million in transition period 1995
from  $448 million in the comparable prior-year period.  International  revenues
represented  55%  and  39%  of  net  sales in transition  period  1995  and  the
comparable prior year period, respectively.  Net sales from the Company's Europe
region  increased 26% over the comparable prior-year period.  The United Kingdom
and  Sweden  were  major  contributors of  total  Europe  region  revenues  with
significant  transition  period 1995 revenue growth also  occurring  in  France,
Norway and Denmark.

      Net  sales  from the Company's Asia Pacific region contributed  to  a  25%
increase in transition period 1995 sales over the comparable prior-year  period.
The  increase in transition period 1995 sales was attributable to revenue growth
in  the  PRC",  Australia  and  Singapore.  Sales into  the  PRC  accounted  for
approximately  7%  of  the  Company's total  transition  period  1995  revenues,
compared with approximately 5% in the comparable prior-year period.

       The   Company  experienced  product  development  and  production  delays
throughout  transition period 1995, which contributed in part to  lower  desktop
and  notebook  systems sales.  In addition, continued industry-wide  competitive
pricing  pressures prompted aggressive pricing adjustments that further  reduced
desktop and notebook system sales.

      The  results  of  the Company's international operations  are  subject  to
currency  fluctuations.  The Company's total revenue was increased  by  2.3%  in
transition period 1995 compared to an increase of 2.0% in the comparable  prior-
year  period,  due  to  fluctuations in the average value  of  the  U.S.  dollar
relative to other currencies.

Gross Profit (Loss)

      The  Company's transition period 1995 gross loss was 1.7%  compared  to  a
gross  profit of 9.1% in the comparable prior-year period.  The decrease in  the
Company's   gross  margin  resulted  primarily  from  product  development   and
production  delays, which in turn led to delays in shipment  and  lower  average
selling  prices of the Company's fall product lines in transition  period  1995.
In  addition,  gross  margins  were negatively impacted  due  to  the  Company's
aggressive  inventory reduction efforts, which resulted in  both  lower  average
selling  prices  and lower margins.  The Company's margins were also  negatively
impacted  by  increased  warranty and service inventory  provisions.   Increased
levels  of  service  inventory  reserves were  required  due  to  the  continued
accelerated rate of product transitions and the resulting reduction  in  service
inventory  valuations.  The increase in the warranty provision  was  due  to  an
increase in both the cost and volume of warranty claims compared with the  prior
year.

      During  transition  period  1995, the Company  and  the  majority  of  its
competitors   continued  to  introduce  new,  lower-priced,   higher-performance
personal  computers resulting in continued pricing pressures  on  both  new  and
older technology products.

      The effect of foreign currency fluctuations on revenue has a corresponding
impact on gross profit, as the Company's production costs are incurred primarily
in U.S. dollars.  When comparing transition period 1995 to the comparable prior-
year  period,  the U.S. dollar declined against nearly all European  currencies.
This  period-to-period  currency  fluctuation resulted  in  an  approximate  two
percentage point increase in gross margins in transition period 1995 compared to
the comparable prior year period.

Operating Expenses

      Total transition period 1995 selling, general, and administrative expenses
increased  by  $12.4  million to $165.7 million from the  comparable  prior-year
period,  and represented 11.6% of net sales in transition period 1995,  compared
to  9.7% in the comparable prior-year period.  Continued expansion into new  and
existing international markets, new product introductions and a greater emphasis
on  advertising,  sales and marketing programs contributed  to  increased  media
advertising,  marketing  promotion,  sales literature,  cooperative  advertising
expenses  and technical support costs.  In addition, in transition period  1995,
the  Company incurred one-time severance payments of approximately $4.1  million
to  executive  officers  pursuant to severance  compensation  agreements.   Also
contributing  to  the higher transition period 1995 costs were  consulting  fees
incurred in connection with the preparation of the Company's turnaround plan and
professional fees associated with the change in the Company's fiscal year-end.

   Transition  period  1995  engineering and development  costs  increased  $1.0
million to $9.6 million and increased as a percentage of net sales due to higher
engineering  materials  expense related to new product introductions.   Products
introduced  in  transition  period 1995 included additions  to  the  Advantage!,
Bravo, Premmia, Ascentia, and Manhattan product lines.

   In  the  second quarter of transition period 1995, the Company implemented  a
restructuring  plan  designed to increase its utilization of  third-party  board
manufacturing and design and realign its Asia Pacific manufacturing  operations.
As a result, the Company recorded a restructuring charge of $13.0 million during
the   second  quarter  of  transition  period  1995.   Costs  included  in   the
restructuring  charge  consisted primarily of employee severance,  asset  write-
downs, vendor cancellation charges and lease write-offs for closed offices.  The
employee  severance  included approximately 1,500 employees primarily  in  semi-
skilled and skilled manufacturing positions.  Approximately $7.6 million of  the
charge  was  expected  to involve cash disbursements with  the  remaining  costs
primarily relating to reductions in net asset values.  During transition  period
1995,  the  Company  incurred  cash expenditures of approximately  $0.8  million
related  to severance payments to terminated employees.  At December  30,  1995,
approximately  $12.2 million of the original restructuring accrual  remained  on
the Company's consolidated balance sheet.

  The Company believes that the restructuring activities were necessary in order
to  implement  its  strategy  of  increased  utilization  of  third-party  board
manufacturing and to realign its Asia Pacific manufacturing operations.

Other Income and Expense

      In  transition period 1995, the Company had net interest expense  of  $6.0
million  compared to $5.9 million in the comparable prior-year period.  Interest
expense  increased  by $1.7 million as a result of higher short-term  borrowings
from  the  Company's bank revolving credit facilities as well as from short-term
loans  during transition period 1995, which were utilized to fund the  Company's
transition period 1995 operations.  Also contributing to higher interest expense
were  higher average interest rates on those short-term borrowings  as  well  as
amortization  of  the Samsung credit line guaranty of $0.5  million,  which  was
recorded  during transition period 1995.  The increase in interest  expense  was
partially offset by an increase in interest income of $1.6 million due to higher
average  cash  balances  during  transition  period  1995  due  to  the  Samsung
investment.

   In  transition period 1995, the Company recognized net other expense of  $3.8
million  compared to net other expense of $1.8 million in the comparable  prior-
year   period.   Other  expense  relates  primarily  to  net  foreign   currency
transaction and remeasurement gains and losses and the costs associated with the
Company's  foreign  currency  hedging activities.  The  increase  in  transition
period  1995 was primarily due to losses incurred as a result of the unfavorable
movement  of  the U.S. dollar relative to other currencies in transition  period
1995  over  the  comparable prior-year period.  See further discussion  included
under "Liquidity and Capital Resources."

Income Tax Provision (Benefit)

   The  Company recorded an effective income tax provision (benefit) rate of  0%
and  (19.5%) in transition period 1995 and for the comparable prior-year period,
respectively.  The decrease in the transition period 1995 effective tax  benefit
rate  was primarily due to the Company's provision of a 100% valuation allowance
against additional deferred tax assets (including loss carryforwards) that arose
during the transition period.

Asset Turnover Ratios

  Days total revenue in accounts receivable for transition period 1995 increased
to  69.5  from 62.6 days in the comparable prior-year period.  The  increase  is
primarily due to increased competitive pressures which have required the Company
of  offer  extended payment terms, primarily in the Company's  Europe  and  Asia
Pacific regions.

   Inventory turnover for transition period 1995 increased to 8.1 from 7.2 turns
in  the  comparable prior-year period.  In transition period 1995,  the  Company
implemented  inventory and supply management practices to improve its  inventory
management, which resulted in an increase in inventory turns.

FISCAL YEARS ENDED JULY 1, 1995 AND JULY 2, 1994

Total Revenue

      Net  sales  increased to $2.468 billion in fiscal year  1995  from  $2.367
billion  in  fiscal  year  1994.  The slight improvement  in  fiscal  year  1995
revenues  was  due  to higher Pentium(R) processor-based desktop  systems  sales
partially  offset  by  lower  386 and 486 desktop systems  sales  and  decreased
shipments  of the Company's notebook system products.  The Company's  net  sales
were  also  increased by 2.3% in fiscal year 1995 compared with a  decreases  of
2.7%  fiscal  year  1994 due to fluctuations in the average value  of  the  U.S.
dollar  relative to its average value in the comparable prior year.   In  fiscal
year  1995,  the Company's worldwide unit shipments increased 5%  to  1,503,000,
compared with a 78% increase in unit volume for fiscal year 1994.

       The   Company  experienced  product  development  and  production  delays
throughout fiscal year 1995, which in part have contributed to lower desktop and
notebook  systems  sales.   In  addition,  continued  industry-wide  competitive
pricing  pressures prompted aggressive pricing adjustments that further  reduced
desktop and notebook system revenues, particularly in the domestic marketplace.

      Net sales from desktop system products increased 15% to $1.741 billion  in
fiscal year 1995 from $1.509 billion in fiscal year 1994.  Major contributors to
the  improved year-over-year sales performance included the Company's Pentium(R)
processor-based desktop systems and selected 486-based desktop systems including
the  Advantage! and Bravo 486DX.  Despite the overall increase, a decline in the
fiscal year 1995 sales growth rate compared to the prior year was primarily  due
to  declines  in  Premmia  486-based and Tandy branded  desktop  systems  sales.
Decreased  sales of the Company's 486-based desktop systems in fiscal year  1995
are  consistent  with the shift in demand toward the Pentium(R)  processor-based
desktop  systems,  which  accounted for 35% of total desktop  systems  sales  in
fiscal year 1995 versus 3% in fiscal year 1994.

      Net  sales from the Company's notebook computer products decreased 11%  to
$464  million  in fiscal year 1995 from $519 million in fiscal year  1994.   The
decline  in net sales from notebook products was primarily attributable  to  the
expiration of two large OEM notebook agreements and the Company's decision to 
de-emphasize the OEM channel. The decrease in net sales of notebook computers
reflected  a 19% decrease in unit shipments to 218,000 in fiscal year 1995  from
268,000  in fiscal year 1994.  The fiscal year 1995 decline in notebook  systems
sales  occurred in the Advantage!, Bravo and PowerExecTM notebook product lines,
and  was  partially  offset by a significant increase in the  Ascentia  notebook
computer  line.   Net  sales  from  the  Company's  notebook  computer  products
represented  19%,  and  22%  of  net  sales for  fiscal  years  1995  and  1994,
respectively.

      Net  sales  from  the Americas region decreased 10% to $1.387  billion  in
fiscal  year  1995  as compared to fiscal year 1994.  As previously  noted,  the
fiscal  year  1995  revenue decline was due primarily to the completion  of  two
large  OEM  contracts  in the fourth quarter of fiscal  year  1994.   Total  OEM
channel  net  sales decreased to one percent of total fiscal year 1995  Americas
net  sales  compared  to  11% in fiscal year 1994.   Sales  to  the  independent
reseller/dealer  channel for fiscal year 1995 decreased 2%  compared  to  fiscal
year 1994 and accounted for 63% of total Americas net sales.  Within the overall
decrease  in  Americas  net  sales, sales to the consumer  retail  channel  grew
slightly,  increasing 2% over the prior year.  The fiscal year 1995 growth  rate
was  attributable to lower sales related to Tandy branded systems in the  United
States.

      International  sales increased 32% to $1.081 billion in fiscal  year  1995
from $821 million in fiscal year 1994.  International sales represented 44%  and
35% of net sales in fiscal years 1995 and 1994, respectively.  Net sales for the
Europe  region increased 40% over the prior year.  The United Kingdom and Sweden
continued  to  be  major  contributors of total Europe region  net  sales,  with
significant fiscal year 1995 revenue growth also occurring in Italy, Norway  and
Switzerland.   Commencing during the second quarter of  fiscal  year  1995,  the
Company's  Ireland  manufacturing facility supplied nearly all  of  the  desktop
product  requirements  for  the Europe region.  The Company  believes  that  its
localized  manufacturing,  centralized distribution  and  service  operation  in
Limerick, Ireland contributed to its Europe region growth.

      Net  sales  from the Company's Asia Pacific region contributed  to  a  17%
increase in fiscal year 1995.  The increase in the fiscal year 1995 growth  rate
was  attributable to higher sales growth in Australia, Singapore, Taiwan and the
Middle  East,  partially offset by a reduction in sales  into  the  PRC  due  to
significantly increased competition and lower fiscal year 1995 sales to  one  of
the  Company's  major customers in the PRC.  Sales into the  PRC  accounted  for
approximately 5% of the Company's total fiscal year 1995 revenues, compared with
approximately 6% in fiscal year 1994.

Gross Profit

      The Company's fiscal year 1995 gross profit margins of 10.0% declined from
14.7%  in  fiscal  year  1994.   The decline in gross  profit  margins  resulted
primarily from product development and production delays, manufacturing  related
costs  associated  with product transitions and continued intense  industry-wide
competitive pricing pressures, particularly in the consumer retail sector of the
market.   Further contributing to reduced gross profit margins  in  fiscal  year
1995  was the increased percentage of revenues generated by the consumer  retail
channel  (including sales to Tandy's retail operations) which  typically  yields
lower  gross  margins.  The consumer retail channel increased to  37%  of  total
fiscal year 1995 Americas revenues versus 32% in fiscal year 1994.

      During  fiscal year 1995, the Company and the majority of its  competitors
continued  to introduce new, lower-priced, higher-performance personal computers
resulting  in  continued  pricing pressures on both  new  and  older  technology
products.

      The effect of foreign currency fluctuations on revenue has a corresponding
impact on gross profit, as the Company's production costs are incurred primarily
in  U.S. dollars.  When comparing fiscal year 1995 to fiscal year 1994, the U.S.
dollar  declined  against  nearly all European  currencies.   This  year-to-year
currency  fluctuation  resulted in an approximate  two  percentage  point  gross
margin increase in fiscal year 1995 results compared to fiscal year 1994.

Operating Expenses

     In fiscal year 1995, selling, general and administrative expenses increased
$47.6  million  from fiscal year 1994.  Expanded worldwide sales  and  marketing
efforts in both new and existing subsidiary locations resulted in higher payroll
and payroll-related expenses.  Entry into new international markets, new product
introductions  and  a  greater  emphasis on  advertising,  sales  and  marketing
programs contributed to increased media advertising, marketing promotion,  sales
literature  and  cooperative advertising expenses.  In addition,  during  fiscal
year  1995,  the Company continued to expand its Asia Pacific and Europe  region
operations.   Costs  associated with this international  expansion  resulted  in
increased  expenses  for  staffing, telephone service,  insurance,  and  outside
professional  services.   The Company also incurred higher  legal  fees  due  to
increased litigation activity.

      Engineering and development costs decreased from $38.9 million  in  fiscal
year  1994  to  $36.4  million in fiscal year 1995  due  to  lower  payroll  and
engineering  materials  expense as compared to  1994.   Products  introduced  in
fiscal year 1995 included additions to the Advantage!, Bravo, Premmia, Ascentia,
and Manhattan product lines.

      During fiscal year 1994, the Company incurred asset write-down charges  of
$50  million and cash expenditures of $47 million related directly to its fiscal
year 1994 restructuring activities.  The Company recorded a $12.5 million credit
in  the  fourth quarter of fiscal year 1994 after concluding that  most  of  its
restructuring  activities  had been completed or were  adequately  provided  for
within  the remaining restructuring accrual.  At July 2, 1994, $15.2 million  of
the  restructuring accrual remained on the Company's consolidated balance sheet.
During  fiscal  year  1995,  the  Company completed  the  consolidation  of  its
worldwide mobile computing manufacturing in Taiwan and the concurrent closure of
its  Fountain  Valley, California manufacturing facility.   During  fiscal  year
1995,  the  Company  incurred  cash expenditures of approximately  $4.7  million
related   primarily   to  the  closure  of  its  Fountain   Valley,   California
manufacturing  facility.  At July 1, 1995, approximately $10.5  million  of  the
original  restructuring  accrual  remained,  consisting  primarily  of   amounts
provided for the net present value of minimum lease payments for facilities that
have been closed and the write-down to net realizable value of related leasehold
improvements.

      The  Company believes that its restructuring activities were necessary  in
order  to reorganize its worldwide manufacturing, engineering, sales and service
operations  as  well  as to reposition its product lines  after  the  June  1993
acquisition of Tandy's personal computer operations.

Other Income and Expense

      In fiscal year 1995, the Company had net interest expense of $15.1 million
compared to $7.8 million in fiscal year 1994.  Interest expense increased  as  a
result  of  the  increased utilization of the Company's  bank  revolving  credit
facilities  during fiscal year 1995, which were utilized to fund  the  Company's
fiscal  year  1995  operations.  Interest expense  for  fiscal  year  1995  also
increased  due to a full year's inclusion of interest on the LYONs,  which  were
originally  issued in December 1993, generating slightly less than seven  months
of  interest  expense for fiscal year 1994.  Additionally, interest expense  for
fiscal year 1995 increased due to the increase in the interest rate on the  note
payable to Tandy Corporation from 3.75% to 4.94%, effective July 1994.

      In  fiscal  year  1995, the Company recognized net other expense  of  $2.6
million  compared to net other income of $.1 million in fiscal year  1994.   The
fiscal  year  1994  other income was attributable to the one-time  $4.3  million
pretax  gain from the sale of the Company's Hong Kong manufacturing facility  in
June 1994.  Other expenses related primarily to foreign currency transaction and
remeasurement  gains  and  losses and the costs associated  with  the  Company's
foreign  currency  hedging  activities.  See further discussion  included  under
"Liquidity and Capital Resources."

Income Tax Provision (Benefit)

     In fiscal years 1995 and 1994, the Company recorded an effective income tax
provision  (benefit) of (19.5%) and 32.4%, respectively.  The  decrease  in  the
fiscal  year  1995  effective  tax  rate was  attributable  to  changes  in  the
proportion   of  income  earned  or  losses  sustained  within  various   taxing
jurisdictions  and  the tax rates in the locations in which  those  earnings  or
losses  were  generated,  as  well as the Company's inability  to  benefit  from
certain deferred tax assets that include loss carryforwards.  The higher  fiscal
1994  effective  tax rate was attributable to the one percent  increase  in  the
federal  income tax rate and changes in the proportion of income  earned  within
various taxing jurisdictions.

Asset Turnover Ratios

   Days  total revenue in accounts receivable for fiscal year 1995 increased  to
57.6  from  49.6  days in fiscal year 1994.  The increase is  primarily  due  to
increased  competitive  pressures  which have  required  the  Company  of  offer
extended payment terms.

   Inventory  turnover for fiscal year 1995 increased to 7.1 from 6.1  turns  in
fiscal year 1994, primarily due to improved inventory management in fiscal  year
1995 relative to fiscal year 1994.

LIQUIDITY AND CAPITAL RESOURCES

Financing Requirements

      The  Company's ability to fund its activities from operations is dependent
upon  its rate of growth, ability to effectively manage its inventory, the terms
under  which suppliers extend credit to the Company, the terms under  which  the
Company  extends  credit to its customers and the Company's ability  to  collect
under such terms, the manner in which it finances any capital expansion and  the
Company's ability to access external sources of financing.  The Company's recent
operations  have resulted in net losses of $417.7 million, $225.0  million,  and
$99.3 million for fiscal year 1996, the transition period 1995, and fiscal  year
1995, respectively, as well as a working capital deficiency of $41.0 million and
total  shareholders'  equity of $12.1 million as of December  28,  1996.   As  a
result,  it  has been necessary for the Company to look to Samsung, its  largest
shareholder,  for financial support while management implements changes  to  the
Company's business in order to return the Company to profitability.  In addition
to  purchases  of  common  stock from the Company  aggregating  $309.5  million,
Samsung  has  provided  credit  guarantees aggregating  $400  million  that  are
available  to support bank borrowings by the Company through December  31,  1998
(for which Samsung received additional Company equity securities then valued  at
$58.8  million) and a $100 million vendor credit line available through November
1997 to facilitate component purchases from Samsung.

      As  of December 28, 1996, the Company had borrowed $175 million under bank
lines supported by Samsung guarantees and had $58.4 million due to Samsung under
the vendor credit line.  The Company has additional borrowing availability under
the  loan  guarantees of $225 million, of which $125 million is available  under
presently  committed bank loan agreements.  Management believes these  financial
resources will be sufficient to support the Company's liquidity requirements  in
fiscal  1997; however, in the event they are not, the Company would be  required
to seek additional financing from Samsung or others, for which it has no current
commitments.   The Company has not determined what steps it will take  when  the
existing additional support agreements terminate in December 1998.  The  Company
believes that it will have adequate time prior to the expiration of the  support
agreements  to  arrange  for new sources of external financing.   The  foregoing
forward-looking  statement  involves risks and uncertainties  that  could  cause
actual  results to differ materially from anticipated results.  See  "Additional
Factors  That  May Affect Future Results" herein.  However, if  the  Company  is
unable  to  arrange for external financing in December 1998, there  would  be  a
material  adverse  effect  on  the Company's business,  financial  position  and
results of operations.

      On  December 14, 1993, the Company issued $315 million par value of Liquid
Yield  OptionTM  Notes  ("LYONs"), due December  14,  2013  and  received  total
proceeds of approximately $111.7 million.  The LYONs are zero coupon convertible
subordinated notes which were sold at a significant discount from par value with
a  yield  to  maturity of 5.25% and a total value at maturity  of  $315  million
payable in cash.  There are no periodic payments of interest on the LYONs.  Each
$1,000  principal amount at maturity of LYONs is convertible into 12.993  shares
of  the  Company's common stock at any time.  Upon conversion  of  a  LYON,  the
Company  may elect to deliver shares of common stock at the conversion  rate  or
cash  equal  to  the market value of the shares of common stock into  which  the
LYONs are convertible.  The holder of a LYON may require the Company to purchase
all  or  a  portion  of its LYONs on December 14, 1998, December  14,  2003  and
December  14,  2008  (the "Purchase Dates"), and such payments  may  reduce  the
liquidity  of  the  Company.   However, the  Company  may,  subject  to  certain
exceptions,  elect to pay the purchase price on any of the three Purchase  Dates
in  cash  or  shares of common stock based upon its then fair  market  value  as
defined in the indenture, or any combination thereof.

      In addition, as of 35 business days after the occurrence of any change  in
control  of  the Company occurring on or prior to December 14, 1998,  each  LYON
will  be purchased for cash by the Company, at the option of the holder,  for  a
purchase price equal to the issue price of the LYONs plus accrued original issue
discount  through the date set for such purchase.  A change in  control  of  the
Company is deemed to have occurred under the terms of the LYONs at such time  as
any  person, other than the Company, has become the beneficial owner of  50%  or
more  of  the  Company's  common  stock or the  Company  is  not  the  surviving
corporation  of  any consolidation or merger of the Company.  Samsung  currently
has  49.4%  beneficial  ownership of the Company.  If the  Samsung  Proposal  is
completed,  and  there is no assurance that it will ultimately occur,  it  would
constitute a change in control under the Company's and the holders of the  LYONs
have  the right to require the Company to redeem the LYONs at their issue  price
plus  accrued  original discount through the date set for  such  redemption.   A
LYONs  redemption  event occurring in fiscal 1997 would result in  approximately
$130 to $140 million of additional cash requirements for which the Company would
be required to seek external financing.

      No  assurance  can  be  given that, if required, additional  financing  in
amounts  in  excess of the borrowing availability supported by  current  Samsung
guarantees will be available on acceptable terms or at all.

      Management  has  developed  plans  to improve  the  Company's  competitive
position  by  increasing operating efficiencies, by more focused and  aggressive
marketing  of  the  Company's products and through a sharing of  expertise  with
Samsung, and it anticipates that these efforts will result in an improvement  of
the  Company's gross margins and operating results.  However, no assurances  can
be  given that the Company will be successful in realizing these goals.  If  the
Company is unable to improve its gross margins and operating results, management
will be required to significantly adjust the Company's operations. The Company's
ability  to  continue its on-going operations on a long term basis is  dependent
upon its ability maintain adequate financing levels, improve gross margins,  and
ultimately  sustain  a profitable level of operations.  The  foregoing  forward-
looking  statement  involves risks and uncertainties  that  could  cause  actual
results  to differ materially from anticipated results.  See "Additional Factors
That May Affect Future Results" herein.

Transactions with Samsung

      On  December 21, 1995, the Company signed the original Additional  Support
Agreement  with  Samsung  that  provides additional  financial  support  to  the
Company,  including  a guaranty by Samsung of a line of credit  of  up  to  $200
million through December 1997 (subsequently extended through December 1998)  and
a  vendor line of credit with Samsung of $100 million through November 1997  for
component  purchases.   In exchange for the additional  financial  support,  the
Company  issued  an  option to Samsung to purchase 4.4  million  shares  of  the
Company's  common  stock  at an exercise price of $.01  per  share,  exercisable
between July 1, 1996 and June 30, 2001, and allowed Samsung to add an additional
member to the Company's Board of Directors.

      At  December  28,  1996  the Company has a $200 million  revolving  credit
facility,  guaranteed  by Samsung as part of the Additional  Support  Agreement,
with  a  final maturity date of December 25, 1997.  The credit guarantee expires
December 31, 1998.  The revolving credit agreement allows the Company to  borrow
at  a  rate of LIBOR plus 0.25% per annum, or the bank's reference rate, at  the
Company's  option.   The Company is required to pay a commitment  fee  equal  to
0.125% per annum based on the average daily unused portion of the facility.  The
fee  is  payable  quarterly in arrears.  At December 28, 1996,  there  was  $175
million outstanding as borrowings under this credit facility at an interest rate
of 6.06% per annum.

      On  December  13,  1996,  the Company signed a Second  Additional  Support
Agreement  with  Samsung  that  provided  the  Company  with  additional  credit
guarantees of $200 million through December 31, 1998.  As consideration for this
new  credit guarantee, the Company issued 500,000 shares of non-voting preferred
stock  to  Samsung.  This second guarantee is in addition to the  existing  $200
million  credit guarantee, provided pursuant to an Additional Support  Agreement
between the Company and Samsung, dated December 21, 1995.  The Second Additional
Support  Agreement also includes a one-year extension of the original  guarantee
provided  under  the Additional Support Agreement, which results  in  guarantees
totaling $400 million expiring on December 31, 1998.

      On  December  18,  1996, the Company completed the establishment  of  bank
credit  lines  totaling  $100  million with three banks,  which  represents  the
initial  $100  million  that  is  guaranteed by the  Second  Additional  Support
Agreement.   The  credit  agreements  allow  the  Company  to  borrow  at  rates
approximating  prevailing market rates.  At December 28,  1996,  there  were  no
outstanding borrowings under these credit lines.

Analysis of Cash Flows

      Working capital of $(41.0) million at December 28, 1996 included cash  and
cash  equivalents of $61.1 million compared to working capital of $223.5 million
and  cash and cash equivalents of $125.4 million at December 30, 1995.  Net cash
used  in  operating  activities  for fiscal year  1996  of  $139.0  million  was
primarily used to fund the Company's current period operating loss.  In addition
to  the  decrease in cash and cash equivalents, the decrease in working  capital
can  primarily  be  attributed to lower inventory, higher accounts  payable  and
higher  short-term borrowings.  The reduction in inventory was primarily due  to
improved  inventory  and  supply management practices. The  Company  had  $175.0
million  in short-term borrowings at December 28, 1996 compared to $75.0 million
at December 30, 1995.

      Net cash used in investing activities of $18.6  million during fiscal 1996
was  primarily due to capital expenditures.  Capital expenditures totaled  $22.4
million  in fiscal year 1996 and consisted primarily of additions to  plant  and
production equipment and software and implementation costs associated  with  the
Company's  new  world-wide transaction-based information  system.   The  Company
expects  its  fiscal year 1997 capital expenditures to be somewhat greater  than
those  incurred  in fiscal year 1996 as it continues with the implementation  of
the new world-wide transaction-based information system.  The foregoing forward-
looking  statement  involves risks and uncertainties  that  could  cause  actual
results  to differ materially from anticipated results.  See "Additional Factors
That May Affect Future Results" herein.

      Net  cash  provided  by  financing activities of  $97.9  million  was  due
primarily  to the net proceeds from short-term borrowings of $100.0 million  and
to  proceeds  from  the  issuance of common stock to Samsung  for  cash  of  $60
million, partially offset by repayment of long-term debt.  On July 11, 1996, the
Company  paid  the  $90  million promissory note due to  Tandy  related  to  the
Company's   1993   acquisition  of  Tandy's  personal   computer   manufacturing
operations.  Payment was in the form of 4,498,594 shares of the Company's common
stock,  then valued at $30 million, and $60 million in cash.  Subsequent to  the
issuance of shares to Tandy, also on July 11, 1996, the Company issued 8,499,336
shares  of its common stock to Samsung in exchange for $60 million in cash  that
was  used  to  pay  Tandy.  The issuance of common stock  to  Samsung  was  made
pursuant to the 1995 Letter of Credit Agreement between the Company and Samsung.
The  Company's working capital and its total shareholders' equity  increased  by
$90  million after completion of the payment of the Tandy note, and issuance  of
its common stock to Tandy and Samsung.

       The  Company  regularly  reviews  its  cash  funding  requirements  on  a
consolidated basis and attempts to meet those requirements through a combination
of  cash  on hand, cash provided by operations, available borrowings  under  any
revolving  credit facilities and possible future public or private  debt  and/or
equity  offerings.   The Company utilizes a centralized approach  for  its  cash
management activities and attempts to maximize the use of its consolidated  cash
resources  so  as to minimize additional debt requirements while complying  with
any  legal  or other restrictions upon the free flow of funds from one  segment,
division  or  subsidiary to another.  The Company invests  its  excess  cash  in
investment grade short-term money market instruments.

Foreign Exchange Hedging

      In  the ordinary course of business and as part of the Company's asset and
liability management, the Company enters into various types of transactions that
involve  contracts and financial instruments with off-balance  sheet  risk.  The
Company  utilizes foreign exchange contracts and foreign currency borrowings  to
hedge  its  exposure  to foreign exchange rate fluctuations impacting  its  U.S.
dollar consolidated financial statements.  The Company attempts to minimize  its
exposure to foreign currency transaction and remeasurement gains and losses  due
to  the  effect of remeasuring the local currency balance sheets of its  foreign
subsidiaries  on the Company's consolidated financial position  and  results  of
operations  by utilizing a limited hedging strategy which includes  the  use  of
foreign  currency   borrowings,  the netting  of  foreign  currency  assets  and
liabilities and forward exchange contracts.  The actual gain or loss  associated
with forward exchange contracts are limited to the contract amount multiplied by
the  value  of the exchange rate differential between the time the  contract  is
entered  into and the time it matures.  The Company typically holds all  of  its
contracts until maturity and enters forward contracts ranging in maturity  dates
from  one  to  nine  months.  Realized and unrealized gains and  losses  on  the
forward  contracts  are  recognized currently in the Consolidated  Statement  of
Operations,  and  any premium or discount is recognized over  the  life  of  the
contract.   Some  foreign locations, such as the PRC, do not allow  open  market
hedging of their currencies and, therefore, the Company is not able to hedge all
of its exposure to foreign currency fluctuations.

   The Company held forward exchange contracts maturing at various dates through
June  1997  with  a face value of approximately $162.6 million at  December  28,
1996,  $162.0 million at December 30, 1995, and $162.0 million at July 1,  1995,
which approximate the Company's hedgeable net monetary asset exposure to foreign
currency  fluctuations  at those respective dates.  For the  fiscal  year  ended
December  28, 1996, for the transition period ended December 30, 1995,  and  for
the  fiscal  years ended July 1, 1995, and July 2, 1994, a net foreign  currency
transaction  loss of $0.4 million, loss of $2.9 million, gain of  $1.7  million,
and  loss of $2.1 million respectively, is included in the caption "Other income
(expense),  net" in Note 3.  Foreign currency borrowings at December  28,  1996,
December 30, 1995, and July 1, 1995 totaled $1.5 million, $4.0 million, and $4.2
million, respectively.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

      The  Company's ability to fund its activities from operations is  directly
dependent  upon its rate of growth, ability to effectively manage its inventory,
the  terms  under which suppliers extend credit to the Company, the terms  under
which  the  Company extends credit to its customers and its ability  to  collect
under such terms, the manner in which it finances any capital expansion, and the
Company's ability to access external sources of financing. The majority of these
sources  of  external  financing are supported by  guarantees  provided  to  the
Company by Samsung.  The Company has not determined what steps it will take when
the  existing additional support agreements terminate in December 1998.  If  the
Company  is unable to arrange for external financing in December 1998, when  the
Samsung  additional  support agreements terminate, there  would  be  a  material
adverse  effect  on the Company's business, financial position  and  results  of
operations.

     During the first quarter of fiscal year 1997, the Company encountered lower
than  anticipated demand for its products.  The Company believes that a  variety
of  factors  are contributing to this lower demand including an acceleration  in
the  competitive pricing environment, a product transition period for  both  the
Company's   commercial  desktop  and  notebook  product  lines,   and   customer
uncertainty surrounding the Samsung Proposal.  As a result of these factors, the
Company's  first  quarter  net sales and operating  losses  will  be  negatively
impacted.

   Future  operating results may be impacted by a number of factors  that  could
cause  actual  results  to  differ materially from those  stated  herein,  which
reflect  management's  current expectations.  These  factors  include  worldwide
economic  and  political  conditions, industry specific factors,  the  Company's
ability to maintain access to external financing sources (including Samsung) and
its  financial  liquidity, the Company's ability to timely develop  and  produce
commercially viable products at competitive prices, the availability and cost of
components,  the  Company's  ability to manage  expense  levels,  the  continued
financial  strength of the Company's dealers and distributors, and the Company's
ability to accurately anticipate customer demand.

      The Company's future success will be highly dependent upon its ability  to
develop, produce and market products that incorporate new technology, are priced
competitively  and  achieve  significant market acceptance.   There  can  be  no
assurance   that  the  Company's  products  will  be  technically  advanced   or
commercially successful due to the rapid improvements in computer technology and
resulting  product obsolescence.  There is also no assurance  that  the  Company
will  be  able  to  deliver commercial quantities of new products  in  a  timely
manner.   The success of new product introductions is dependent on a  number  of
factors,  including  market acceptance, the Company's ability  to  manage  risks
associated  with  product  transitions, the effective  management  of  inventory
levels  in line with anticipated product demand and the timely manufacturing  of
products  in  appropriate quantities to meet anticipated  demand.   The  Company
regularly introduces new products designed to replace existing products.   While
the  Company  attempts to closely monitor new product introductions and  product
obsolescence, there can be no assurance that such transitions will occur without
adversely  affecting the Company's net sales, cash flow and  profitability.   In
addition, if the Company is unable to successfully anticipate and manage  shifts
in  personal  computer technology, the Company's product life  cycles  could  be
negatively  impacted and may continue to have a material adverse effect  on  the
Company's net sales, cash flow and profitability.

      The  Company has, over the past several years, had difficulty in  bringing
products  to market.  Product development delays have occurred for a variety  of
reasons,  primarily  resulting  from  difficulties  in  the  Company's   product
development  processes.   While the Company has  focused  on  these  issues  and
believes  that  improved  processes  and  procedures  have  been  designed   and
implemented,  there can be no assurance that these new processes and  procedures
will  be  successful.   If  these  improved processes  and  procedures  are  not
successful, there could continue to be material adverse effects on the Company's
net sales, cash flow, and profitability.

      Because  of  these  and  other factors affecting the  Company's  operating
results,  past  financial  performance  should  not  be  considered  a  reliable
indicator of future performance, and investors should not use historical  trends
to anticipate results or trends in future periods.

      The  Company's  participation in the highly competitive personal  computer
industry  often results in significant volatility in the Company's common  stock
price.   Factors  such  as  new product introductions, price  changes  or  other
announcements by the Company or its competitors, as well as quarterly variations
in the financial results of the Company, have caused substantial fluctuations in
the  market price of the Company's common stock.  In addition, the stock  market
has  experienced and continues to experience price and volume fluctuations  that
have  particularly  affected the market price for securities of  many  companies
within  the  technology  sector.  These broad market fluctuations,  as  well  as
general  economic and political conditions may materially adversely  affect  the
market price of the Company's common stock and/or the Company's ability to raise
capital.

      The  Company  believes  that its production capacity  and  the  production
capacity  of  its OEM suppliers for the products it manufactures and  purchases,
respectively, should be sufficient to support anticipated unit volumes  for  the
foreseeable  future.  However, if the Company is unable to  obtain  certain  key
components, or to effectively forecast customer demand or manage its  inventory,
increased  inventory obsolescence or reduced utilization of production  capacity
could adversely impact the Company's gross margins and results of operations.

     Increases  in  demand  for  personal computers have  created  industry-wide
shortages,  which at times have resulted in premium prices being  paid  for  key
components,  such  as flat panel display screens, dynamic random  access  memory
chips  ("DRAMs"), static random access memory chips, CD-ROM drives and monitors.
These shortages have occasionally resulted in the Company's inability to procure
these  components in sufficient quantities to meet demand for its products.   In
addition, a number of the Company's products include certain components, such as
microprocessors, video chips, core logic, modems, lithium ion batteries,  static
random  access  memory chips and application specific integrated circuits,  that
are  occasionally  purchased  from single sources due  to  availability,  price,
quality   or  other  considerations.   These  single  source  suppliers  include
purchases  of selected lithium ion batteries from Sony Corporation  as  well  as
selected  core  logic  from Intel Corporation.  In addition,  the  Company  also
purchases  a  majority of its microprocessor requirements from Intel Corporation
and  a  majority  of  random  access memory chips  from  Samsung.   The  Company
purchases  both  components  and selected finished goods  pursuant  to  purchase
orders  placed  in the ordinary course of business and has no guaranteed  supply
arrangements  with  single source suppliers.  Reliance  on  suppliers  generally
involves  risks,  including the possibility of defective parts,  a  shortage  of
components,  an  increase  in  component costs and disruptions  in  delivery  of
components.   Should  delays, defects or shortages re-occur or  component  costs
significantly  increase,  the Company's net sales  and  profitability  could  be
adversely affected.

     The  Company and Samsung have entered into strategic agreements covering  a
broad  range  of  commercial relationships including,  among  others,  component
supply  agreements for certain critical components manufactured by  Samsung  and
used  by  the  Company  in the manufacture of personal  computers  and  a  joint
procurement  agreement  providing a mechanism for Samsung  and  the  Company  to
coordinate their purchases from third parties in order to obtain more  favorable
pricing.   However, as Samsung is a supplier of critical components in a  highly
competitive marketplace, other suppliers may be less likely to extend attractive
terms  to or to do business with the Company.  In addition, because Samsung  has
other business involvement typical of large, multi-national companies and is not
based  in  the  U.S., it is possible that some additional suppliers,  customers,
employees  and  others will not react favorably to Samsung's investment  in  the
Company or to the Samsung Proposal.

     Samsung is a critical supplier of components to the Company and is based in
South  Korea.   Political turmoil between North and South Korea could  adversely
affect the Company's operations.

    In fiscal year 1996 and in transition period 1995, the Company implemented a
restructuring  plan  designed to increase its utilization of  third-party  board
manufacturing and design, to realign its Asia Pacific manufacturing  operations,
to  close or consolidate certain regional offices, and to transfer manufacturing
of  notebooks  to  OEMs.  The Company's increased reliance on third-party  board
manufacturers involves risks, including the possibility of defective  boards,  a
shortage  of  boards, an increase in board costs and disruptions in delivery  of
boards.   Should delays, defects or shortages occur or board costs significantly
increase, the Company's net sales and profitability could be adversely affected.
In addition, the Company's notebook products are manufactured by outside vendors
including  Quanta Computer, Inc. and Compal Electronics, Inc. in Taiwan.   These
OEMs  are  subject  to  the  risks  inherent in notebook  computing  technology,
development and manufacturing.  As a result, the Company's ability to bring  its
notebook  products to market is highly dependent upon these third-party  vendors
to  effectively  design, develop and manufacture these products.   Should  these
companies  not be able to design, develop or manufacture the Company's  products
in a timely manner, the Company's net sales, cash flows, and profitability could
be adversely affected.

      Although  the  Company  believes that the  restructuring  activities  were
necessary,  no  assurance  can be given that the restructuring  action  will  be
successful or that similar action will not be required in the future.

      The  ongoing introduction of new technologies across all of the  Company's
product  lines is intended to enable the Company to keep pace with rapid  market
changes  and to minimize the effect of continued competitive pricing.   However,
there  can  be no assurance that the Company will have the financial  resources,
marketing and distribution capability, or the technological knowledge to compete
successfully.   In  addition,  the  Company's results  of  operations  could  be
adversely  impacted if it is unable to effectively implement  its  technological
and  marketing alliances with other companies, such as Microsoft and Intel,  and
manage the competitive risks associated with these relationships.

     The Company participates in a highly competitive and volatile industry that
is  characterized by dynamic customer demand patterns, rapid introduction of new
products,  technological  advances  and product  obsolescence  resulting  in  an
extremely  competitive  pricing  environment with  downward  pressure  on  gross
margins.   The  Company's  ability to compete  is  largely  dependent  upon  its
financial strength and its ability to adequately fund its operations.   Many  of
the  Company's  competitors  are  significantly larger  and  have  significantly
greater  financial  resources than the Company.  In addition,  large  industrial
companies  with  significant  consumer  electronics  expertise,  including  such
companies  at  Sony, Fujitsu, Hitachi and Toshiba have entered or increased  the
personal computer marketplace with products competing for market share with  the
Company's  products,  leading  to  increased competition  and  downward  pricing
pressures.   The  Company anticipates that the personal computer  industry  will
continue  to experience intense price competition and dramatic price reductions.
There  can  be no assurance that future pricing actions by the Company  and  its
competitors will not adversely impact the Company's net sales and profitability.

      General  economic conditions have an impact on the Company's business  and
financial  results.  From time to time, the markets in which the  Company  sells
its  products  experience weak economic conditions that  may  negatively  affect
sales  of  the  Company's products.  Although the Company does not consider  its
business  to  be  highly  seasonal, it has historically  experienced  seasonally
higher  sales  in  the  consumer retail sales channel in the  quarter  ended  in
December  due  to  strong  holiday demand for some of its  products  in  certain
regions.

     The Company's international operations may be affected by changes in United
States trade relationships, increased competition and the political and economic
stability  of  the  locations in which sales occur.   The  Company  operates  in
foreign  locations, such as the PRC, where future sales may  be  dependent  upon
continuing favorable trade relations.  Additionally, foreign locations  such  as
the  PRC  and Taiwan may experience changes in their general economic  stability
due  to  such  factors  as  increased inflation and  political  turmoil.   Also,
political  tensions  between  the  PRC and Taiwan  could  adversely  affect  the
Company's  operations,  particularly its notebook production.   Any  significant
change  in  United States trade relations or the economic or political stability
of  foreign locations in which the Company operates could have an adverse effect
on  the  Company's  net  sales  and profitability.   In  addition,  the  Company
maintains offices in Hong Kong, which will become part of the PRC.

      Consistent  with industry practice, in certain circumstances, the  Company
provides  customers  with  stock rebalancing and price  protection  rights  that
permit  these distributors, retailers and dealers to return slow-moving products
to  the Company for credit or to receive price adjustments if the Company lowers
the  price  of selected products within certain time periods.  Stock rebalancing
programs  allow customers to return product and receive credit for the  invoiced
price  less  any post-sale pricing reductions.  Partially offsetting the  credit
issued  is the value of the product which is returned.  The Company, as part  of
its  revenue recognition policy, estimates the expected returns and reduces both
sales  and  cost  of sales accordingly.  Stock rebalancing and price  protection
credits  represented  6.0% of net sales during fiscal  year  1996,  4.2%  during
transition  period  1995, 4.0% for fiscal year 1995, and 2.1%  for  fiscal  year
1994.   If sales and pricing trends experienced in the current year continue  or
accelerate, there can be no assurance that the Company will not experience rates
of  return  or price protection adjustments that adversely impact the  Company's
net sales and profitability in the future.

      The  Company's  primary means of distribution continues to be  third-party
computer  resellers  and  consumer retailers.  While  the  Company  continuously
monitors and manages the credit it extends to its customers to limit its  credit
risk,  the Company's business could be adversely affected in the event that  the
financial  condition of its customers weakens.  In the event  of  the  financial
failure  of  a major customer, the Company would experience disruptions  in  its
distribution  as  well as the loss of the unsecured portion of  any  outstanding
accounts receivable.

      The  Company's  international  operations are  also  affected  by  foreign
currency  fluctuations.   The  financial statements  of  the  Company's  foreign
subsidiaries  are  remeasured into the United States dollar functional  currency
for  consolidated  reporting  purposes.  Gains and losses  resulting  from  this
remeasurement  process are recognized currently in the consolidated  results  of
operations.   The Company attempts to minimize the impact of these remeasurement
gains and losses by utilizing a limited hedging strategy which includes the  use
of  foreign  currency  borrowings, the netting of foreign  currency  assets  and
liabilities, and forward exchange contracts.  The Company's exposure to currency
fluctuations  will  continue to increase as a result of  the  expansion  of  its
international  operations.  Significant fluctuations in  currency  values  could
have  an  adverse  effect  on  the  Company's  net  sales,  gross  margins   and
profitability.

     The personal computer industry presents risks for claims of infringement of
patents,  trademarks and copyrights.  From time to time, the Company is notified
that  certain of its products may infringe upon the intellectual property rights
of  others.   The Company generally evaluates all such notices on a case-by-case
basis  to determine whether licenses are necessary or desirable.  If such claims
are  made,  there  can  be  no  assurance that licenses  will  be  available  on
commercially reasonable terms or that retroactive royalty payments on  sales  of
the  Company's computer products will not be required.  In addition, substantial
costs  may be incurred in disputing such claims.  The Company believes that  the
actions  it takes to avoid or minimize the impact to the Company of such  claims
are  prudent; however, there can be no assurance that such claims will not occur
or would not have a material adverse effect on the Company's business operations
and  profitability.  Pursuant to its Strategic Alliance Agreement  with  Samsung
dated  February 27, 1995, the Company has a patent cross license agreement  with
Samsung dated July 31, 1995 that expires on July 31, 2005.

      In  determining  the  amount of the valuation  allowance  required  to  be
established  against deferred tax assets in accordance with  the  provisions  of
Statement  of  Financial  Accounting Standards No. 109, "Accounting  for  Income
Taxes,"  the  Company has primarily relied upon its ability to  generate  future
taxable  income using certain available tax planning strategies.  The amount  of
taxable  income  that  could  actually  be  generated  from  such  tax  planning
strategies  is dependent upon the Company being able to sell certain appreciated
assets  at  the current estimated fair market value.  Although the  Company  has
utilized  an  outside  valuation firm to determine the  current  estimated  fair
market  value  of such assets, changes in market conditions could  result  in  a
reduction  of  the  estimated  fair market value  of  these  assets  that  would
adversely affect the amount of the valuation allowance and reduce the amount  of
net deferred tax assets considered realizable.

      Sections  382  and 383 of the Internal Revenue Code of 1986  ("the  Code")
place  certain limitations on U.S. net operating loss carryforwards  and  excess
credits  if  one  or  more  shareholders have increased their  aggregate  equity
ownership of the Company by more than 50 percentage points, within a three  year
measurement period.  As a result of recent shareholder equity transactions  with
Tandy Corporation ("Tandy") and Samsung Electronics Co. Ltd, ("Samsung") on July
11,  1996, the Company has experienced a change in ownership as defined  in  the
Code.  Accordingly, the amount of taxable income or income tax in any particular
year  that  can  be  offset  by net operating loss and tax  credit  carryforward
amounts  is  limited to a prescribed annual amount equal to 5.78%  of  the  fair
market  value  of  the  Company  as  of July 11,  1996.   Based  on  preliminary
calculations, the Company does not believe that any of the net operating loss or
tax  credit carryforward amounts in the aggregate will be unusable solely  as  a
result  of  the annual limitation, although the amounts that can be utilized  in
any  year  may be limited. Should the Samsung Proposal be completed as proposed,
the  Company's ability to realize a benefit from its net deferred tax asset, and
a  substantial  portion of the Company's deferred tax assets from net  operating
loss  carryovers  that  have  been offset by a  valuation  allowance,  would  be
impaired.

   The  Company's corporate headquarters facility, at which the majority of  its
research  and  development  activities are  conducted,  is  located  near  major
earthquake  faults which have experienced earthquakes in the  past.   While  the
Company does carry insurance at levels management believes to be prudent, in the
event  of  a  major earthquake or other disaster affecting one or  more  of  the
Company's  facilities, it is likely that insurance proceeds would not cover  all
of  the  costs incurred and, therefore, the operations and operating results  of
the Company could be adversely affected.

   This  Annual Report on Form 10-K contains certain forward-looking  statements
that  are based on current expectations.  In light of the important factors that
can materially affect results, including those set forth above and elsewhere  in
this  Form 10-K, the inclusion of forward-looking information herein should  not
be  regarded  as  a representation by the Company or any other person  that  the
objectives or plans of the Company will be achieved.  The Company may  encounter
competitive, technological, financial, legal and business challenges  making  it
more  difficult  than expected to continue to develop, market,  manufacture  and
ship  new products on a timely basis; competitive conditions within the personal
computer  industry may change adversely; demand for the Company's  products  may
weaken; the market may not accept the Company's new products; the Company may be
unable to retain existing key management personnel; inventory risks may rise due
to  shifts  in  market  demand;  the  Company's  forecasts  may  not  accurately
anticipate market demand; and there may be other material adverse changes in the
Company's operations or business.  Certain important presumptions affecting  the
forward-looking  statements made herein include, but  are  not  limited  to  (i)
timely  identifying, designing, and delivering new products as well as enhancing
existing   products;  (ii)  implementing  current  restructuring  plans;   (iii)
defending  positions with the IRS and in the legal proceedings described  above,
results  of  such undertakings being difficult to assess and potential  material
adverse  effects  due to ultimate loss on substantive issues or the  substantial
expense  and  loss  of  time connected with defense of claims;  (iv)  accurately
forecasting  capital  expenditures; (v) improving  efficiencies  in  world  wide
distribution activities; (vi) predicting the significance of the indirect  sales
channel;  (vii)  obtaining  new  sources of  external  financing  prior  to  the
expiration  of existing or contemplated support arrangements entered  into  with
Samsung;  and (viii) the nature and extent of Samsung's continued financial  and
other  support  for  the  Company,  and the outcome  of  the  Samsung  Proposal.
Assumptions  relating to budgeting, marketing, advertising, product development,
litigation,  taxation  and other management decisions  are  subjective  in  many
respects and thus susceptible to interpretations and periodic revisions based on
actual  experience and business developments, the impact of which may cause  the
Company to alter its marketing, capital expenditure or other budgets, which  may
in turn affect the Company's financial position and results of operations.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Financial Statements:

      Report of Independent Auditors.
       Consolidated Balance Sheets at December 28, 1996, December 30, 1995,  and
          July 1, 1995.
       Consolidated  Statements of Operations for the six months ended  December
          30, 1995  and  for  the  years  ended December 28,  1996,  July  1,  
          1995,  and July 2, 1994.
       Consolidated Statements of Shareholders' Equity for the six months  ended
          December  30, 1995 and for  the  years  ended  December  28,  1996, 
          July   1, 1995, and July 2, 1994.
       Consolidated  Statements of Cash Flows for the six months ended  December
          30, 1995 and  for  the  years  ended December 28,  1996,  July  1,  
          1995, and July 2, 1994.
       Notes to Consolidated Financial Statements.


ITEM  9.    CHANGES  IN  AND DISAGREEMENTS WITH ACCOUNTANTS  ON  ACCOUNTING  AND
            FINANCIAL DISCLOSURE

     Not applicable.


REPORT OF INDEPENDENT AUDITORS



The Board of Directors and Shareholders
AST Research, Inc.


      We  have  audited  the  accompanying consolidated balance  sheets  of  AST
Research, Inc. as of December 28, 1996, December 30, 1995 and July 1, 1995,  and
the  related  consolidated statements of operations, shareholders'  equity,  and
cash  flows for the year ended December 28, 1996, the six months ended  December
30,  1995,  and  each of the two years in the period ended July  1,  1995.   Our
audits  also  included the financial statement schedule listed in the  Index  at
Item  14(a).  These financial statements and schedule are the responsibility  of
the  Company's management.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

      We  conducted  our  audits in accordance with generally accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing  the  accounting  principles used and significant  estimates  made  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in  all  material respects, the consolidated financial position of AST Research,
Inc.  at  December  28,  1996, December 30, 1995, and  July  1,  1995,  and  the
consolidated  results of its operations and its cash flows for  the  year  ended
December  28, 1996, the six months ended December 30, 1995 and each of  the  two
years  in  the period ended July 1, 1995, in conformity with generally  accepted
accounting  principles.  Also, in our opinion, the related  financial  statement
schedule, when considered in relation to the basic financial statements taken as
a  whole,  presents  fairly in all material respects the information  set  forth
therein.



                                               ERNST & YOUNG LLP
                                                 

Orange County, California
January 30, 1996


                               AST RESEARCH, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                 December 28,       December 30,     July 1,
(In thousands, except share amounts)                                 1996               1995           1995
--------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>             <C>
ASSETS
 Current assets:
   Cash and cash equivalents                                    $     61,063    $    125,387    $     95,825
   Accounts receivable, net of allowance for doubtful
     accounts of $20,243, $18,629, and $17,452 at
     December 28, 1996, December 30, 1995, and
     July 1, 1995, respectively                                      400,061         392,598         394,927
   Inventories                                                       139,007         252,339         311,469
   Deferred income taxes                                              18,813          19,495          31,973
   Other current assets                                               19,949          47,802           6,938
--------------------------------------------------------------------------------------------------------------
        Total current assets                                         638,893         837,621         841,132
 Property and equipment, net                                          91,612          98,725         101,255
 Other assets                                                        100,552         119,696          79,114
--------------------------------------------------------------------------------------------------------------
                                                                $    831,057    $  1,056,042    $  1,021,501
==============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
   Short-term borrowings                                        $    175,000    $     75,000    $    156,000
   Accounts payable, including payable to related
     party of $58,394 and $31,562 at December 28, 1996
     and December 30, 1995, respectively                             272,693         199,346         213,202
   Accrued salaries, wages and employee benefits                      15,684          19,827          17,760
   Other accrued liabilities                                         184,664         200,639         119,689
   Income taxes payable                                               31,610          26,902          25,189
   Current portion of long-term debt                                     291          92,361           2,420
--------------------------------------------------------------------------------------------------------------
        Total current liabilities                                    679,942         614,075         534,260
 Long-term debt                                                      131,737         125,540         219,224
 Other non-current liabilities                                         7,238           5,545           4,779
--------------------------------------------------------------------------------------------------------------

 Commitments and contingencies

 Shareholders' equity:
   Preferred stock, par value $.01; 1,000,000 shares
     authorized, 500,000 shares issued and outstanding
     at December 28, 1996, liquidation preference
     of $32,500,000                                                   27,780               -               -
   Common stock, par value $.01; 200,000,000 shares
     authorized, 57,757,830, 44,679,400, and 32,412,500
     shares issued and outstanding at December 28, 1996
     December 30, 1995, and July 1, 1995, respectively                   578             447             324
   Additional capital                                                505,797         414,735         142,208
   Retained earnings (deficit)                                      (522,015)       (104,300)        120,706
--------------------------------------------------------------------------------------------------------------
        Total shareholders' equity                                    12,140         310,882         263,238
--------------------------------------------------------------------------------------------------------------
                                                                $    831,057    $  1,056,042    $  1,021,501
==============================================================================================================
</TABLE>
                             See accompanying notes.


                               AST RESEARCH, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                 Fiscal Year       Six Months            Fiscal Year Ended
                                                    Ended            Ended       -------------------------------
                                                 December 28,     December 30,       July 1,            July 2,
(In thousands, except per share amounts)             1996             1995             1995               1994
------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>               <C>                <C>
Net sales                                     $   2,068,643    $   1,016,283     $  2,467,783       $  2,367,274
Revenue from related party                           35,000                -                -                  -
------------------------------------------------------------------------------------------------------------------
Total revenue                                     2,103,643        1,016,283        2,467,783          2,367,274

Cost of sales                                     2,078,775        1,033,158        2,222,108          2,019,541
------------------------------------------------------------------------------------------------------------------
Gross profit (loss)                                  24,868          (16,875)         245,675            347,733

Selling, general and administrative expenses        336,367          165,746          314,982            267,386
Engineering and development expenses                 40,702           19,608           36,383             38,858
Restructuring charge (credit)                         6,527           12,967                -            (12,500)
Other charges                                        26,380                -                -                  -
------------------------------------------------------------------------------------------------------------------
Total operating expenses                            409,976          198,321          351,365            293,744
Operating income (loss)                            (385,108)        (215,196)        (105,690)            53,989

Financing and other expense, net                    (32,607)          (9,810)         (17,675)            (7,677)
------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                  (417,715)        (225,006)        (123,365)            46,312

Income tax provision (benefit)                            -                -          (24,056)            15,003
------------------------------------------------------------------------------------------------------------------
Net income (loss)                             $    (417,715)    $   (225,006)     $   (99,309)       $    31,309
==================================================================================================================
Net income (loss) per common share:
   Primary                                    $       (8.22)   $       (5.27)    $      (3.07)      $       0.96
   Fully diluted                              $       (8.22)   $       (5.27)    $      (3.07)      $       0.95
==================================================================================================================
Shares used in computing net income
  (loss) per common share:
    Primary                                          50,827           42,721           32,371             32,548
    Fully diluted                                    50,827           42,721           32,371             34,866
==================================================================================================================
</TABLE>
                             See accompanying notes.



                               AST RESEARCH, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                                                        Retained
                                                Preferred Stock          Common Stock    Additional     Earnings
(In thousands)                                  Shares    Amount     Shares     Amount     Capital     (Deficit)
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>    <C>    <C>    <C>       <C>       <C>
Balance at July 3, 1993                            -   $      -      31,579    $  316    $ 129,784     $ 188,706
  Exercise of stock options                        -          -         755         7        9,554             -
  Tax benefit related to employee stock options    -          -           -         -        1,823             -
  Vesting of restricted stock                      -          -           -         -          263             -
  Net loss                                         -          -           -         -            -        31,309
------------------------------------------------------------------------------------------------------------------
Balance at July 2, 1994                            -          -      32,334       323      141,424       220,015
  Exercise of stock options                        -          -          79         1          784             -
  Net loss                                         -          -           -         -            -       (99,309)
------------------------------------------------------------------------------------------------------------------
Balance at July 1, 1995                            -          -      32,413       324      142,208       120,706
    Issuance of common stock to related party,
    net of issuance costs of $8,876                -          -      12,070       121      240,443             -
  Issuance of stock option to related party in
    exchange for additional support                -          -           -         -       31,045             -
    Exercise of stock options                      -          -         196         2        1,039             -
  Net loss                                         -          -           -         -            -      (225,006)
------------------------------------------------------------------------------------------------------------------
Balance at December 30, 1995                       -          -      44,679       447      414,735      (104,300)
  Issuance of preferred stock to related party
    in exchange for additional support, net
    of issuance costs of $267                    500     27,780           -         -            -             -
  Issuance of common stock to repay
     long-term debt, net of issuance costs
      of $152                                      -          -       4,499        45       29,803             -
  Issuance of common stock to related party        -          -       8,499        85       59,915             -
  Expenses paid by related party                   -          -           -         -        1,009             -
  Exercise of stock options                        -          -          81         1          335             -
  Net loss                                         -          -           -         -            -      (417,715)
------------------------------------------------------------------------------------------------------------------
Balance at December 28, 1996                     500   $ 27,780      57,758    $  578    $ 505,797    $ (522,015)
==================================================================================================================
</TABLE>
                             See accompanying notes.


                               AST RESEARCH, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                      Fiscal Year       Six Months         Fiscal Year Ended
                                                         Ended            Ended      ----------------------------
                                                      December 28,      December 30,      July 1,         July 2,
(In thousands)                                            1996              1995            1995            1994
------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>             <C>             <C>
Cash flows from operating activities:
Net income (loss)                                     $  (417,715)     $ (225,006)     $  (99,309)     $   31,309
Adjustments to reconcile net income (loss) to net cash
   used in operating activities:
   Depreciation and amortization                           27,525          11,595          19,209          22,928
   Amortization of debt issue costs and credit
       guarantees                                          23,810           3,675           6,102           2,933
   Provision (benefit) for deferred income taxes            3,024           2,047         (25,318)          8,983
   Gain on sale of capital equipment                       (1,812)           (435)           (870)         (4,286)   
   Other charges                                           26,380               -               -              -
   Pen-based inventory write-off                                -               -               -          33,600
   Expenses paid by related party                           1,009
   Change in operating assets and liabilities, net
     of effects of acquisition:
      Accounts receivable                                  (5,713)          4,620         (58,714)        (86,290)
      Inventories                                         113,332          59,130          22,260         (19,808)
      Other current assets                                 27,545         (17,318)         12,798           3,317
      Accounts payable                                     73,773          (8,322)          2,142          29,545
      Accrued salaries, wages, and employee benefits       (3,942)          2,105          (4,152)          4,782
      Other accrued liabilities                           (11,437)         64,529           9,215         (43,470)      
      Income taxes payable                                  4,708           1,713          (2,266)        (17,377)
      Other non-current liabilities                        (1,896)         (8,568)            787          (8,523)
Exchange (gains) losses                                     2,434           2,907          (1,658)          2,097
------------------------------------------------------------------------------------------------------------------
      Net cash used in operating activities              (138,975)       (107,328)       (119,774)        (40,260)

Cash flows from investing activities:
   Purchases of capital equipment                         (22,445)        (10,649)        (26,080)        (30,045)
   Proceeds from disposition of capital equipment           4,274           1,611           4,474          10,673
   Purchases of other assets                                 (462)         (2,811)        (12,022)         (1,484) 
   Payment related to Tandy/GRiD acquisition                    -               -               -         (15,000)
------------------------------------------------------------------------------------------------------------------
      Net cash used in investing activities               (18,633)        (11,849)        (33,628)        (35,856)

Cash flows from financing activities:
   Short-term borrowings (repayments), net                100,000         (81,000)        106,000          (9,217)
   Repayment of long-term debt                            (62,255)         (6,877)           (391)           (520)
   Proceeds from issuance of long-term debt                     -               -              23         107,974
   Proceeds from issuance of common stock:
      To related party                                     60,000         240,564               -               -
      Other                                                   184           1,041             785           9,561
------------------------------------------------------------------------------------------------------------------
      Net cash provided by financing activities            97,929         153,728         106,417         107,798

Effect of exchange rate changes on cash and
   cash equivalents                                        (4,645)         (4,989)        (10,308)           (164)
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents      (64,324)         29,562         (57,293)         31,518

Cash and cash equivalents at beginning of period          125,387          95,825         153,118         121,600
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period            $    61,063     $   125,387     $    95,825     $   153,118
==================================================================================================================
</TABLE>
                             See accompanying notes.


                               AST RESEARCH, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                      Fiscal Year       Six Months         Fiscal Year Ended
                                                         Ended            Ended       ---------------------------
                                                      December 28,      December 30,      July 1,         July 2,
(In thousands)                                            1996              1995            1995            1994
------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                <C>            <C>            <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
   FINANCING ACTIVITIES:

Issuance to related party of .5 million shares
   of preferred stock in exchange for a
   two-year $200 million credit guarantee             $    27,780     $         -     $         -     $         -

Issuance of 4.5 million shares of common stock
   to Tandy Corporation to pay $30 million
    of the $90 million promissory note due to
   Tandy Corporation                                  $    30,000     $         -     $         -     $         -

Issuance to related party of a five-year option
   to purchase 4.4 million shares of common
   stock at an exercise price of  $.01 per share
   in exchange for a two-year $200 million
   credit guarantee, and a two-year $100 million
   vendor line                                        $         -     $    31,045     $         -     $         -

Tax benefit of employee stock options                 $         -     $         -     $         -     $     1,823
==================================================================================================================

The Company purchased certain assets relating
   to Tandy/GRiD France's personal computer
   operations effective September 1, 1993.  In
   conjunction with the acquisition, liabilities
   were assumed as follows:

   Fair value of assets acquired                      $         -     $         -     $         -     $    16,571
   Note payable to Tandy                                        -               -               -          (6,720)
------------------------------------------------------------------------------------------------------------------
Liabilities assumed                                   $         -     $         -     $         -     $     9,851
==================================================================================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION

   Cash paid during the year for interest             $    11,568     $     7,717     $     9,937     $     3,149
   Cash paid (received) during the year for
      income taxes                                    $    (4,729)    $       913     $     9,895     $    22,210
==================================================================================================================
</TABLE>

                                                   See accompanying notes.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
      The accompanying consolidated financial statements include the accounts of
AST  Research,  Inc. ("Company") and its wholly and majority owned subsidiaries.
All   intercompany   accounts  and  transactions   have   been   eliminated   in
consolidation.  Accounts denominated in foreign currencies have been  remeasured
into   the  functional  currency  in  accordance  with  Statement  of  Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation," using  the
U.S. dollar as the functional currency.

Business
     The Company designs, manufactures, markets, services and supports a variety
of  personal computers, including desktop, notebook, and server systems marketed
under the Advantage!, Bravo, Ascentia and Manhattan brand names.

Financing Requirements
      The  Company's  recent operations have resulted in net  losses  of  $417.7
million,  $225.0  million, and $99.3 million for fiscal  year  1996,  transition
period  1995,  and fiscal year 1995, respectively, as well as a working  capital
deficiency  of $41.0 million and total shareholders' equity of $12.1 million  as
of  December  28, 1996.  As a result, it has been necessary for the  Company  to
look to Samsung Electronics Co., Ltd. ("Samsung"), its largest shareholder,  for
financial support while management implements changes to the Company's  business
in  order  to return the Company to profitability.  In addition to purchases  of
common  stock from the Company aggregating $309.5 million, Samsung has  provided
credit  guarantees aggregating $400 million (see Note 4) that are  available  to
support  bank  borrowings by the Company through December 31,  1998  (for  which
Samsung  received  additional Company equity securities  then  valued  at  $58.8
million)  and a $100 million vendor credit line available through November  1997
to facilitate component purchases from Samsung.

      As  of December 28, 1996, the Company had borrowed $175 million under bank
lines supported by Samsung guarantees and had $58.4 million due to Samsung under
the  vendor  credit  line.  As a result, the Company  has  additional  borrowing
availability under the loan guarantees of $225 million, of which $125 million is
available  under presently committed bank loan agreements.  Management  believes
these  financial resources will be sufficient to support the Company's liquidity
requirements  in  fiscal 1997; however, in the event they are not,  the  Company
would  be required to seek additional financing from Samsung or others for which
it has no current commitments.

      Additionally  on  January  30, 1997, the Company  announced  that  Samsung
proposed  to commence negotiations to acquire all of the outstanding  shares  of
the Company not owned by Samsung or its affiliates at a price of $5.10 per share
(see Note 6).  If this transaction were to occur, and there is no assurance that
it  will  ultimately occur, it would constitute a change in  control  under  the
Company's  Liquid Yield OptionTM Notes ("LYONs"), and the holders of  the  LYONs
have  the right to require the Company to redeem the LYONs at their issue  price
plus  accrued  original discount through the date set for  such  redemption.   A
LYONs  redemption  event occurring in fiscal 1997 would result in  approximately
$130  to $140 million of additional cash requirement for which the Company would
be required to seek external financing.

      No  assurance  can  be  given that, if required, additional  financing  in
amounts  in  excess of the borrowing availability supported by  current  Samsung
guarantees will be available on acceptable terms or at all.

      Management  has  developed  plans  to improve  the  Company's  competitive
position  by  increasing operating efficiencies, by more focused and  aggressive
marketing  of  the  Company's products and through a sharing of  expertise  with
Samsung,  and  it  anticipates that these efforts will result in  improving  the
Company's  gross margins and operating results.  However, no assurances  can  be
given  that  the  Company will be successful in realizing these  goals.  If  the
Company is unable to improve its gross margins and operating results, management
will be required to significantly adjust the Company's operations. The Company's
ability  to  continue its on-going operations on a long term basis is  dependent
upon its ability maintain to adequate financing levels, improve gross 
margins, and ultimately sustain a profitable level of operations.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fiscal Year
      The  Company  operates within a conventional 52/53 week accounting  fiscal
year.   On  October 26, 1995, the Company changed its fiscal year-end  from  the
Saturday  closest to June 30 to the Saturday closest to December  31,  with  the
exception  of  certain foreign subsidiaries that will operate on a  December  31
fiscal  year-end.  The change was made in order to align the Company's  year-end
with  that of its largest shareholder, Samsung Electronics Co. Ltd. ("Samsung").
The  change  in fiscal year is effective for the six months ended  December  30,
1995  ("transition  period"  or "transition period  1995").   Fiscal  year  1996
included 52 weeks.  Transition period 1995 included 26 weeks.  The fiscal  years
ended July 1, 1995 and July 2, 1994 included 52 weeks.

Use of Estimates
      The  preparation  of  financial statements in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the amounts reported in the financial  statements  and
accompanying notes.  The industry in which the Company operates is characterized
by  rapid  technological change and short product life  cycles.   As  a  result,
estimates are required to provide for product returns, product obsolescence  and
warranty returns.  Actual results may differ, however, from those estimates.

Cash and Cash Equivalents
      Cash  and  cash  equivalents generally consist of  cash,  certificates  of
deposit, time deposits, commercial paper, short-term government obligations  and
other money market instruments.  The Company invests its excess cash in deposits
with   major  international  banks,  government  securities  and  money   market
securities  of  investment  grade companies from a variety  of  industries  and,
therefore,  bears minimal risk.  These securities have original  maturity  dates
not exceeding three months.

Fair Values of Financial Instruments
      Fair  values of cash and cash equivalents, short-term borrowings  and  the
current  portion of long-term debt approximate cost due to the short  period  of
time  to  maturity.  Fair values of long-term debt are based  on  quoted  market
prices  or on borrowing rates currently available to the Company for loans  with
similar  terms  or  maturity.   The carrying amounts  of  the  forward  exchange
contracts equal their fair value and are adjusted at each balance sheet date for
changes in exchange rates.  The estimated fair value amounts disclosed in Note 7
have  been  determined  by  the  Company  using  available  market  information.
However,  considerable  judgment is necessary in  interpreting  market  data  to
develop  estimates of fair value.  Accordingly, the estimates presented are  not
necessarily  indicative  of  the amounts that the Company  could  realize  in  a
current market exchange.  Changes in assumptions could significantly affect  the
estimates.

Inventories
      Inventories  are stated at the lower of cost, determined  on  a  first-in,
first-out basis, or market.

Property and Equipment
      Property  and equipment are stated at cost.  Depreciation and amortization
are  provided  on  the straight-line method over the following estimated  useful
lives:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
  <S>                                                                 <C>
   Buildings                                                            40 years
   Machinery and equipment                                             3-5 years
   Furniture and fixtures                                                5 years
   Leasehold improvements      Shorter of 5 years or remaining term of the lease
--------------------------------------------------------------------------------
</TABLE>

Intangible Assets
   During  the  fiscal year ended July 1, 1995, the Company  elected  the  early
adoption  of  Statement of Financial Accounting Standards  No.  121  ("SFAS  No.
121"),  "Accounting for the Impairment of Long-Lived Assets and  for  Long-Lived
Assets  to Be Disposed Of."  In accordance with SFAS No. 121, long-lived  assets
and certain identifiable

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                                        

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

intangibles  held  and used by the Company are reviewed for impairment  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may  not be recoverable.  The recoverability test is performed at a consolidated
level  based on undiscounted net cash flows, because the assets being tested  do
not  have  identifiable cash flows that are largely independent of  other  asset
groupings.

      Since  adoption of SFAS No. 121, the Company has evaluated its  long-lived
assets  for  impairment  on a quarterly basis.  As a  result  of  an  unexpected
deterioration in the Company's operating results for the third quarter of fiscal
year  1996  and  the resulting impact on the Company's future expectations,  the
Company  concluded that its long-lived assets had become impaired.  The  decline
in  the  Company's  revenue and gross margin during the third  quarter  resulted
primarily  from  the Company's inability to generate sufficient demand  for  its
products  and  the continued aggressive pricing environment within the  computer
marketplace.   As  a result, the Company updated its cash flow  projections  for
purposes of evaluating its long-lived assets for impairment to reflect a reduced
level  of sales growth and to adjust the period of time and rate by which  gross
margins are expected to improve.

      In  accordance  with SFAS 121, the impairment loss equals  the  difference
between  the  carrying value of long-lived assets, including goodwill,  and  the
fair  value  of  the  long-lived assets.  Within the third fiscal  quarter,  the
Company  completed an estimate of the fair value of its long-lived assets,  and,
based   on  this  estimate,  the  Company  recorded  an  impairment  charge   of
approximately  $21.6 million.  The impairment charge consisted of the  remaining
net  book  value  of  goodwill acquired in connection with  the  Company's  1993
acquisition  of  Tandy  Corporation's ("Tandy") personal computer  manufacturing
operations.   The  Company's estimate of fair the value of tangible  assets  was
based upon independent appraisals.  The Company's SFAS No. 121 analysis for  the
fourth  quarter  of fiscal year 1996, and appraisals, indicated  that  the  fair
value of its long-lived assets approximates their net book value.

      Patents  are  amortized using the straight-line method over the  estimated
useful  life of the patented technology.  Licenses are amortized on a  straight-
line basis over the estimated economic lives of the related assets.

Revenue Recognition
      The Company recognizes revenue from product sales at the time of shipment.
In  certain circumstances, the Company provides customers with stock rebalancing
and  price  protection  rights  that permit these distributors,  retailers,  and
dealers  to return slow-moving products to the Company for credit or to  receive
price  adjustments if the Company lowers the price of selected  products  within
certain  time  periods.  Stock rebalancing programs allow  customers  to  return
product  and  receive credit for the invoiced price less any  post-sale  pricing
reductions.  The effect of these programs is estimated and current period  sales
and cost of sales are reduced accordingly.

Warranty Revenue and Costs
     Revenue from separately stated warranty programs is deferred and recognized
over  the extended warranty period, and the related extended warranty costs  are
recognized as incurred.

     The Company provides, by a current charge to income, an amount it estimates
will be needed to cover future warranty obligations for products sold during the
year.   The  accrued  liability for warranty costs is included  in  the  caption
"Other accrued liabilities" in the accompanying consolidated balance sheets.

Advertising Costs
      Advertising costs are expensed as incurred.  Advertising expense  for  the
year  ended December 28, 1996, the six months ended December 30, 1995,  and  the
years  ended  July  1,  1995,  and  July 2, 1994 was  $71,530,000,  $32,795,000,
$59,262,000 and $41,138,000 respectively.

Engineering and Development
      Engineering and development costs are expensed as incurred.  Substantially
all  engineering and development expenses are related to developing new products
and designing significant improvements to existing products.

                                        
                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred Grants
      During  fiscal  year 1994, the Company obtained various  grants  from  the
Industrial  Development  Authority of the Republic  of  Ireland.   These  grants
include  employment,  training and capital grants and  extend  through  December
1996.   Employment grants are amortized into income over a period of  one  year.
Employee training grants are recognized  in income in the period in which the 
training costs are incurred  by the  Company.  Grants for the acquisition of 
property and equipment are deferred and recognized in income on the same basis 
as the related property and equipment is depreciated.

     During the six months ended December 30, 1995, fiscal year 1995, and fiscal
year  1994,  the Company recorded approximately $2.1 million, $8.0 million,  and
$5.1  million, respectively, in grant funds received or receivable.  The  amount
deferred under these grants at December 28, 1996, December 30, 1995, and July 1,
1995  was  $3.5  million, $6.0 million, and $6.7 million, respectively,  and  is
included in "Other accrued liabilities" in the accompanying consolidated balance
sheets.  Total grant amounts amortized into income during fiscal year 1996,  the
six-month period ended December 30, 1995, fiscal year 1995, and fiscal year 1994
were $2.5 million, $2.8 million, $5.8 million, and $0.6 million,  respectively.

      The  Company has a ten year contingent liability to repay, in whole or  in
part,  grants received under certain circumstances pursuant to the  Capital  and
Employment Grant Agreements which began February 1994.  In addition, the Company
has  a five year contingent liability under the Employment Grant Agreement  from
the  date of first payment to repay employment grants paid in respect to any job
if  such  job remains vacant for a period in excess of six months.  At  December
28,  1996,  the  Company also has seven years remaining on a one  million  Irish
punts  (U.S. $1.7 million) ten year contingent liability related to the purchase
of the manufacturing facility which began in November 1993 and is payable in the
event that the Company terminates operations in Ireland.

Income Taxes
      The income tax provision (benefit) is computed on the pretax income (loss)
of  the  consolidated entities located within each taxing country based  on  the
current  tax  law.   Deferred  taxes result from  the  future  tax  consequences
associated  with  temporary  differences  between  the  amount  of  assets   and
liabilities  recorded  for tax and financial accounting purposes.   A  valuation
allowance  for deferred tax assets is recorded to the extent the Company  cannot
determine,  in  accordance with the provisions of SFAS No. 109, "Accounting  for
Income Taxes," that the ultimate realization of net deferred tax assets is  more
likely  than not.  In making such determination, the Company considers estimated
future  reversals  of existing taxable temporary differences,  estimated  future
earnings  and  available  tax  planning strategies.   To  the  extent  that  the
estimates of these items are reduced or not realized, the amount of the deferred
tax assets considered realizable could be adversely affected.

      Incremental  United States income taxes have not been  provided  on  $70.0
million   of   cumulative  undistributed  earnings  of  the  Company's   foreign
subsidiaries.  These earnings, which reflect full provision for non-U.S.  income
taxes, are expected to be reinvested indefinitely in non-U.S. operations  or  to
be  remitted  substantially free of additional tax.   Accordingly,  no  material
provision has been made for taxes that might be payable upon remittance of  such
earnings nor is it practicable to determine the amount of this liability.  As  a
result  of  the restructuring plan completed in the second quarter of  the  six-
month  period  ended December 30, 1995 (Note 2), the Company provided  for  U.S.
taxes  on  $98.9  million  of  undistributed foreign  earnings  that  management
believes  will no longer be indefinitely reinvested in non-U.S. operations.   In
fiscal  year  1996,  this  amount was distributed as  a  dividend  to  the  U.S.
subsidiary from one of its foreign subsidiaries.

Per Share Information
   Primary net income per common share has been computed based upon the weighted
average  number  of  common  and common equivalent shares  outstanding.   Common
equivalent shares result from the assumed exercise of outstanding stock  options
that  have a dilutive effect when applying the treasury stock method.  The fully
diluted  per  share calculation assumes, in addition to the above and  where  it
results in additional dilution, that the Company's


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                                        
                                        
NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Liquid Yield Option Notes were converted from the date of issuance with earnings
being  increased for interest expense, net of taxes, that would  not  have  been
incurred had conversion taken place.

Stock Option Plans
     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for  Stock  Issued  to  Employees," ("APB 25"), and related  Interpretations  in
accounting  for its employee stock options.  Under APB 25, because the  exercise
price  of  the Company's employee stock options equals the market price  of  the
underlying stock on the date of grant, no compensation expense is recognized.

      The Company records the amounts received upon the exercise of options as a
credit  to common stock and additional capital.  The Company realizes an  income
tax  benefit  from the exercise or early disposition of certain  stock  options.
This  benefit  results  in a decrease in current income  taxes  payable  and  an
increase in additional capital.

Reclassifications
     Certain prior year balances have been reclassified to conform with the 1996
presentation.

NOTE 2.  ACQUISITIONS AND RESTRUCTURING

   In  June  1993,  the  Company  acquired certain assets  and  assumed  certain
liabilities   relating  to  Tandy  Corporation's  ("Tandy")  personal   computer
manufacturing  operations  and  the  GRiD  North  American  and  European  sales
divisions.   In  September 1993, the Company also purchased certain  assets  and
assumed  certain  liabilities of Tandy/GRiD France.  The  total  purchase  price
(including Tandy/GRiD France) was $111.7 million and included a cash payment  of
$15  million and a three-year promissory note in the principal amount  of  $96.7
million.   The  acquisitions were accounted for in accordance with the  purchase
method of accounting and, accordingly, the net assets acquired were included  in
the Company's consolidated balance sheets based upon their estimated fair values
at  the transactions' effective dates.  The Company's consolidated statements of
operations  include the revenues and expenses of the acquired  businesses  after
the effective dates of the respective transactions.

  Restructuring charges of $125 million were recorded in June 1993 in connection
with  the  Company's acquisition of Tandy's personal computer manufacturing  and
engineering  operations  and  GRiD's  North  American  and  European  sales  and
marketing  operations.  During fiscal year 1994, the Company completed  most  of
its  restructuring activities and incurred asset write-downs of $50 million  and
cash  expenditures  of  $47 million related directly to  its  fiscal  year  1994
restructuring  activities.  The Company recorded a $12.5 million credit  in  the
fourth  quarter  of  fiscal  year  1994  after  concluding  that  most  of   its
restructuring  activities  had been completed or were  adequately  provided  for
within  the remaining restructuring accrual.  At July 2, 1994, $15.2 million  of
restructuring  accrual  remained on the Company's  consolidated  balance  sheet.
During  fiscal  year  1995,  the  Company completed  the  consolidation  of  its
worldwide mobile computing manufacturing in Taiwan and the concurrent closure of
its  Fountain  Valley, California manufacturing facility.   During  fiscal  year
1995,  the  Company  incurred  cash expenditures of approximately  $4.7  million
related   primarily   to  the  closure  of  its  Fountain   Valley,   California
manufacturing  facility.  At July 1, 1995, approximately $10.5  million  of  the
original  restructuring accrual remained on the Company's  consolidated  balance
sheet.  During transition period 1995, the Company incurred cash expenditures of
approximately  $1.3  million related primarily to the closure  of  its  Fountain
Valley, California manufacturing facility and at December 30, 1995, $9.2 million
of  the  restructuring  accrual remained on the Company's  consolidated  balance
sheet.    During  fiscal  1996,  the  Company  incurred  cash  expenditures   of
approximately  $4.0  million  and at December 28,  1996,  $5.2  million  of  the
restructuring accrual remained on the Company's consolidated balance sheet.  The
remaining  accrual consists of amounts provided for the minimum  lease  payments
for  facilities that have been closed and the write-down to net realizable value
of  related leasehold improvements being disposed of.  The Company believes that
these  restructuring  activities  were necessary  in  order  to  reorganize  its
worldwide  manufacturing, engineering, sales and service operations as  well  as
reposition its product lines after the June 1993 acquisition of Tandy's personal
computer operations.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 2.  ACQUISITIONS AND RESTRUCTURING (CONTINUED)

    In  the second quarter of transition period 1995, the Company implemented  a
restructuring  plan, separate and apart from the June 1993 charge,  designed  to
increase  its utilization of third party board manufacturing and design  and  to
realign  its  Asia  Pacific manufacturing operations.  In accordance  with  this
plan,  the  Company  recorded a restructuring charge of  $13.0  million.   Costs
included  in the restructuring charge consisted primarily of employee severance,
asset  write-downs, vendor cancellation charges and lease write-offs for  closed
offices.    The  employee  severance  included  approximately  1,500   employees
primarily  in  semi-skilled and skilled manufacturing positions.   Approximately
$7.6  million of the charge was expected to involve cash disbursements with  the
remaining  costs primarily relating to reductions in net asset  values.   During
transition  period 1995, the Company incurred cash expenditures of approximately
$0.8 million related to severance payments to terminated employees.  At December
30,  1995,  approximately  $12.2 million of the original  restructuring  accrual
remained on the Company's consolidated balance sheet.  During fiscal year  1996,
the  Company incurred cash expenditures of $5.4 million and non-cash charges  of
$3.8  million,  related primarily to severance payments, asset  write-downs  and
lease payments for closed facilities.  At December 28, 1996, $3.0 million of the
restructuring  accrual  remained on the Company's  consolidated  balance  sheet,
consisting primarily provisions for lease obligations.  As of December 28, 1996,
approximately  $4.2  million  of the total $10.0  million  restructuring  charge
utilized  to date relates to severance payments made to the 1,532 employees  who
have been terminated under this plan.  As of December 28, 1996, the majority  of
the  restructuring has been completed, although certain lease  obligations  will
continue through fiscal year 1998.

   In  the  second  quarter  of  fiscal year  1996,  the  Company  approved  and
implemented a restructuring plan, separate and apart from the restructuring plan
implemented  in  transition period 1995, designed to restructure  its  worldwide
operations  into three regional operating groups.  The Company's plans  included
the consolidation and/or closure of certain regional offices and reconfiguration
centers  and the suspension of its notebook manufacturing operations in  Taiwan,
accompanied  by  the transfer of notebook manufacturing to third-party  original
equipment  manufacturers.  In accordance with this plan, the Company recorded  a
restructuring charge of approximately $6.5 million in the quarter ended June 29,
1996.   Costs included in the restructuring charge consist primarily of employee
severance,   asset   write-downs   and   provisions   for   lease   obligations.
Approximately  $5.8 million is expected to involve cash disbursements  with  the
remaining  costs primarily involving asset write-downs.  The employee  severance
was  expected  to involve approximately 240 employees, across all functions  and
levels.   In  fiscal year 1996, the Company incurred aggregate cash expenditures
of  $4.1  million and non-cash charges of $0.3 million, consisting primarily  of
employee  severance, asset write-downs, and payments for lease obligations.   At
December  28,  1996,  approximately $2.1 million of  the  restructuring  accrual
remained  on  the Company's consolidated balance sheet, consisting primarily  of
provisions  for lease obligations.  As of December 28, 1996, 250 employees  have
been  terminated  under  this  plan, and the total $3.1  accrued  for  severance
payments has been paid.  At December 28, 1996, the majority of the restructuring
had  been  completed, although certain lease obligations will  continue  through
fiscal year 2001.

      Although  the  Company believes that these restructuring  activities  were
necessary,  no assurance can be given that these restructuring actions  will  be
successful or that similar actions will not be required in the future.

                                        
                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 3.  SUPPLEMENTAL FINANCIAL INFORMATION

Supplemental Balance Sheet Information

Inventories
     Inventories consist of the following:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                 December 28,      December 30,        July 1,
(In thousands)                                                        1996             1995              1995
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>              <C>
Purchased parts                                                   $   68,877       $   73,012       $   67,296
Work in process                                                        7,380           33,823           36,686
Finished goods                                                        62,750          145,504          207,487
---------------------------------------------------------------------------------------------------------------
Total                                                             $  139,007       $  252,339       $  311,469
===============================================================================================================
</TABLE>

Property and Equipment
     Property and equipment consists of the following:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                  December 28,     December 30,        July 1,
(In thousands)                                                        1996             1995              1995
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>              <C>
Land                                                              $   16,079       $   15,961       $   15,961
Buildings                                                             34,285           34,253           34,824
Machinery and equipment                                               89,119           93,990           88,476
Furniture and fixtures                                                12,627           13,519           12,860
Leasehold improvements                                                14,097           13,174           13,140
---------------------------------------------------------------------------------------------------------------
                                                                     166,207          170,897          165,261
Accumulated depreciation                                             (74,595)         (72,172)         (64,006)
---------------------------------------------------------------------------------------------------------------
Property and equipment, net                                       $   91,612       $   98,725       $  101,255
===============================================================================================================
</TABLE>

Other Assets
  Other assets consist of the following:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                 December 28,      December 30,        July 1,
(In thousands)                                                        1996             1995              1995
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>              <C>
Deferred income taxes                                             $   41,674       $   44,016       $   33,585
Credit line guarantees, less accumulated amortization of 17,723 
   and $506 at December 28, 1996 and December 30, 1995,
   respectively                                                       43,350           32,519                -
Goodwill, less accumulated amortization of $8,218 and $6,615
   at December 30, 1995, and July 1, 1995, respectively                    -           24,250           25,853
Patents,licenses and other intangibles, less accumulated
   amortization of $3,672, $2,130 and $436 at December
   28, 1996, December 30, 1995 and July 1, 1995, respectively          8,793           10,890           11,382
Other, net                                                             6,735            8,021            8,294
---------------------------------------------------------------------------------------------------------------
Total                                                             $  100,552       $  119,696       $   79,114
===============================================================================================================
</TABLE>

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 3.  SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

Other Current Accounts
      Accrued  royalties of $35.3 million and accrued product warranty of  $48.8
million  were  included  in "Other accrued liabilities" at  December  28,  1996.
Prepaid  value  added  taxes of $22.2 million were included  in  "Other  current
assets,"  and  amounts  payable for value added  taxes  of  $45.3  million  were
included in "Other accrued liabilities" at December 30, 1995.

Supplemental Statements of Operations Information

Other Charges
      Other charges for the fiscal year ended December 28, 1996 consisted of the
following (in thousands):

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                                            December 28,
(In thousands)                                                                                  1996
---------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>
Asset impairment charge                                                                     $    21,643
Facility write-down to net
  realizable value                                                                                1,149
Provision under Founder's Agreement                                                               3,588
---------------------------------------------------------------------------------------------------------------
Total                                                                                           $26,380
===============================================================================================================
</TABLE>

   For  further information concerning the asset impairment charge, see Note  1.
Summary of Significant Accounting Policies, Intangible Assets.

   As  part  of  its  second quarter restructuring plan, $1.1 million  in  other
charges were provided as a result of management's commitment to dispose  of  its
existing  sales facility in France.  The carrying amount of the facility,  which
includes  land,  a  building, and leasehold improvements, is approximately  $3.1
million after the write-down and represents the estimated fair value less  costs
to sell.

   Effective  July  27,  1993, the Company entered into an  employment  contract
("Founder's  Agreement")  with founder and former Chairman  of  the  Board  (now
Chairman  Emeritus),  Safi U. Qureshey, who was then serving  as  the  Company's
Chief  Executive Officer.  The Founder's Agreement provided for  five  years  of
salary,  health and welfare benefits, two years of bonus, acceleration of  stock
options  and certain other benefits if active employment was terminated  by  the
Company  or by Mr. Qureshey under specified conditions.  On June 28,  1996,  the
Company  elected  Kwang-Ho  Kim  as Chairman and  named  Mr.  Qureshey  Chairman
Emeritus,  which  would  have resulted in Mr. Qureshey being  entitled  to  such
compensation and benefits had he not agreed to defer its effectiveness  to  some
future  date  of  his choice.  As a result,  the Company provided  $3.6  million
during  fiscal year 1996, representing the present value of the benefits payable
to Mr. Qureshey.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 3.  SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

Financing and other expense
     Financing and other expense consist of the following:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                             Fiscal Year       Six Months          Fiscal Year Ended
                                                Ended            Ended           --------------------
                                            December 28,      December 30,       July 1,     July 2,
(In thousands)                                   1996            1995              1995        1994
--------------------------------------------------------------------------------------------------------
<S>                                        <C>               <C>                <C>         <C>
Interest income                             $      2,777      $    2,631         $   2,362   $ 2,125
Interest expense                                 (33,412)         (8,634)          (17,436)   (9,937)
Other income (expense), net                       (1,972)         (3,807)           (2,601)      135
---------------------------------------------------------------------------------------------------------
Total financing and other expense, net      $    (32,607)      $  (9,810)        $ (17,675)  $(7,677)
=========================================================================================================
</TABLE>

NOTE 4.  FINANCING ARRANGEMENTS

      At  December  28,  1996, the Company has a $200 million  revolving  credit
facility,  guaranteed  by Samsung as part of the Additional  Support  Agreement,
with  a  final maturity date of December 25, 1997.  The credit guarantee expires
December 31, 1998.  The revolving credit agreement allows the Company to  borrow
at  a  rate of LIBOR plus 0.25% per annum, or the bank's reference rate, at  the
Company's option.  The Company is required to pay a commitment
fee  equal to 0.125% per annum based on the average daily unused portion of  the
facility.  The fee is payable quarterly in arrears.  At December 28, 1996, there
was  $175  million outstanding as borrowings under this credit  facility  at  an
interest rate of 6.06% per annum.

      On  December  13,  1996,  the Company signed a Second  Additional  Support
Agreement  (Note  6) with Samsung that provides the Company with  an  additional
$200  million credit guarantee through December 31, 1998.  On December 18, 1996,
the Company completed the establishment of additional bank credit lines totaling
$100 million with three banks, which represents the initial $100 million that is
guaranteed  by  the Second Additional Support Agreement.  The credit  agreements
allow the Company to borrow at the prime rate.  At December 28, 1996, there were
no outstanding borrowings under these credit lines.

      The  weighted average interest rate on total short-term borrowings  as  of
December  28,  1996, December 30, 1995 and July 1, 1995 was  6.06%,  8.50%,  and
8.22% respectively.

NOTE 5.  LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                       December 28,      December 30,   July 1,
(In thousands)                                                              1996            1995         1995
-----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>          <C>
Liquid Yield Option Notes (zero coupon convertible subordinated
   notes) due 2013, less original issue discount of $184,470,
   $191,063, and $194,232, at December 28, 1996,
   December 30, 1995, July 1, respectively, 5.25% yield to maturity    $   130,530      $ 123,937    $  120,768

Promissory note payable to Tandy, paid July 1996                                 -         90,000        96,720

Other notes payable and capital lease obligations  due in various
   installments through April 2002                                           1,498          3,964         4,156
                                                                           132,028        217,901       221,644
Less current portion of long-term debt                                        (291)       (92,361)       (2,420)
-----------------------------------------------------------------------------------------------------------------
Long-term debt                                                         $   131,737      $ 125,540    $  219,224
=================================================================================================================
</TABLE>
                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 5.  LONG-TERM DEBT (CONTINUED)

   On  December 14, 1993, the Company issued $315 million par value of LYONs due
December  14, 2013 and received total proceeds of approximately $111.7  million.
The  LYONs are zero coupon convertible subordinated notes which were sold  at  a
significant  discount from par value with a yield to maturity  of  5.25%  and  a
total  value at maturity of $315 million payable in cash.  There are no periodic
payments of interest on the LYONs.  Each $1,000 principal amount at maturity  of
LYONs  is  convertible into 12.993 shares of the Company's common stock  at  any
time.   Upon  conversion of a LYON, the Company may elect to deliver  shares  of
common  stock  at the conversion rate or cash equal to the market value  of  the
shares  of common stock into which the LYONs are convertible.  The holder  of  a
LYON  may  require  the Company to purchase all or a portion  of  its  LYONs  on
December  14,  1998,  December 14, 2003 and December  14,  2008  (the  "Purchase
Dates"),  and  such payments may reduce the liquidity of the Company.   However,
the  Company may, subject to certain exceptions, elect to pay the purchase price
on  any of the three Purchase Dates in cash or shares of common stock based upon
its  then  fair  market value as defined in the indenture,  or  any  combination
thereof.

   In  addition,  as of 35 business days after the occurrence of any  change  in
control  of  the Company occurring on or prior to December 14, 1998,  each  LYON
will  be purchased for cash by the Company, at the option of the holder,  for  a
price equal to the issue price of the LYONs plus accrued original issue discount
through  the date set for such purchase.  A change in control of the Company  is
deemed to have occurred under the terms of the LYONs at such time as any person,
other  than the Company, has become the beneficial owner of 50% or more  of  the
Company's  common stock or the Company is not the surviving corporation  of  any
consolidation  or merger of the Company.  On January 30, 1997, Samsung  proposed
to  commence  negotiations regarding the acquisition by Samsung of  all  of  the
outstanding shares of the Company's common stock not currently owned by  Samsung
or  its affiliates, at a price of $5.10 per share.  Samsung currently has  49.4%
beneficial  ownership of the Company.  If the transaction is consummated,  there
would  be  a change in control, and the holders of the LYONs have the right to
require the Company to redeem the LYONs at their issue price plus accrued 
original discount through the date set for such redemption.  A LYONs redemption 
event occurring in fiscal 1997 would result in approximately $130 million to 
$140 million of additional cash requirement for which the Company would be 
required to seek external financing.  No decision has been made by the 
Company with respect to the source of funds to meet the change in control
redemption requirements, should this transaction be completed.

      At  December  30,  1996, the assets held under capital leases  total  $3.1
million,  net of $0.8 million in accumulated depreciation, and are  included  in
land and buildings in the accompanying consolidated balance sheet.

     Principal repayments on long-term debt required in fiscal years 1997, 1998,
1999,  2000  and 2001 are $291,000, $282,000, $282,000, $282,000  and  $282,000,
respectively,  exclusive  of  the purchase of the  LYONs,  should  the  proposed
transaction with Samsung be completed.

NOTE 6.  SHAREHOLDERS' EQUITY TRANSACTIONS

      On  February 27, 1995, the Company entered into a Stock Purchase Agreement
("Purchase  Agreement")  with  Samsung  providing  for  a  significant  minority
ownership  interest in the Company of approximately 40%.  On June 30, 1995,  the
Company's  shareholders  approved the strategic investment  and  all  regulatory
approval  was  received  as of July 1, 1995.  Under the terms  of  the  Purchase
Agreement,  as  amended  by Amendment No. 1 thereto  dated  June  1,  1995,  and
Amendment  No.  2  thereto dated July 29, 1995, Samsung purchased  6.44  million
newly issued shares of common stock from the Company, representing 19.9% of  the
then  outstanding shares of common stock, at $19.50 per share  and  commenced  a
cash  tender  offer  to purchase 5.82 million shares of common  stock  from  the
Company's  shareholders,  representing 18% of the  then  outstanding  shares  of
common  stock, at $22 per share.  Concurrently with the acceptance of the shares
for  purchase  under  the  tender offer, Samsung  also  purchased  5.63  million
additional newly issued shares of common stock from the Company at $22 per share
so that its aggregate ownership interest in the Company, after completion of all
of  the purchases, was approximately 40%.  On July 31, 1995, the transaction was
completed and the Company received net proceeds of approximately $240 million.

   On December 21, 1995, the Company signed an Additional Support Agreement with
Samsung  that provides additional financial support to the Company,  principally
including a guarantee by Samsung of a line of credit of  up  to  $200  million
through  December 1997 and a vendor line of credit with Samsung of $100  million
through November

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 6.  SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)

1997 for component purchases.  In exchange for the additional financial support,
the  Company issued an option to Samsung to purchase 4.4 million shares  of  the
Company's  common  stock  at an exercise price of $.01  per  share,  exercisable
between July 1, 1996 and June 30, 2001, and allowed Samsung to add an additional
member  to  the  Company's  Board of Directors.   The  issuance  of  the  option
increases  Samsung's  potential ownership in the Company to  approximately  45%.
The  value of the benefits received in exchange for the option were recorded  in
"Other assets" based on the fair value of the option at the date of issuance, or
$31   million.   In  connection  with  this  agreement,  the  Company   incurred
professional  fees  of  approximately $2 million, which were  also  capitalized.
This  other asset will be amortized on a straight-line basis to interest expense
over the benefit period ending December 1998.

      On July 11, 1996, the Company paid the $90 million promissory note due  to
Tandy  related  to  the Company's 1993 acquisition of Tandy's personal  computer
manufacturing  operations.  Payment was in the form of 4,498,594 shares  of  the
Company's  common  stock, then valued at $30 million, and $60 million  in  cash.
Subsequent  to  the  issuance of shares to Tandy, also on  July  11,  1996,  the
Company  issued 8,499,336 shares of its common stock to Samsung in exchange  for
$60  million  in cash that was used to pay Tandy.  The issuance  of  the  common
stock  to Samsung was made pursuant to a 1995 Letter of Credit Agreement between
the  Company  and  Samsung.   The  equity  transactions  were  recorded  net  of
professional fees of approximately $0.1 million.

      On  December  13,  1996,  the Company signed a Second  Additional  Support
Agreement  with Samsung to provide certain additional financial support  to  the
Company as consideration for 500,000 shares of non-voting preferred stock.   The
shares are not subject to mandatory redemption, but each share is redeemable  at
the Company's option for cash of $100.75 or 13.11 shares of the Company's common
stock,  beginning  in  January 1999.  The preferred  shares  carry  a  quarterly
cumulative  dividend, beginning in 1999, at the annual rate of $4.72 per  share,
with annual increases to a maximum rate of $7.96 per share in the year 2004  and
thereafter.  The  value of the benefits received in exchange for  the  preferred
stock  were recorded in "Other assets" based on the estimated fair value of  the
stock  at  the  date  of  issuance, or $28.1 million.  In connection  with  this
agreement, the Company incurred professional fees of approximately $0.3 million,
which  were also capitalized.  This other asset will be amortized on a straight-
line basis to interest expense over the benefit period ending December 1998.

NOTE 7.  FINANCIAL INSTRUMENTS

Foreign Currency Contracts
      In  the ordinary course of business and as part of the Company's asset and
liability management, the Company enters into various types of transactions that
involve  contracts and financial instruments with off-balance sheet  risk.   The
Company  utilizes foreign exchange contracts and foreign currency borrowings  to
hedge  its  exposure  to foreign exchange rate fluctuations impacting  its  U.S.
dollar consolidated financial statements.  The Company attempts to minimize  its
exposure to foreign currency transaction and remeasurement gains and losses  due
to  the  effect of remeasuring the local currency balance sheets of its  foreign
subsidiaries  on the Company's consolidated financial position  and  results  of
operations  by utilizing a limited hedging strategy which includes  the  use  of
foreign  currency   borrowings,  the netting  of  foreign  currency  assets  and
liabilities and forward exchange contracts.  The actual gain or loss  associated
with forward exchange contracts are limited to the contract amount multiplied by
the  value  of the exchange rate differential between the time the  contract  is
entered  into and the time it matures.  The Company typically holds all  of  its
contracts until maturity and enters forward contracts ranging in maturity  dates
from  one  to  nine  months.  Realized and unrealized gains and  losses  on  the
forward  contracts  are  recognized currently in the consolidated  statement  of
operations,  and  any premium or discount is recognized over  the  life  of  the
contract.   Some  foreign  locations, such as the  People's  Republic  of  China
("PRC"),  do  not allow open market hedging of their currencies and,  therefore,
the  Company  is  not  able  to hedge all of its exposure  to  foreign  currency
fluctuations.

      The  Company  held forward exchange contracts maturing  at  various  dates
through  June  1997 with a face value of approximately $162.6  at  December  28,
1996,  $162.0 million at December 30, 1995, and $162.0 million at July 1,  1995,
which approximate the Company's hedgeable net monetary asset exposure to foreign
currency  fluctuations  at those respective dates.  For the  fiscal  year  ended
December 28, 1996, the transition period ended December 30, 1995, and the fiscal
years  ended  July 1, 1995, and July 2, 1994, a net foreign currency transaction
loss of $0.4 million, loss

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 7.  FINANCIAL INSTRUMENTS (CONTINUED)

of $2.9 million, gain of $1.7 million, and loss of $2.1 million respectively, is
included  in the caption "Financing and other expense, net", in the accompanying
Consolidated Statements of Operations.  Foreign currency borrowings at  December
28,  1996,  December  30,  1995, and July 1, 1995  totaled  $1.5  million,  $4.0
million, and $4.2 million, respectively.

Fair Values of Financial Instruments
     The estimated fair values of financial instruments are as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                      December 28, 1996         December 30, 1995            July 1, 1995
                                    ------------------------  -----------------------    -----------------------
                                     Carrying    Estimated      Carrying  Estimated       Carrying   Estimated
(In thousands)                        Amount     Fair Value      Amount   Fair Value       Amount    Fair Value
-----------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>           <C>          <C>           <C>          <C>
Cash and cash equivalents           $  61,063   $   61,063    $  125,387   $  125,387    $  95,825    $  95,825
Short-term borrowings                 175,000      175,000       (75,000)     (75,000)    (156,000)    (156,000)
Current portion of long-term debt        (291)        (291)      (92,361)     (92,361)      (2,420)      (2,420)
Long-term debt:
    Liquid Yield Option Notes        (130,530)     (97,256) (a) (123,937)    (107,100)    (120,768)    (103,950)
    Other                              (1,499)      (1,499)       (1,603)      (1,603)     (98,456)     (98,456)
Forward exchange contract liability      (399)        (399)         (370)        (370)        (611)        (611)
=================================================================================================================
</TABLE>

(a)  Based  on  quoted market price as required by SFAS No. 107, "Disclosures
     about Fair  Value  of Financial Instruments".  On January 30,  1997,  
     Samsung proposed to commence negotiations to acquire all of the outstanding
     shares of the Company's common stock not currently owned by Samsung or its 
     affiliates, at  a  price  of $5.10 per share.  There is no guarantee that 
     the transaction will ultimately occur.  However, if the transaction  is  
     consummated, there would be a change in control (Note 5) and the Company 
     would be required to repay the LYONs at their issue price plus accrued 
     original issue discount through the date set for such purchase.  Therefore,
     assuming completion of the transaction, the Company believes that a better 
     estimate of the fair market value of the LYONs at December 28, 1996 is the
     accreted interest value of $130.5 million.

Concentrations of Credit Risk
      The  Company's  foreign exchange instruments, along  with  cash  and  cash
equivalents and accounts receivable, involve elements of market and credit risk.
The  counterparties  to  financial instruments consist  of  a  number  of  major
financial  institutions.  In addition to limiting the amount of  agreements  and
contracts  it  enters into with any one party, the Company monitors  the  credit
quality  of  the  financial  institutions  which  are  counterparties  to  these
financial  instruments.  The Company does not believe that there is  significant
risk of nonperformance by the counterparties.

     The Company distributes its products through various distribution channels,
including  independent  resellers,  dealers,  national  distributors,   national
reseller  organizations,  OEMs, U.S. Government approved  dealers  and  consumer
retailers.   Concentrations  of credit risk are generally  limited  due  to  the
Company's  broad range of distribution channels and the Company's geographically
diverse  customer base.  However, sales in certain European countries  and  into
the  PRC  are  to  a more limited customer base comprised  primarily  of  larger
entities  which may be affected by, among other things, the economic  conditions
and/or  political occurrences within the region.  Sales into the PRC for  fiscal
year  1996,  transition  period 1995, fiscal year 1995,  and  fiscal  year  1994
accounted  for approximately 3%, 7%, 5%, and 6%, respectively, of the  Company's
total revenues.

     The Company's sales are primarily to customers whose activities are related
to the retail, consumer electronics or personal computer industries.  Therefore,
the Company's ability to collect trade receivables may be adversely affected  by
changes  or  conditions  impacting  these  industries.   Credit  limits,  credit
insurance,  ongoing  credit  evaluations and account monitoring  procedures  are
utilized  to  various  degrees to attempt to reduce the  risk  of  loss  on  the
Company's accounts receivable.  No single customer accounted for more  than  10%
of  the Company's net sales for fiscal year 1996, transition period 1995, or for
fiscal years 1995, or 1994.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 8.  INCOME TAXES

The income tax provision (benefit) is based on income (loss) before income taxes
as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                  Fiscal Year     Six Months
                                                     Ended             Ended             Fiscal Year Ended
                                                  December 28,     December 30,       July 1,          July 2,
 (In thousands)                                       1996             1995             1995             1994
-----------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>               <C>              <C>
 U.S.                                           $ (176,999)      $ (139,438)       $(103,930)       $   16,534
 Foreign                                          (240,716)         (85,568)         (19,435)           29,778
-----------------------------------------------------------------------------------------------------------------
                                                $ (417,715)      $ (225,006)       $(123,365)       $   46,312
=================================================================================================================
</TABLE>

The components of the income tax provision (benefit) are as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                   Fiscal Year       Six Months          Fiscal Year Ended
                                                      Ended            Ended        ---------------------------
                                                  December 28,      December 30,      July 1,          July 2,
(In thousands)                                         1996             1995            1995             1994
-----------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>                <C>            <C>
Current:
 Federal                                         $  (3,058)       $    2,033         $  (700)      $   (2,781)
 State                                                  98               107            (124)            (201)
 Foreign                                               (64)           (4,187)          2,086            9,002
-----------------------------------------------------------------------------------------------------------------
                                                    (3,024)           (2,047)          1,262            6,020
=================================================================================================================

Deferred:
 Federal                                             3,119              (249)        (19,971)           8,532
 State                                                 (98)              (50)         (3,722)             105
 Foreign                                                 3             2,346          (1,625)             346
-----------------------------------------------------------------------------------------------------------------
                                                     3,024             2,047         (25,318)           8,983
-----------------------------------------------------------------------------------------------------------------
                                                 $       -        $        -        $(24,056)      $   15,003
=================================================================================================================
</TABLE>

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 8.  INCOME TAXES (CONTINUED)

      Deferred  taxes  reflect the impact of future tax consequences  associated
with temporary differences between the amount of assets and liabilities recorded
for  tax  and  financial accounting purposes.  These temporary  differences  are
determined  in  accordance  with  SFAS  No.  109.   Temporary  differences   and
carryforwards  which give rise to a significant portion of deferred  tax  assets
and  liabilities as of December 28, 1996, December 30, 1995, and  July  1,  1995
are as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                        December 28, 1996         December 30, 1995           July 1, 1995
                                   ------------------------     ----------------------  -----------------------
(In thousands)                         Assets  Liabilities        Assets  Liabilities      Assets  Liabilities
-------------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>          <C>           <C>          <C>          <C>
Inventory reserves                  $  13,441    $       -    $   12,726    $       -    $ 11,178     $      -
Accrued liabilities                    27,124            -        14,367            -      14,834            -
Undistributed foreign earnings,
   net of foreign tax credit                -            -             -      (21,976)          -            -
Warranty reserves                      12,063            -         9,868            -       4,857            -
State income taxes                          -       (1,042)            -       (1,031)          -       (1,750)
Goodwill and intangibles amortization   3,908            -             -       (1,441)          -       (1,762)
Net operating loss carryforwards      206,340            -       147,684            -      72,362            -
Capitalized research and development
   costs                               21,937            -             -            -           -            -
Other                                  21,752         (180)       18,159         (244)     14,543         (422)
Total deferred taxes                  306,565       (1,222)      202,804      (24,692)    117,774       (3,934)
Valuation allowance                  (244,856)           -      (114,601)           -     (48,282)           -
------------------------------------------------------------------------------------------------------------------
                                    $  61,709    $  (1,222)    $  88,203     $(24,692)   $ 69,492     $ (3,934)
===================================================================================================================
</TABLE>

      The Company has established a valuation allowance against its deferred tax
assets  in  accordance with the provisions of SFAS No. 109.  The $130.3  million
increase  in  this valuation allowance is primarily the result  of  management's
determination  that the increased deferred tax asset resulting from  the  fiscal
1996 operating loss may not be realized.

      In determining the actual amount of the valuation allowance required to be
established,  the  Company has primarily relied upon  its  ability  to  generate
future  taxable  income  using available tax planning strategies  involving  the
potential sale of certain appreciated assets.  Although the Company has utilized
an  outside valuation firm to determine the current estimated fair market  value
of  such assets, changes in market conditions could result in a reduction of the
estimated  fair  market value of these assets that would  adversely  affect  the
amount  of  the  valuation allowance and reduce the amount of net  deferred  tax
assets considered realizable.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 8.  INCOME TAXES (CONTINUED)

      The  income  tax provision (benefit) differs from the amounts computed  by
applying the statutory federal income tax rate as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                          Fiscal Year  Six Months         Fiscal Year Ended
                                                             Ended          Ended       ------------------------
                                                         December 28,    December 30,    July 1,      July 2,
(In thousands)                                                1996           1995          1995         1994
----------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>           <C>           <C>
Statutory federal income tax provision (benefit)           $ (146,200)   $ (78,752)    $ (43,178)    $  16,209
Increase (decrease) in taxes resulting from:
   State income taxes, net of federal benefit                       -           43        (2,208)         (137)
   Tax on undistributed foreign earnings                           32       34,631             -             -
   Foreign income taxed at different rates                     (2,093)       5,642         5,692       (10,005)
   Losses producing no current tax benefit                    146,148       38,870        15,916         8,589
   Adjustment to deferred tax assets and
      liabilities for change in tax rate                            -            -             -        (1,266)
   Other, net                                                   2,113         (434)         (278)        1,613
----------------------------------------------------------------------------------------------------------------
                                                           $        -    $       -     $ (24,056)     $ 15,003
================================================================================================================
</TABLE>

      The Company's manufacturing operations in Taiwan and the PRC operate under
complete  or  partial tax holidays which expire in 1997 and 1999,  respectively.
The  aggregate  dollar amount and per share effect of these  tax  holidays  were
immaterial  for  fiscal year 1996, transition period 1995 and for  fiscal  years
1995, and 1994.

      In  determining the provision (benefit) for income taxes for  fiscal  year
1996,  the  Company has utilized approximately $0.2 million of  prior  year  net
operating  loss  ("NOL") carryforwards to reduce the amount of  taxes  otherwise
payable  for  such  year.   The  Company  has  $630  million  of  remaining  NOL
carryforwards  which  it  expects will be available  to  offset  future  taxable
income.   Approximately  $292 million of such carryforwards  relate  to  foreign
operations in various taxing jurisdictions of which $143 million expire in years
1997  through 2006 and $149 million have no expiration date.  The remaining $338
million of such carryforwards relate to U.S. operations and expire in the  years
2008 to 2012.

      Sections  382  and 383 of the Internal Revenue Code of 1986  ("the  Code")
place  certain limitations on U.S. net operating loss carryforwards  and  excess
credits  if  one  or  more  shareholders have increased their  aggregate  equity
ownership of the Company by more than 50 percentage points, within a three  year
measurement period.  As a result of recent shareholder equity transactions  with
Tandy Corporation ("Tandy") and Samsung Electronics Co. Ltd, ("Samsung") on July
11,  1996, the Company experienced a change in ownership as defined in the Code.
Accordingly,  the amount of taxable income or income tax in any particular  year
that can be offset by net operating loss and tax credit carryforward amounts  is
limited to a prescribed annual amount equal to 5.78% of the fair market value of
the Company as of July 11, 1996.  Based on preliminary calculations, the Company
does  not  believe that any of the net operating loss or tax credit carryforward
amounts  in  the  aggregate will be unusable solely as a result  of  the  annual
limitation,  although  the  amounts that can be utilized  in  any  year  may  be
limited.   On  January  30,  1997  Samsung  proposed  to  commence  negotiations
regarding  the acquisition of all of the outstanding shares not currently  owned
by  Samsung or its affiliates.  Should the transaction be completed as proposed,
the  Company's ability to realize a benefit from its net deferred tax asset, and
a  substantial  portion of the Company's deferred tax assets from net  operating
loss  carryovers  that  have  been offset by a  valuation  allowance,  would  be
impaired.

   The  Internal  Revenue Service ("IRS") is currently examining  the  Company's
1989,  1990  and  1991  federal income tax returns.  In addition,  the  IRS  has
completed  its  examination of the Company's 1987 and 1988  federal  income  tax
returns  and  has  proposed  adjustments to the  Company's  federal  income  tax
liabilities  for  such  years.  Initially, the IRS had proposed  adjustments  of
approximately $12.6 million, plus accrued interest of $17.2 million.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 8.  INCOME TAXES (CONTINUED)

Following  the Company's request for an administrative conference to appeal  the
proposed  adjustments,  the  IRS  Appeals  Office  returned  the  case  to   the
Examination  Office  for  further  development  because  the  method   used   in
determining  the  original proposed adjustments was not  adopted  in  the  final
regulations.  Management believes that any aggregate liability that  may  result
upon  the final resolution of the proposed adjustments for 1987 and 1988 or  the
current  examinations of 1989, 1990 and 1991 will not have  a  material  adverse
effect   on  the  Company's  consolidated  financial  position  or  results   of
operations.   However, management is unable to estimate the amount of  any  loss
that may be realized in the event of an unfavorable outcome.

NOTE 9.  BENEFIT PLANS

Profit Sharing Plan
      During  1983,  the  Company  established a profit  sharing  plan  for  all
employees.   The  plan  is  a noncontributory, defined  contribution  plan  that
provides for contributions from the Company based on eligible compensation.  The
Company's  contributions  are  determined at the  discretion  of  the  Board  of
Directors  and  are not to exceed income before provision for income  taxes  and
profit  sharing expense.  The Company did not contribute to the plan for  fiscal
year 1996, transition period 1995, or for the fiscal years 1995 and 1994.

      In  1987,  the Company approved a modification to the profit sharing  plan
that  added  a  401(k)  employee savings program.  Under the  401(k)  plan,  the
Company  is  obligated to contribute matching amounts for employee contributions
equal  to 100% on the first 2% of employee salary contributions and 50%  on  the
next  4% of employee salary contributions.  Company contributions generally vest
over five years from the date of the employee's eligibility to participate.  The
Company's  contributions for the fiscal year 1996, the transition  period  ended
December 30, 1995, and fiscal years 1995 and 1994 amounted to $1.6 million, $1.1
million, $2.5 million, and $2.1 million, respectively.

Employee Bonus Plans
      Pursuant  to  the Employee Bonus Plan, all employees of  the  Company  are
eligible  to  receive,  on  a  quarterly  basis,  a  percentage  of  their  base
compensation  as  a  cash bonus.  The percentage paid is at  the  discretion  of
management and is limited to a maximum of 15% of the respective employee's  base
quarterly compensation.  For fiscal year 1996, transition period 1995 and fiscal
year  1995,  no bonuses were paid.  Bonuses paid for the fiscal year  1994  were
$2.0 million.

      The  Company  also has a performance based management incentive  plan  for
officers  and key employees.  Bonuses under the plan are distributed to officers
and  key  employees  of  the  Company based upon  performance  related  criteria
determined  at  the discretion of the Compensation Committee  of  the  Board  of
Directors.   Bonuses  paid  for the fiscal year 1996  were  $0.5  million.   For
transition period 1995 and fiscal year 1995, no bonuses were paid.  Bonuses paid
for the fiscal year ended July 2, 1994 were $1.9 million.

Stock Plans
     The Company has three employee stock plans, adopted in 1985, 1989 and 1995,
and  three non-employee director stock plans adopted in 1991, 1994 and 1996 (the
"Plans").

      In  1985, the Company adopted the Chief Executives' Plan (the "CE  Plan").
The CE Plan, as amended in 1987, provided for an aggregate of 1.2 million shares
of  the  Company's common stock to be available to the chief executive officers,
which  include the president and executive vice presidents of the  Company,  and
such other officers that the Board of Directors might specifically designate  as
a  "chief executive officer" for purposes of the CE Plan.  In 1995, the CE  Plan
was  terminated, except as to options then outstanding.  At December  28,  1996,
200,000  options remained outstanding and were exercisable at a price  of  $3.50
per share.

      The  1989  Long-Term Incentive Program (the "1989 Program"),  as  amended,
provides  for  the  granting  of  stock  options,  stock  appreciation   rights,
restricted  stock and performance units.  An amendment to the plan,  adopted  by
the

                                        
                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 9.  BENEFIT PLANS (CONTINUED)

Board  in  1992,  and approved by a shareholder vote, annually increases  shares
authorized to be issued by 2% of the number of common shares outstanding at each
fiscal year-end.  Under the 1989 Program, options granted become exercisable  at
the  discretion of the Board of Directors or Compensation Committee  and  expire
ten  years  from the date of grant.  No stock appreciation rights or performance
units have been granted under the 1989 Program.

   The  Company's 1991 Stock Option Plan for Non-Employee Directors  (the  "Non-
Employee  Option  Plan"), as amended in 1995, provides for an initial  grant  of
options  to  purchase 20,000 shares of the Company's common stock to each  newly
appointed  non-employee director.  In addition, on January  1  each  year,  each
participant will receive an
option  to  purchase  12,000 shares of common stock.  The  aggregate  number  of
shares that may be issued under the Plan is 500,000.  Options vest equally  over
four  years  commencing on the first anniversary of the  date  of  grant.   Each
option  is  exercisable at 100% of the common stock's fair market value  on  the
date of grant.

      In  1994,  the Company adopted the AST Research, Inc. 1994 One-Time  Grant
Stock  Option  Plan for Non-Employee Directors.  The Plan, as amended  in  1995,
provided for the grant of an option to purchase 50,000 shares of common stock to
each  non-employee member of the Company's Board of Directors on July  1,  1994.
At  December 28, 1996, 100,000 options remained outstanding and were exercisable
at a price of $14.25 per share.

      In  1995, the Company adopted the President's Plan.  The President's  Plan
provides  for an aggregate of 1,000,000 shares of the Company's common stock  to
be available to the President of the Company.

      In 1996, the Company adopted the 1996 Non-Employee Director Plan.  Subject
to  shareholder approval, this plan provides for an aggregate of 500,000  shares
of the Company's common stock to be available to the non-employee members of the
Company's Board of Directors.

The following table summarizes stock options available for grant:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                             Fiscal Year          Six Months
                                                Ended               Ended                Fiscal Year Ended
                                            December 28,        December 30,           July 1,       July 2,
(In thousands)                                   1996                1995                1995          1994
----------------------------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>                <C>            <C>

Balance at beginning of period                 1,767,744           1,652,631          1,605,568      2,052,143
Authorized                                     1,679,607           2,143,588            648,250        896,675
Granted                                       (1,949,249)         (2,579,425)        (1,261,700)    (1,624,400)
Canceled                                       3,005,413           1,345,625            747,195        380,425
Plan shares expired                              (67,400)           (794,675)           (86,682)       (99,275)
----------------------------------------------------------------------------------------------------------------
Available for future grant                     4,436,115           1,767,744          1,652,631      1,605,568
================================================================================================================
</TABLE>

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 9.  BENEFIT PLANS (CONTINUED)

      A  summary of the status of the Company's stock option plans as of  fiscal
year  1996,  transition year 1995, fiscal year 1995, and fiscal year  1994,  and
changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                               Fiscal Year 1996                      Transition Year 1995
                                          -------------------------             -----------------------------
                                               Weighted-Average                         Weighted-Average
                                          Shares     Exercise Price               Shares       Exercise Price
---------------------------------------------------------------------------------------------------------------

<S>                                   <C>                 <C>                 <C>               <C>                 <C>
Outstanding at beginning of year       5,518,875           $ 10.35             4,481,975         $   14.86
Granted                                1,949,249              5.38             2,579,425             10.50
Exercised                                (80,500)             4.18              (196,000)             5.29
Canceled                              (3,005,413)             9.23            (1,346,525)            15.90
                                      -----------                             -----------
Outstanding at end of year             4,382,211           $  6.86             5,518,875         $   10.35
---------------------------------------------------------------------------------------------------------------
Exercisable at end of year             2,057,260                               2,183,574
---------------------------------------------------------------------------------------------------------------
Weighted-average fair value of options
  granted during the year                                  $  2.25                               $    3.47
===============================================================================================================
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                               Fiscal Year 1995                      Fiscal Year 1994
                                        ----------------------------         --------------------------------
                                               Weighted-Average                     Weighted-Average
                                            Shares   Exercise Price             Shares         Exercise Price
---------------------------------------------------------------------------------------------------------------
<S>                                   <C>                 <C>                 <C>               <C>

Outstanding at beginning of year       4,046,220           $ 15.60             3,504,380         $   14.49
Granted                                1,261,700             13.95             1,624,400             17.17
Exercised                                (78,750)             9.97              (755,000)            12.67
Canceled                                (747,195)            17.95              (327,560)            17.90
                                      -----------                             -----------
Outstanding at end of year             4,481,975           $ 14.86             4,046,220         $   15.60
---------------------------------------------------------------------------------------------------------------
Exercisable at end of year             1,909,477                               1,351,661
===============================================================================================================
</TABLE>

        The following table summarizes information about stock options 
outstanding at December 28, 1996:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                    Options Outstanding                             Options Exercisable
                       Number      Weighted-average                               Number
    Range of        outstanding        remaining       Weighted-average        exercisable     Weighted-average
Exercise Prices     at 12/28/96    contractual life     exercise price         at 12/28/96      exercise price
---------------------------------------------------------------------------------------------------------------
<S>                 <C>                 <C>               <C>                    <C>                 <C>
 $          3.50       200,000           0.1 years         $  3.50                200,000         $   3.50
    4.00 to 5.00     3,241,711           8.9                  4.56              1,082,010             4.58
    5.25 to 8.63        70,000           8.9                  8.36                 17,000             8.49
  10.75 to 15.00       309,000           8.0                 13.46                238,500            13.70
  15.13 to 22.75       561,500           5.8                 17.54                519,750            17.43
                     ----------                                                 ----------
 $ 3.50 to 22.75     4,382,211           8.0 years         $  6.86              2,057,260         $   8.81
===============================================================================================================
</TABLE>

      At  December 28, 1996, 8,818,326 shares of the Company's common stock were
reserved for issuance under the Company's various stock option plans.

   The  Company applies APB Opinion 25 and related Interpretations in accounting
for  its  stock plans and accordingly, no compensation cost has been recognized.
Pro forma information regarding net income and earnings per share is required by
of  Statement of Financial Accounting Standards No. 123, "Accounting  for  Stock
Based


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 9.  BENEFIT PLANS (CONTINUED)

Compensation"  ("SFAS No. 123"), and has been determined as if the  Company  had
accounted  for employee stock options under the fair value method  of  SFAS  No.
123.   The fair value for stock options was estimated at the date of grant using
a Black-Scholes option pricing model with the following range of assumptions for
fiscal  year 1996 and transition period 1995, respectively:  risk-free  interest
rates of 5.50% and 5.09%; volatility factors of the expected market price of the
Company's  common stock of 0.54 and 0.56, and an expected life of the option  of
4.1 and 5.1 years.

      For  purposes of pro forma disclosures, the estimated fair  value  of  the
options  is amortized to expense over the options' vesting periods.  The effects
of  applying SFAS 123 for providing pro forma disclosures in fiscal 1996 and  in
transition  period 1995 are not likely to be representative of  the  effects  on
reported  net  income  for future years.  The Company's  pro  forma  information
follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                    Fiscal Year                         Six Months
                                                       Ended                              Ended
                                                   December 28,                       December 30,
(In thousands, except per share amounts)                1996                               1995
---------------------------------------------------------------------------------------------------------------
<S>                                                <C>                                <C>
Net loss                       As reported          $ (417,715)                        $ (225,006)
                               Pro forma              (419,920)                          (225,865)

Net loss per share             As reported          $    (8.22)                       $     (5.27)
                               Pro forma                 (8.26)                             (5.29)
===============================================================================================================
</TABLE>

      In  December  1990,  the  Board of Directors authorized  the  issuance  of
warrants to purchase an aggregate of 80,000 shares of the Company's common stock
to  its  then  non-employee directors.  At December 28, 1996,  40,000  of  these
warrants  remained  outstanding and were exercisable at  an  exercise  price  of
$13.88  per  share.   On  July 27, 1992, the Board of Directors  authorized  the
issuance of warrants to purchase 50,000 shares of the Company's common stock  to
the Company's then Chairman of the Board.  At December 28, 1996, 37,500 of these
warrants  remained  outstanding and were exercisable at a price  of  $13.50  per
share.

      On  September  23, 1996, all outstanding stock options held  by  employees
(excluding  executive  officers and board members)  were  repriced  with  a  new
exercise  price of $4.63 per share, the closing market price on that date.   The
repricing  is  subject to the condition that the options are not  exercised  and
employment  is not terminated prior to September 22, 1997.  The Company  intends
to  cancel  and reissue new options under the Company's 1989 Long Term Incentive
Plan.   The  number of shares and vesting schedule of the new options grants  is
the  same  as  that  of the original grant.  A total of 3,035,268  options  with
exercise prices ranging from $4.81 to $9.38 were repriced.

NOTE 10.  SHAREHOLDER RIGHTS PLAN

      On June 30, 1989, the Board of Directors adopted a Shareholder Rights Plan
which is intended to protect shareholders from unfair takeover practices.  Under
the  Plan,  each  share of common stock carries one right to  obtain  additional
stock or other property according to terms provided in the Plan.  The rights are
not  exercisable or separable from the common stock until another party acquires
at  least  15%  of the Company's then outstanding common stock  or  commences  a
tender offer for at least 15% of the Company's then outstanding common stock.

  In the event the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation or 50% or more
of its consolidated assets or earning power are sold or  transferred, each right
will  entitle its holder to receive, at the then current exercise price,  common
stock  of  the  acquiring company having a market value equal to two  times  the
exercise price of the right.  If a person or entity were to acquire 15% or  more
of  the  outstanding shares of the Company's common stock, or if the Company  is
the  surviving  corporation in a merger and its common stock is not  changed  or
exchanged,  each right will entitle the holder to receive, at the  then  current
exercise  price,  common  stock having a market value equal  to  two  times  the
exercise price of the right.  Until a right is exercised, the holder of a right,
as such, will have no rights as a shareholder of the Company, including, without
limitation, the rights to vote as a shareholder or receive dividends.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 10.  SHAREHOLDER RIGHTS PLAN (CONTINUED)

The  rights, which expire on June 30, 1999, may be redeemed by the Company at  a
price  of  $0.01  per  right.  At December 28, 1996, 500,000  of  the  1,000,000
authorized  but  unissued  preferred shares of  the  Company  are  reserved  for
issuance upon exercise of these rights.

  As a condition of entering into the Stock Purchase Agreement with Samsung, the
Company amended the Shareholder Rights Plan to allow Samsung, in accordance with
the  terms  and conditions of the Stockholder Agreement between the Company  and
Samsung dated July 31, 1995, to acquire, without additional Board or
Stockholder approval and without triggering the Shareholders Rights Plan, up  to
49.9%  of  the  common stock during the first four years of its investment,  and
after  the standstill period, which now ends December 15, 1998, up to 66.67%  of
the  common stock except that such limits shall not apply to any acquisition  by
Samsung made pursuant to a cash tender offer for all equity securities not owned
by Samsung and/or its affiliates.

NOTE 11.  COMMITMENTS AND CONTINGENCIES

Lease Commitments
      The  Company leases its field offices, certain equipment, automobiles  and
most  of  its  operating  facilities under operating lease  agreements.   Future
minimum lease payments under these leases approximate the following amounts:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
(In thousands)
Fiscal Year                                                                                             Amount
---------------------------------------------------------------------------------------------------------------
  <S>                                                                                               <C>
   1997                                                                                             $  12,017
   1998                                                                                                 8,938
   1999                                                                                                 5,483
   2000                                                                                                 3,355
   2001                                                                                                 3,004
   Thereafter                                                                                          18,361
---------------------------------------------------------------------------------------------------------------
Total minimum lease payments                                                                        $  51,158
===============================================================================================================
</TABLE>

      Operating lease commitments have been reduced for rental income from  non-
cancelable  subleases  by approximately $1.8 million in 1997,  $1.4  million  in
1998, and $0.9 million in 1999.

     Rent expense for fiscal year 1996, transition period 1995, and fiscal years
1995  and  1994,  was  approximately $10,496,000, $5,070,000,  $11,125,000,  and
$10,588,000, respectively.

Royalty Commitments
      The Company has commitments for minimum guaranteed royalties under various
licensing  agreements which are payable over periods ranging from  one  to  five
years.   The  Company has been notified that certain of its  products  may  also
require  licenses  under  patents held by others.  The Company  evaluates  these
licensing  proposals on a case-by-case basis to determine whether  licenses  are
necessary  or  desirable.   Although these evaluations continue,  management  is
accruing amounts that, in its judgment, represent the potential royalties and/or
legal costs of resolving these claims.

Employment Contracts
      The Company maintains Severance Compensation Agreements with its executive
officers and its non-officer vice presidents.  Such agreements provide  for  (i)
lump  sum payments comprised of up to two years of salary and bonus and  certain
other  benefits  for  executive officers, or one year of salary  and  bonus  and
certain  other benefits for vice presidents who are not executive  officers  and
(ii) acceleration of the vesting of stock options upon a "change of control"  of
the Company and termination of the covered employee for reasons specified in the
contract. The aggregate commitment under these Severance Compensation Agreements
should all covered employees be terminated is approximately $3.4 million.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 11.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

     The Company has a severance policy for its executive officers which, in the
event  of an involuntary termination other than in connection with a "change  in
control," generally requires the Company to pay its President severance equal to
two  years  of salary and its other executive officers' severance equal  to  six
months  of salary plus an additional month of salary for each year of employment
with  the  Company, up to a maximum of 12 months.  Benefits are  also  continued
during this period.

Other Contingencies
      The  Company has been named as a defendant or co-defendant, generally with
other  personal computer manufacturers, including such companies as  IBM,  AT&T,
Unisys,  Digital  Equipment  Corporation, NEC,  Olivetti,  NCR,  Panasonic,  and
Matsushita,  in  eighteen similar lawsuits each of which alleges  as  a  factual
basis  the  occurrence of carpal tunnel syndrome or repetitive stress  injuries.
The  suits  naming the Company are just a few of the many lawsuits of this  type
which have been filed, often naming IBM and other major computer companies.  The
claims  against  the  Company total in excess of $100  million  in  compensatory
damages  and  punitive damages and additional unspecified amounts.  The  Company
has  denied or is in the process of denying the claims and intends to vigorously
defend  the  suits. The Company is unable at this time to predict  the  ultimate
outcome  of  these  suits.  Ultimate resolution of the  litigation  against  the
Company  may  depend  on progress in resolving this type of litigation  overall.
The  Company is currently unable to estimate the amount of any loss that may  be
realized  in the event of an unfavorable outcome.  However, before consideration
of  any potential insurance recoveries, the Company believes that the claims  in
the  suits  filed  against it will not have a material impact on  the  Company's
consolidated  financial  position or results of  operations.   The  Company  has
maintained various liability insurance policies during the periods covering  the
claims   above.    While  such  policies  may  limit  coverage   under   certain
circumstances, the Company believes that it is adequately insured.   Should  the
Company  not be successful in defending against such lawsuits or not be able  to
claim compensation under its liability insurance policies, the Company's results
of operations and financial condition may be adversely affected.

     The Company was named, along with twelve other personal computer companies,
as  a  defendant in a lawsuit filed on March 27, 1995 in the Superior Court  for
the  County of Merced, California.  The case name for this March 27, 1995 filing
is  People  v.  Acer,  et al., and the complaint alleged that  the  Company  has
engaged in deceptive advertising and unlawful business practices in relation  to
computer  monitor screen measurements.  The People v. Acer lawsuit was  resolved
by  a Stipulated Judgment that the Company signed along with representatives  of
all  other  defendants.  The Company was named, along with three other  personal
computer or monitor companies, as a defendant in a class action lawsuit filed on
May 2, 1995 in the Superior Court for the County of Marin, California.  The case
name  for  this May 2, 1995 filing is Kaplan, et al. v. Viewsonic, et  al.,  and
alleges  that  the  defendants have engaged in unfair business practices,  false
advertising and breach of implied warranty concerning the advertisement  of  the
size  of  computer monitor screens.  The Company was named, along with 37  other
defendants,  in a class action lawsuit, Long v. Packard Bell, et al.,  filed  on
August  21,  1995  in  the Superior Court for the County of Orange,  California,
which alleges certain claims concerning the advertising of the sizes of computer
monitors.  The Company was named, along with nine other defendants, in  a  class
action  lawsuit,  Randy Davis, Ph.D., Inc. v. AST Research,  et  al.,  filed  on
August  23,  1995 in Superior Court for the County of Orange, California,  which
alleges  certain  claims concerning the advertising of  the  sizes  of  computer
monitors.   The Company was named, along with 35 other defendants,  in  a  class
action  lawsuit,  Sutter  v. Acer, et al., filed on September  7,  1995  in  the
Superior  Court for the County of Sacramento, California, which alleges  certain
claims  concerning  the  advertising of the sizes  of  computer  monitors.   The
Company  was  named, along with 41 other defendants, in a class action  lawsuit,
Shapiro  v.  ADI Systems, Inc., et al., filed on August 14, 1995 in Santa  Clara
County,  California, which alleges certain claims concerning the advertising  of
the  sizes  of  computer monitors.  The Company was named, along with  29  other
defendants,  in  a  class action lawsuit, Maizes & Maizes,  et  al.,   v.  Apple
Computer  Inc., et al., filed on December 15, 1995 in Essex County, New  Jersey,
which alleges certain claims concerning the advertising of the sizes of computer
monitors.   The Company is currently unable to estimate the amount of  any  loss
that  may  be realized in the event of an unfavorable outcome in any or  all  of
these  cases.   However, based on preliminary facts available  to  the  Company,
management  does  not  believe that the outcome of these disputes  will  have  a
material  adverse  impact on the Company's consolidated  financial  position  or
results of operations.


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 11.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

      The  Company  has been named, along with Samsung and certain  current  and
former  members  of the Company's Board of Directors, as a defendant  in  twelve
shareholder  class action lawsuits filed on or shortly after January  31,  1997.
Eleven class action complaints were filed in the Court of Chancery in New Castle
County,  Delaware,  under case names Miller v. Kim, et  al;  Tepper  v.  Samsung
Electronics  Co., Ltd., et al.; Kenneth Steiner v. Kim, et al.; William  Steiner
v.  Kim,  et al.; Zeiff v. AST Research, Inc., et al; Schultz v. Choo,  et  al.;
Ungar v. AST Research, Inc. et al.; Schnoll v. AST Research, Inc., et al.;  Krim
v.  AST  Research,  Inc., et al.; Jaroslawicz v. Kim, et  al.;  and  Rattner  v.
Samsung  Electronics Co., Ltd.  A separate class action complaint was filed  but
not  served on January 31, 1996 in the Superior Court for the County of  Orange,
California,  under case name Sigler v. AST Research, Inc., et al The  Plaintiffs
allege  that the defendants have engaged in an unlawful scheme to enable Samsung
to acquire all outstanding shares of the Company's stock not previously owned by
Samsung  for  inadequate  consideration and  in  violation  of  the  defendants'
fiduciary duties.  The plaintiffs seek to enjoin Samsung's proposed purchase  of
the  Company's  outstanding  shares and request  unspecified  monetary  damages,
including  attorney  and  expert fees and costs.   On  February  27,  1997,  the
plaintiffs in the Delaware cases submitted a proposed Order of Consolidation  to
the court, which has not yet been entered.  The litigation is in its preliminary
stages.   The Company is unable at this time to predict the ultimate outcome  of
these lawsuits.

      The  Company  is also subject to other legal proceedings and  claims  that
arise  in the normal course of business.  While the outcome of these proceedings
and  claims cannot be predicted with certainty, management does not believe that
the  outcome of any of these matters will have a material adverse effect on  the
Company's consolidated financial position or results of operations.

NOTE 12.  SEGMENT AND GEOGRAPHIC INFORMATION

      The Company operates in one industry segment: the manufacture and sale  of
personal  computers, including desktop, server, and notebook  computer  systems.
The  Company  currently  markets its products through retail  computer  dealers,
consumer  retailers,  international  and  regional  distributors,  value   added
dealers, and value added resellers.

     At the end of fiscal year 1995, the Company reorganized its worldwide sales
organization  and  internal reporting structure into  three  major  geographical
groups:  The Americas, which includes the United States and Canada; Europe;  and
Asia  Pacific, which includes Asia, the Pacific Rim and the Middle East.   Prior
period geographic information has been reclassified in accordance with this  new
organization.

A summary of the Company's operations by geographic area is as follows:

Year ended December 28, 1996

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                            Asia
(In thousands)                               Americas        Europe       Pacific      Eliminated   Consolidated
------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>           <C>           <C>           <C>
Sales to unaffiliated
  customers                               $  1,140,808   $    675,592  $   252,243   $         -   $  2,068,643
Transfers between
  geographic areas                             214,850        649,150      455,586    (1,319,586)             -
------------------------------------------------------------------------------------------------------------------
Net sales                                 $  1,355,658   $  1,324,742  $   707,829   $(1,319,586)  $  2,068,643
Revenue from related party                      25,000         10,000            -             -         35,000
------------------------------------------------------------------------------------------------------------------
Total revenue                             $  1,380,658   $  1,334,742  $   707,829   $(1,319,586)  $  2,103,643
==================================================================================================================
Operating loss                            $   (230,896)  $   (110,771) $   (46,928)  $     3,487   $   (385,108)
==================================================================================================================
Identifiable assets                       $    420,764   $    285,534  $    124,759  $         -   $    831,057
==================================================================================================================
</TABLE>

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 12.  SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
[CAPTION]
<TABLE>
Six months ended December 30, 1995
------------------------------------------------------------------------------------------------------------------
                                                                            Asia
(In thousands)                                  Americas     Europe       Pacific      Eliminated   Consolidated
------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>           <C>           <C>          <C>
Sales to unaffiliated
  customers                                $    453,054   $    383,304  $   179,925   $         -  $  1,016,283
Transfers between
  geographic areas                              140,797        378,420      419,466      (938,683)            -
------------------------------------------------------------------------------------------------------------------
Total revenue                              $    593,851   $    761,724  $   599,391   $  (938,683)  $ 1,016,283
==================================================================================================================
Operating loss                             $   (149,180)  $    (47,481) $   (18,974)  $       439   $  (215,196)
==================================================================================================================
Identifiable assets                        $    491,243   $    380,769  $   184,030   $         -  $  1,056,042
==================================================================================================================
</TABLE>
[CAPTION]
<TABLE>
Year ended July 1, 1995
------------------------------------------------------------------------------------------------------------------
                                                                            Asia
(In thousands)                               Americas        Europe       Pacific      Eliminated   Consolidated
------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>          <C>            <C>          <C>
Sales to unaffiliated
  customers                                $  1,387,442   $    743,561  $   336,780   $         -  $  2,467,783
Transfers between
  geographic areas                              375,500        628,831      902,319    (1,906,650)            -
------------------------------------------------------------------------------------------------------------------
Total revenue                              $  1,762,942   $  1,372,392  $ 1,239,099   $(1,906,650) $  2,467,783
==================================================================================================================
Operating loss                             $    (91,738)  $     (6,362) $    (7,619)  $        29  $   (105,690)
==================================================================================================================
Identifiable assets                        $    508,714   $    287,218  $   225,569   $         -  $  1,021,501
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended July 2, 1994
------------------------------------------------------------------------------------------------------------------
                                                                            Asia
(In thousands)                               Americas        Europe       Pacific      Eliminated   Consolidated
------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>           <C>           <C>          <C>
Sales to unaffiliated
  customers                                $  1,546,010   $    532,921  $   288,343   $         -  $  2,367,274
Transfers between
  geographic areas                              404,582        251,605      904,204    (1,560,391)            -
------------------------------------------------------------------------------------------------------------------
Total revenue                              $  1,950,592   $    784,526  $ 1,192,547   $(1,560,391) $  2,367,274
==================================================================================================================
Operating income (loss)                    $     22,786   $    (20,027) $    44,025   $     7,205  $     53,989
==================================================================================================================
Identifiable assets                        $    541,469   $    257,098  $   207,053   $         -  $  1,005,620
==================================================================================================================
</TABLE>

      In determining operating income (loss) for each geographic area, sales and
purchases  between  geographic areas have been accounted for  on  the  basis  of
internal  transfer  prices set by the Company.  Identifiable  assets  are  those
tangible and intangible assets used in operations in each geographic area.   The
fiscal  year 1994 restructure credit of $12.5 million relates to and is included
in  the  Americas  operating income.  The transition period  1995  restructuring
charge  of  $13 million relates to and is included in the Asia Pacific operating
loss.  The fiscal year 1996 restructuring charge of $6.5 million is included  in
operating income (loss) in the geographic areas in which the actual


                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 14.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

restructuring  costs are expected to be incurred.  This amount is  comprised  of
$1.1  million  in the Americas segment, $3.7 million in the Europe  segment  and
$1.7 million in the Asia Pacific segment.

      The  tables  below set forth selected quarterly financial information  for
fiscal  year  1996, transition period 1995, and fiscal year 1995 (in  thousands,
except per share amounts).

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Year ended December 28, 1996                   First Quarter   Second Quarter   Third Quarter    Fourth Quarter
------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>              <C>              <C>
Net sales                                        $  519,972       $  538,759       $  408,483       $  601,429
Revenue from related party                           10,000           15,000                -           10,000           
------------------------------------------------------------------------------------------------------------------
Total Revenue                                       529,972          553,759          408,483       $  611,429        
Gross profit (loss)                                 (19,646)          18,601          (18,762)          44,675
Net loss                                           (115,760)         (98,730)        (135,268)         (67,957)
Net loss per share                               $    (2.59)      $    (2.21)      $    (2.41)      $    (1.18)
------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Six months ended December 30, 1995             First Quarter   Second Quarter
------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>                                    
Total revenue                                    $  403,357       $  612,926
Gross  loss                                          (6,769)         (10,106)
Net loss                                            (96,382)        (128,624)
Net loss per share                               $    (2.36)      $    (2.88)
------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Year ended July 1, 1995                        First Quarter   Second Quarter   Third Quarter    Fourth Quarter
------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>              <C>              <C>
Total revenue                                    $  495,446       $  640,159       $  670,176       $  662,002
Gross profit                                         37,299           66,318           86,942           55,115
Net loss                                            (39,406)         (21,724)          (6,548)         (31,631)
Net loss per share                               $    (1.22)      $     (.67)      $     (.20)      $     (.98)
------------------------------------------------------------------------------------------------------------------
</TABLE>

         In fiscal year 1996 and transition period 1995, the quarterly per share
amounts  do  not  sum  to the per share amounts for respective  periods  due  to
differences  in  the  weighted  average number of  shares  outstanding  in  each
quarterly  reporting  period  versus  the  weighted  average  number  of  shares
outstanding for the respective periods.  In fiscal year 1996, transition  period
1995 and fiscal year 1995, fully diluted per share information is anti-dilutive.

NOTE 15.  RELATED PARTY TRANSACTIONS

        On July 31, 1995, the Company completed the sale of 12.07 million shares
of   the   Company's  common  stock  to  Samsung,  receiving  net  proceeds   of
approximately $240 million.

         On November 22, 1995, Samsung provided a $50 million short-term loan to
the  Company at an interest rate of 7.3125% per annum.  The Company repaid  this
loan on December 28, 1995.

         On  December 21, 1995, the Company issued a five year option to Samsung
to  purchase  4.4 million shares of the Company's common stock  at  an  exercise
price  of $.01 per share and allowed Samsung to add an additional member to  the
Company's  Board  of  Directors, in exchange for additional  financial  support,
principally  including a two-year $200 million credit guarantee and  a  two-year
vendor credit line of $100 million for selected component purchases.

   On  July  11, 1996, the Company paid the $90 million promissory note  due  to
Tandy  related  to  the Company's 1993 acquisition of Tandy's personal  computer
manufacturing  operations.  Payment was in the form of 4,498,594 shares  of  the
Company's  common  stock then valued at $30 million, and $60  million  in  cash.
Subsequent  to  the  issuance of shares to Tandy, also on  July  11,  1996,  the
Company issued 8,499,336 shares of its common stock to

                               AST RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 15.  RELATED PARTY TRANSACTIONS (CONTINUED)

Samsung  in  exchange for $60 million in cash that was used to pay  Tandy.   The
issuance of the common stock to Samsung was made pursuant to the 1995 Letter  of
Credit Agreement between the Company and Samsung.

      On October 11, 1996, Samsung provided a $50 million short-term loan to the
Company  at  an interest rate of 5.9% per annum.  The Company repaid  the  loan,
including interest of $0.6 million, on December 19, 1996.

      On  December  13,  1996,  the Company signed a Second  Additional  Support
Agreement  with Samsung to provide certain additional financial support  to  the
Company as consideration for 500,000 shares of non-voting preferred stock.   The
shares are not subject to mandatory redemption, but each share is redeemable  at
the Company's option for cash of $100.75 or 13.11 shares of the Company's common
stock,  beginning  in  January 1999.  The preferred  shares  carry  a  quarterly
cumulative  dividend, beginning in 1999, at the annual rate of $4.72 per  share,
with annual increases to a maximum rate of $7.96 per share in the year 2004  and
thereafter.

   On  February 22, 1996, the Company entered into a Server Technology  Transfer
Agreement  and  a  Strategic  Consulting Agreement  with  Samsung.   The  Server
Technology Transfer Agreement grants Samsung a royalty-free license through July
31,  2000  to use the technical information supplied by the Company  to  produce
server technology products.  The Strategic Consulting Agreement grants Samsung a
royalty-free  license through July 31, 2000 to use various marketing  and  sales
planning studies provided by the Company.  Under each agreement, Samsung paid $5
million to the Company.  These amounts are not refundable under any circumstance
and are not contingent upon the rendering of future services by the Company.  As
a result of these agreements, $10.0 million was recorded as revenue from related
party in fiscal year 1996.

      On  June  27,  1996,  the  Company entered into an  Intellectual  Property
Assignment Agreement with Samsung, which assigns certain patent applications  of
the  Company to Samsung.  Samsung purchased a first group of patent applications
from the Company during the second quarter of fiscal year 1996 for $15 million
and  exercised an option to purchase an additional group of patent  applications
for  $10 million during the fourth quarter of fiscal year 1996.  A total of  $25
million related to these agreements was recorded as revenue from a related party
in  fiscal year 1996.  The Company received $15 million in fiscal 1996, and  the
remaining  payment  of $10 million to be received in fiscal  year  1997  is  not
contingent upon the rendering of future services by the Company

      During fiscal year 1996, Samsung paid the salaries of certain employees of
the Company.  The Company recorded a capital contribution of $1.0 million, which
represents the estimated compensation expense of the employees paid by Samsung.

      During  fiscal year 1996 and transition period 1995, the Company purchased
$304.7  million  and  $144.7  million of components and  products  from  Samsung
respectively.  Amounts payable to Samsung at December 28, 1996 and December  30,
1995 were $58.4 million and $31.6 million, respectively.

NOTE 16.  SUBSEQUENT EVENT

     On January 30, 1997 the Company announced that Samsung proposed to commence
negotiations to the acquire all of the outstanding shares of common stock of the
Company not currently owned by Samsung or its affiliates at a price of $5.10 per
share.  Pursuant to the terms of a Stockholder Agreement between the Company and
Samsung,  Samsung's ability to purchase shares and engage in other  transactions
with  the Company is subject to certain restrictions, including approval of  the
Independent Directors (as defined in the Stockholder Agreement).  The  Company's
Board of Directors has formed a special committee, consisting of the Independent
Directors, to evaluate the Samsung Proposal, and to consider other options  that
may  be  available to the Company.  There is no assurance that  any  transaction
will ultimately occur.

PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11.  EXECUTIVE COMPENSATION

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  The information called for in these four items is incorporated by reference to
AST  Research, Inc's, definitive proxy statement relating to its annual  meeting
of  stockholders, to be filed with the Commission within 120 days of the
end of fiscal year 1996.


PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  (1)  Financial Statements

          See Index to Consolidated Financial Statements at Item 8 on Page 32 of
     this report.

     (2)  Financial Statement Schedule

          II - Consolidated Valuation and Qualifying Accounts and Reserves

           Financial  statement schedules other than the schedule  listed  above
     have  been  omitted  since  they are either not required,  not  applicable,
     or the information is otherwise included.

     (3)  Exhibits

Exhibit
Number                             Description

2.1    Agreement  for  Purchase and Sale of Assets dated June 30,  1993  between
       AST  Research, Inc. and Tandy Corporation, TE Electronics, Inc. and  GRiD
       Systems  Corporation.   The  Schedules  have  been  omitted  and  are  as
       described  in  the  Agreement (incorporated by  reference  to  referenced
       exhibit number of the Company's Current Report on Form 8-K as filed  with
       the  Securities  and  Exchange Commission on July  28,  1993,  Commission
       File No. 0-13941).
2.1.2  Circuit  Board  Purchase  Agreement  dated  July  13,  1993  between  AST
       Research, Inc. and TE Electronics Inc. pursuant to the Agreement for  the
       Purchase  and  Sale  of  Assets  dated June  30,  1993  (incorporated  by
       reference to referenced exhibit number of the Company's Annual Report  on
       Form 10-K for the fiscal year ended July 3, 1993, Commission File No.  0-
       13941).
2.1.3  Agreement  of  Sale of Going Business (English translation)  between  AST
       Research  France  and  Tandy  GRiD France, effective  September  1,  1993
       (incorporated by reference to referenced exhibit number of the  Company's
       Current  Report  on  Form 8-K as filed with the Securities  and  Exchange
       Commission on October 29, 1993, Commission File No. 0-13941).
2.2    Agreement  of  Stock Purchase dated as of February 27, 1995  between  AST
       Research,  Inc.  and  Samsung Electronics Company Ltd.  (incorporated  by
       reference  to  referenced exhibit number of the Company's Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       March 3, 1995, Commission File No. 0-13941).
2.2.1  Amendment  No.  1 to Stock Purchase Agreement dated as of  June  1,  1995
       between   AST   Research,   Inc.  and  Samsung  Electronics   Co.,   Ltd.
       (incorporated by reference to referenced exhibit number of the  Company's
       Solicitation/Recommendation Statement on Amendment No. 1 to Schedule 14D-
       9  as  filed with the Securities and Exchange Commission on June 8, 1995,
       SEC File No. 005-44159).
2.2.2  Amendment  No.  2 to Stock Purchase Agreement dated as of July  29,  1995
       between   AST   Research,   Inc.  and  Samsung  Electronics   Co.,   Ltd.
       (incorporated by reference to referenced exhibit number of the  Company's
       Current  Report  on  Form 8-K as filed with the Securities  and  Exchange
       Commission on August 7, 1995, Commission File No. 0-13941).
3.1    Certificate   of  Incorporation  of  AST  Research,  Inc.,   a   Delaware
       Corporation, as amended (incorporated by reference to referenced  exhibit
       number  of  the  Company's Current Report on Form 8-K as filed  with  the
       Securities  and  Exchange Commission on August 7, 1995 , Commission  File
       No. 0-13941).
3.2    Bylaws  of  AST  Research,  Inc.,  a  Delaware  corporation,  as  amended
       (incorporated by reference to referenced exhibit number of the  Company's
       Current  Report  on  Form 8-K as filed with the Securities  and  Exchange
       Commission on December 22, 1995, Commission File No. 0-13941).




Exhibit
Number                          Description

4.1    Form  of  Amended and Restated Rights Agreement dated as of  January  28,
       1994  between  the Company and American Stock Transfer &  Trust  Co.,  as
       Successor  Rights Agent (incorporated by reference to referenced  exhibit
       number  of  the  Company's Quarterly Report on Form 10-Q for  the  fiscal
       quarter  ended  January  1,  1994), and  Certificate  of  Designation  of
       Preferred  Stock  and  Rights Certificate and Summary  of  Terms  of  the
       Company's Shareholder Rights Plan which were included as exhibits to  the
       original  Rights  Agreement dated as of August 15, 1989 (incorporated  by
       reference to Exhibit 1 of the Company's Registration Statement on Form 8-
       A  as  filed  with the Securities and Exchange Commission on  August  14,
       1989, Commission File No. 0-13941).
4.1.1  Amendment  to Rights Plan dated as of March 1, 1995 between AST Research,
       Inc.  and  American Stock Transfer & Trust Co. (incorporated by reference
       to  referenced exhibit number of the Company's Current Report on Form 8-K
       as  filed  with the Securities and Exchange Commission on March 3,  1995,
       Commission File No. 0-13941).
10.1   Lease  Agreement dated November 1, 1985 pertaining to AST Europe  Limited
       premises  at  Goat  Wharf, Brentford in the London  Borough  of  Hounslow
       (incorporated by reference to referenced exhibit number of the  Company's
       Annual  Report  on  Form 10-K for the fiscal year ended  June  30,  1986,
       Commission File No. 0-13941).
10.2   Joint  Venture Contract dated September 7, 1993 between Tianjin  Economic
       -  Technological  Development  Area  Business  Development  Co.  and  AST
       Research  (Far  East)  Limited (incorporated by reference  to  referenced
       exhibit  number of the Company's Quarterly Report on Form  10-Q  for  the
       fiscal quarter ended April 2, 1994, Commission File No. 0-13941).
10.3   Employment  Grant Agreement dated November 9, 1993 between the Industrial
       Development  Authority,  AST  Ireland  Limited  and  AST  Research,  Inc.
       (confidential  treatment is requested with respect to  portions  of  this
       exhibit) (incorporated by reference to referenced exhibit number  of  the
       Company's  Annual Report on Form 10-K for the fiscal year ended  July  2,
       1994, Commission File No. 0-13941).
10.4   Capital  Grant  Agreement dated November 9, 1993 between  the  Industrial
       Development  Authority,  AST  Ireland  Limited  and  AST  Research,  Inc.
       (confidential  treatment is requested with respect to  portions  of  this
       exhibit) (incorporated by reference to referenced exhibit number  of  the
       Company's  Annual Report on Form 10-K for the fiscal year ended  July  2,
       1994, Commission File No. 0-13941).
10.5   Settlement  Agreement  and Release dated January  1,  1995,  between  AST
       Research,   Inc.   and   Texas  Instruments  Incorporated   (confidential
       treatment  is  requested  with  respect  to  portions  of  this  exhibit)
       (incorporated by reference to referenced exhibit number of the  Company's
       Quarterly  Report on Form    10-Q for the fiscal quarter ended  April  1,
       1995, Commission File No. 0-13941).
10.6   Strategic  Alliance  Agreement  dated  February  27,  1995  between   AST
       Research,  Inc.,  and Samsung Electronics Company, Ltd. (incorporated  by
       reference  to referenced exhibit number of  the Company's Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       March 3, 1995, Commission File No. 0-13941).
10.7   Confidentiality Agreement dated December 21, 1994 between  AST  Research,
       Inc.  and  Samsung Electronics Co., Ltd. (incorporated  by  reference  to
       referenced  exhibit  number  of the Company's Solicitation/Recommendation
       Statement  on  Schedule 14D-9 as filed with the Securities  and  Exchange
       Commission on March 6, 1995, SEC File No. 005-44159).
10.8   Registration  Rights Agreement dated July 31, 1995 between AST  Research,
       Inc. and Samsung Electronics Company, Ltd. (incorporated by reference  to
       referenced exhibit number of the Company's Current Report on Form 8-K  as
       filed  with  the  Securities and Exchange Commission on August  7,  1995,
       Commission File No. 0-13941).
10.9   Stockholder Agreement dated July 31, 1995 between AST Research, Inc.  and
       Samsung   Electronics  Company,  Ltd.  (incorporated  by   reference   to
       referenced exhibit number of the Company's Current Report on Form 8-K  as
       filed  with  the  Securities and Exchange Commission on August  7,  1995,
       Commission File No. 0-13941).
10.10  Amendment   to  Stockholder  Agreement  dated  December   21,   1995   to
       Stockholder Agreement dated July 31, 1995 between AST Research, Inc.  and
       Samsung  Electronics  Company  Co., Ltd. (incorporated  by  reference  to
       referenced exhibit number of the Company's Current Report on Form 8-K  as
       filed  with the Securities and Exchange Commission on December 22,  1995,
       Commission File No. 0-13941).


Exhibit
Number                          Description

10.11  Component Sales Agreement dated July 31, 1995 between AST Research,  Inc.
       and   Samsung  Electronics  Co.,  Ltd.  (incorporated  by  reference   to
       referenced exhibit number of the Company's Current Report on Form 8-K  as
       filed  with  the  Securities and Exchange Commission on August  7,  1995,
       Commission File No. 0-13941).
10.12  Cooperative  Procurement  Agreement  dated  July  31,  1995  between  AST
       Research,  Inc.  and  Samsung  Electronics  Co.,  Ltd.  (incorporated  by
       reference  to  referenced exhibit number of the Company's Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       August 7, 1995, Commission File No. 0-13941).
10.13  Marketing   Cooperation  Agreement  dated  July  31,  1995  between   AST
       Research,  Inc.  and  Samsung  Electronics  Co.,  Ltd.  (incorporated  by
       reference  to  referenced exhibit number of the Company's Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       August 7, 1995, Commission File No. 0-13941).
10.14  AST  OEM  Supply  to  SEC  Agreement dated  July  31,  1995  between  AST
       Research,  Inc.  and  Samsung  Electronics  Co.,  Ltd.  (incorporated  by
       reference  to  referenced exhibit number of the Company's Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       August 7, 1995, Commission File No. 0-13941).
10.15  SEC  OEM  Supply  to  AST  Agreement dated  July  31,  1995  between  AST
       Research,  Inc.  and  Samsung  Electronics  Co.,  Ltd.  (incorporated  by
       reference  to  referenced exhibit number of the Company's Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       August 7, 1995, Commission File No. 0-13941).
10.16  Joint  Development  and Technical Cooperation Agreement  dated  July  31,
       1995  between  AST  Research,  Inc. and  Samsung  Electronics  Co.,  Ltd.
       (incorporated by reference to referenced exhibit number of the  Company's
       Current  Report  on  Form 8-K as filed with the Securities  and  Exchange
       Commission on August 7, 1995, Commission File No. 0-13941).
10.17  Patent  Cross License Agreement dated July 31, 1995 between AST Research,
       Inc.  and  Samsung Electronics Co., Ltd. (incorporated  by  reference  to
       referenced exhibit number of the Company's Current Report on Form 8-K  as
       filed  with  the  Securities and Exchange Commission on August  7,  1995,
       Commission File No. 0-13941).
10.18  Employee  Exchange  Agreement dated July 31, 1995 between  AST  Research,
       Inc.  and  Samsung Electronics Co., Ltd. (incorporated  by  reference  to
       referenced exhibit number of the Company's Current Report on Form 8-K  as
       filed  with  the  Securities and Exchange Commission on August  7,  1995,
       Commission File No. 0-13941).
10.19  General  Terms  Agreement dated July 31, 1995 between AST Research,  Inc.
       and  Samsung  Electronics   Co.,  Ltd.  (incorporated  by  reference   to
       referenced exhibit number of the Company's Current Report on Form 8-K  as
       filed  with  the  Securities and Exchange Commission on August  7,  1995,
       Commission File No. 0-13941).
10.20  Letter  Agreement  dated  July 31, 1995 between AST  Research,  Inc.  and
       Samsung  Electronics Co., Ltd. (incorporated by reference  to  referenced
       exhibit number of the Company's Current Report on Form 8-K as filed  with
       the  Securities  and  Exchange Commission on August 7,  1995,  Commission
       File No. 0-13941).
10.21  Additional  Support  Agreement  dated  December  21,  1995  between   AST
       Research,  Inc.  and  Samsung  Electronics  Co.,  Ltd.  (incorporated  by
       reference  to  referenced exhibit number of the Company's Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       December 22, 1995, Commission File No. 0-13941).
10.22  Credit  Agreement dated December 27, 1995 among AST Research, Inc.,  Bank
       of  America  NT & SA as agent and the other financial institutions  party
       hereto  (incorporated by reference to referenced exhibit  number  of  the
       Company's  Transition  Report on Form 10-K  for  the  fiscal  year  ended
       December 30, 1995, Commission File No. 0-13941).
10.23  First  Amendment to Credit Agreement dated February 29,  1996  among  AST
       Research,  Inc., Bank of America NT & SA as agent and the other financial
       institutions  party  hereto  (incorporated  by  reference  to  referenced
       exhibit  number of the Company's Transition Report on Form 10-K  for  the
       fiscal year ended December 30, 1995, Commission File No. 0-13941).


Exhibit
Number                          Description

10.24  Server  Technology  Transfer Agreement dated February 22,  1996,  between
       AST  Ireland  Limited and Samsung Electronics Co. Ltd.  (incorporated  by
       reference  to  referenced  exhibit number  of  the  Company's  Transition
       Report  on  Form  10-K  for  the fiscal year  ended  December  30,  1995,
       Commission File No. 0-13941).
10.25  Strategic  Consulting  Agreement, dated February 22,  1996,  between  AST
       Ireland  Limited  and  Samsung  Electronics  Co.  Ltd.  (incorporated  by
       reference to referenced exhibit number of the Company's Quarterly  Report
       on  Form  10-Q  for  the fiscal quarter ended March 30, 1996,  Commission
       File No. 0-13941).
10.26  Intellectual  Property Assignment Agreement dated June 27, 1996,  between
       AST  Research,  Inc.  and Samsung Electronics Co. Ltd.  (incorporated  by
       reference  to  referenced exhibit number of the Company's Current  Report
       on  Form 8-K as filed with the Securities and Exchange Commission on June
       28, 1996,  Commission File No. 0-13941).
10.27  Second  Additional Support Agreement dated December 13, 1996 between  AST
       Research,  Inc.  and  Samsung  Electronics Co.,  Ltd.,  (incorporated  by
       reference  to referenced exhibit number of the Company's' Current  Report
       on  Form  8-K  as  filed with the Securities and Exchange  Commission  on
       December 26, 1996, Commission File No. 0-13941).
10.28  Credit  Agreement dated December 12, 1996 between AST Research, Inc.  and
       ABN  AMRO  Bank,  N.V. (incorporated by reference to  referenced  exhibit
       number  of  the  Company's Current Report on Form 8-K as filed  with  the
       Securities and Exchange Commission on December 26, 1996, Commission  File
       No. 0-13941).
10.29  Credit  Agreement dated December 13, 1996 between AST Research, Inc.  and
       Bank  of America NT & SA (incorporated by reference to referenced exhibit
       number  of  the  Company's Current Report on Form 8-K as filed  with  the
       Securities and Exchange Commission on December 26, 1996, Commission  File
       No. 0-13941).
10.30  Credit  Agreement dated December 13, 1996 between AST Research, Inc.  and
       Societe  General (incorporated by reference to referenced exhibit  number
       of  the Company's Current Report on Form 8-K as filed with the Securities
       and  Exchange  Commission on December 26, 1996, Commission  File  No.  0-
       13941).
10.31  Second  Amendment  to  Credit  Agreement  December  13,  1996  among  AST
       Research,  Inc., Bank of America NT & SA as agent and the other financial
       institutions  party  hereto  (incorporated  by  reference  to  referenced
       exhibit number of the Company's Current Report on Form 8-K as filed  with
       the  Securities and Exchange Commission on December 26, 1996,  Commission
       File No. 0-13941).
10.32  First  Intellectual  Property Option Exercise  dated  December  17,  1996
       between   AST   Research   and   Samsung  Electronics   Company   Limited
       (incorporated by reference to referenced exhibit number of the  Company's
       Current  Report  on  Form 8-K as filed with the Securities  and  Exchange
       Commission on December 26, 1996, Commission File No. 0-13941).



Executive Compensation Plans and Arrangements

10.75* 1987  Employee  Bonus  Plan  (incorporated  by  reference  to  referenced
       exhibit  number  of  the Company's Annual Report on  Form  10-K  for  the
       fiscal year ended June 30, 1986, Commission File No. 0-13941).
10.76* Form of Indemnification Agreement, as amended to date.
10.77* Form  of  Indemnification Trust Agreement (incorporated by  reference  to
       referenced exhibit number of the Company's Registration of Securities  of
       Certain Successor Issuers on Form 8-B, Commission File No.     0-13941).
10.78* 1989  Long-Term Incentive Program (incorporated by reference  to  exhibit
       numbers 4.1, 4.2, 4.3 and 4.4 of the Company's Registration Statement  on
       Form S-8, Registration No. 33-29345).
10.79* Amendment  to  1989 Long-Term Incentive Program related  to  increase  in
       number  of shares (incorporated by reference to referenced exhibit number
       of  the  Company's Annual Report on Form 10-K for the fiscal  year  ended
       June 27, 1992, Commission File No. 0-13941).


Exhibit
Number                          Description

10.80* Nonqualified  Common Stock Option Agreement for officers under  the  1989
       Long-Term  Incentive Program, approved by Compensation Committee  January
       23,   1992   pursuant  to  administrative  authority  under   such   plan
       (incorporated by reference to referenced exhibit number in the  Company's
       Annual  Report  on  Form 10-K for the fiscal year ended  June  27,  1992,
       Commission File No. 0-13941).
10.81* Amendment   to  Officers  Nonqualified  Common  Stock  Option  Agreement,
       approved   by  Compensation  Committee  January  23,  1992  pursuant   to
       administrative  authority under such plan (incorporated by  reference  to
       referenced  exhibit number in the Company's Annual Report  on  Form  10-K
       for the fiscal year ended June 27, 1992, Commission File No. 0-13941).
10.82* Amendment  to  AST  Research,  Inc.  1989  Long-Term  Incentive   Program
       (incorporated by reference to referenced exhibit number of the  Company's
       Quarterly  Report  on Form 10-Q for the fiscal quarter ended  January  1,
       1994, Commission File No. 0-13941).
10.83* Supplemental   Medical  Plan  for  Executives  of  AST   Research,   Inc.
       (incorporated by reference to referenced exhibit number of the  Company's
       Annual  Report  on  Form 10-K for the fiscal year ended  June  30,  1989,
       Commission File No. 0-13941).
10.84* Form  of Warrant Certificate issued to Non-Employee Directors in December
       1990  (incorporated  by  reference to referenced exhibit  number  of  the
       Company's Annual Report on Form 10-K for the fiscal year ended  June  28,
       1991, Commission File No. 0-13941).
10.85* Form  of Warrant Certificate issued to Non-Employee Director in July 1992
       (incorporated by reference to referenced exhibit number of the  Company's
       Annual  Report  on  Form 10-K for the fiscal year ended  June  27,  1992,
       Commission File No. 0-13941).
10.86* Form  of  Amendment to Warrant Certificate dated as of February 27,  1995
       (incorporated  by  reference  to  referenced  exhibit  number   of    the
       Company's  Solicitation/Recommendation Statement  on  Schedule  14D-9  as
       filed  with the Securities and Exchange Commission on March 6, 1995,  SEC
       File No. 005-44159).
10.87* 1991  Stock  Option  Plan  for  Non-Employee Directors  (incorporated  by
       reference to referenced exhibit number of the Company's Annual Report  on
       Form 10-K for the fiscal year ended June 28, 1991, Commission File No. 0-
       13941).
10.88* Form  of Nonqualified Stock Option agreement under 1991 Stock Option Plan
       for  Non-Employee  Directors  (incorporated by  reference  to  referenced
       exhibit  number  of  the Company's Annual Report on  Form  10-K  for  the
       fiscal year ended June 28, 1991, Commission File No. 0-13941).
10.89* Amendment  to  AST Research, Inc. 1991 Stock Option Plan for Non-Employee
       Directors (incorporated by reference to referenced exhibit number of  the
       Company's  Quarterly  Report on Form 10-Q for the  fiscal  quarter  ended
       January 1, 1994, Commission File No. 0-13941).
10.90* Amendment  to  the  AST Research, Inc. 1991 Stock Option  Plan  for  Non-
       Employee Directors dated February 27, 1995 (incorporated by reference  to
       referenced   exhibit   number   of   the   Company's   Solicitation   and
       Recommendation  Statement on Schedule 14D-9 as filed with the  Securities
       and Exchange Commission on March 6, 1995, SEC File No. 005-44159).
10.91* Amendment  to  AST Research, Inc. 1991 Stock Option Plan for Non-Employee
       Directors (comprised of resolutions adopted by the Board of Directors  on
       July  27,  1995)  (incorporated  by  reference  to  Exhibit  4.1  of  the
       Company's  Registration  Statement  on  Form  S-8  as  filed   with   the
       Securities  and  Exchange Commission on January  26,  1996,  Registration
       No. 333-00489).
10.92* Employment  Agreement dated as of July 27, 1993 between Safi U.  Qureshey
       and  AST  Research, Inc. (incorporated by reference to referenced exhibit
       number of the Company's Annual Report on Form
       10-K  for  the  fiscal year ended July 3, 1993, Commission  File  No.  0-
       13941).
10.93* Amendment  to  and  Clarification of Employment  Agreement  dated  as  of
       February  27,  1995  between  AST Research  Inc.  and  Safi  U.  Qureshey
       (incorporated by reference to referenced exhibit number of the  Company's
       Current  Report  on  Form 8-K as filed with the Securities  and  Exchange
       Commission on March 3, 1995, Commission File No. 0-13941).
10.94* Form  of  Severance Compensation Agreement (incorporated by reference  to
       referenced  exhibit number of the Company's Annual Report  on  Form  10-K
       for the fiscal year ended July 3, 1993, Commission File No. 0-13941).


Exhibit
Number                          Description

10.95* Form  of  Amendment to Executive Officer Severance Compensation Agreement
       (incorporated by reference to referenced exhibit number of the  Company's
       Solicitation/Recommendation Statement on Schedule  14D-9  as  filed  with
       the  Securities and Exchange Commission on March 6, 1995,  SEC  File  No.
       005-44159).
10.96* Form  of  Amendment  to  Vice President Severance Compensation  Agreement
       (incorporated by reference to referenced exhibit number of the  Company's
       Solicitation/Recommendation Statement on Schedule  14D-9  as  filed  with
       the  Securities and Exchange Commission on March 6, 1995,  SEC  File  No.
       005-44159).
10.97* Amendment  to  Severance Compensation Agreement dated February  27,  1995
       between  AST  Research,  Inc.  and  Safi  U.  Qureshey  (incorporated  by
       reference    to    referenced   exhibit   number   of    the    Company's
       Solicitation/Recommendation Statement on Schedule  14D-9  as  filed  with
       the  Securities and Exchange Commission on March 6, 1995,  SEC  File  No.
       005-44159).
10.98* Involuntary  Termination Policy dated September 2, 1994 (incorporated  by
       reference to referenced exhibit number of the Company's Annual Report  on
       Form 10-K for the fiscal year ended July 2, 1994, Commission File No.  0-
       13941).
10.99* AST  Research,  Inc.  1994  One-Time Grant Stock  Option  Plan  for  Non-
       Employee  Directors  (incorporated by  reference  to  referenced  exhibit
       number  of  the  Company's Quarterly Report on Form 10-Q for  the  fiscal
       quarter ended January 1, 1994, Commission File No. 0-13941).
10.100*Option  Agreement  Under  AST Research, Inc. 1994  One-Time  Grant  Stock
       Option  Plan  for Non-Employee Directors  (incorporated by  reference  to
       referenced exhibit number of the Company's Quarterly Report on Form  10-Q
       for  the  fiscal quarter ended January 1, 1994, Commission  File  No.  0-
       13941).
10.101*Amendment  to  the  AST Research, Inc. 1994 One-Time Grant  Stock  Option
       Plan for Non-Employee Directors dated February 27, 1995 (incorporated  by
       reference    to    referenced   exhibit   number   of    the    Company's
       Solicitation/Recommendation Statement on Schedule  14D-9  as  filed  with
       the  Securities and Exchange Commission on March 6, 1995,  SEC  File  No.
       005-44159).
10.102*Form  of Acknowledgment/Consent to Waiver of Rights under the 1991  Stock
       Option Plan for Non-Employee Directors and/or AST Research Inc. 1994 One-
       Time Grant Stock Option Plan for Non-Employee Directors (incorporated  by
       reference    to    referenced   exhibit   number   of    the    Company's
       Solicitation/Recommendation Statement on Schedule  14D-9  as  filed  with
       the  Securities and Exchange Commission on March 6, 1995,  SEC  File  No.
       005-44159).
10.103*Performance  Based  Annual  Management Incentive  Plan  (incorporated  by
       reference to referenced exhibit number of the Company's Annual Report  on
       Form 10-K for the fiscal year ended July 2, 1994, Commission File No.  0-
       13941).
10.104*President's  Plan  (comprised of resolutions  adopted  by  the  Board  of
       Directors  on  November 2, 1995)  (incorporated by reference  to  Exhibit
       4.1  of  the  Company's Registration Statement on Form S-8 as filed  with
       the  Securities and Exchange Commission on January 26, 1996, Registration
       No. 333-00487).
10.105*Form   of   Nonqualified  Stock  Option  Agreement  pertaining   to   the
       President's  Plan  (incorporated  by reference  to  Exhibit  4.2  of  the
       Company's  Registration  Statement  on  Form  S-8  as  filed   with   the
       Securities and Exchange Commission on January 26, 1996, Registration  No.
       333-00487).
10.106*AST  Research, Inc. Profit Sharing Plus Plan, amended and restated as  of
       July  1, 1993 (incorporated by reference to referenced exhibit number  of
       the  Company's Transition Report on Form 10-K for the fiscal  year  ended
       December 30, 1995, Commission File No. 0-13941).
10.107*First  Amendment  to  the  AST Research, Inc. Profit  Sharing  Plus  Plan
       effective  January  1,  1996  (incorporated by  reference  to  referenced
       exhibit  number of the Company's Transition Report on Form 10-K  for  the
       fiscal year ended December 30, 1995, Commission File No. 0-13941).
10.108*# 1996  Non-Employee Director Plan (comprised of resolutions  adopted
       by the Board of Directors on November 26, 1996).
21. #  Subsidiaries of the registrant.
23. #  Consent of Independent Auditors.
24. #  Power  of Attorney (included on the signature pages of this Annual Report
       on Form 10-K).
27. #  Financial Data Schedule.

#     Filed herewith
*Indicates  a  management contract or compensatory plan or arrangement  required
 to  be  filed  as  an exhibit to this Annual Report on Form  10-K  pursuant  to
 Item 14(c).

(b)  Reports on Form 8-K


     On October 7, 1996, the Company filed a report on Form 8-K reporting, under
     Item  5  thereof,  that  Michael Willcocks,  Senior  Vice  President,  Asia
     Pacific,  and Gerald T. Devlin, Senior Vice President, Americas,  resigned.
     The Company also announced that Hoon Choo joined the Company as Senior Vice
     President, Asia Pacific.

     On  October  11,  1996, the Company filed a report on Form  8-K  reporting,
     under  Item 5 thereof, that Dennis R. Leibel, Senior Vice President, Legal,
     Administration and Secretary, retired.

     On  November  11, 1996, the Company filed a report on Form  8-K  reporting,
     under  Item  5 thereof, that it signed a non-binding letter of intent  with
     Samsung  Electronics  Co., Ltd. ("Samsung") to provide  certain  additional
     financial  support to the Company as consideration for shares of non-voting
     Preferred Stock.  The Company also reported that Roger W. Johnson has  been
     named  as  a member of the Company's Board of Directors.  In addition,  the
     Company  released  results  of  the third  quarter  of  fiscal  year  1996,
     reporting a net loss of $135.3 million, or $2.41 per share.

     On  December  26, 1996, the Company filed a report on Form  8-K  reporting,
     under  Item 5 thereof, that it signed a Second Additional Support Agreement
     with Samsung Electronics Co. Ltd. ("Samsung") to provide certain additional
     financial  support to the Company as consideration for shares of non-voting
     preferred  stock.  In addition, on December 26, 1996, the Company  reported
     that  it renewed its present $200 million credit line with a consortium  of
     nine  banks.   The Company further reported that Samsung has exercised  its
     option to purchase a first group of intellectual properties pursuant to the
     Intellectual  Property  Assignment Agreement dated  June  27,  1996  for  a
     payment of $10 million.


AST Advantage!, AST Adventure!, AST Premmia, AST Research, GRiDPAD, GRiD, Victor
and  PalmPad are registered trademarks of AST Research, Inc.  AST Computer,  the
AST  Computer  logo,  AST  Works,  Ascentia, ASTVision,  Pronto!,  Pronto!  Pro,
Percepta,  Bravo, Convertible, ExeCare, Manhattan, PowerExec,  and  Premmia  are
trademarks   of  AST  Research,  Inc.   OverDrive  and  Pentium  are  registered
trademarks  of  Intel  Corporation.   Pentium  Pro  is  a  trademark  of   Intel
Corporation.  OS/2 is a registered trademark of International Business  Machines
Corporation.   NetWare is a registered trademark of Novell, Inc.   MS-DOS  is  a
registered trademark and Encarta is a trademark of Microsoft Corporation.  Radio
Shack  is  a  registered  service  mark of  Tandy  Corporation.   Prodigy  is  a
registered trademark of the Prodigy Services Corporation.  America Online  is  a
registered  service  mark of America Online, Inc.  CompuServe  is  a  registered
service mark of CompuServe, Inc.  Liquid Yield Option and LYON are trademarks of
Merrill Lynch & Co.  All other product or service names mentioned herein may  be
trademarks  or registered trademarks of their respective owners.   Reference  to
the  "Energy Star" program does not represent EPA endorsement of any product  or
service.  Copyright (C)1996 AST Research, Inc.  All Rights Reserved.


SIGNATURES

    Pursuant  to  the  requirements of Section 13 or  15(d)  of  the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Irvine,
State of California, on March 28, 1997.

                                        AST RESEARCH, INC.


Date:  March 28, 1997                   By:  \s\ WON S. YANG
                                                 Won S. Yang
                                                 Senior Vice President
                                                 and  Chief Financial  Officer
                                                (Acting)



                              POWER OF ATTORNEY
                                        
    We,  the undersigned directors and officers of AST Research, Inc., do hereby
constitute  and  appoint Young Soo Kim our true and lawful attorney-in-fact  and
agent, with full power of substitution to do any and all acts and things in  our
name  and behalf in our capacities as directors and officers and to execute  any
and  all instruments for us and in our names in the capacities indicated  below,
which  said attorney-in-fact and agent may deem necessary or advisable to enable
said corporation to comply with the Securities Exchange Act of 1934, as amended,
and  any  rules,  regulations and requirements of the  Securities  and  Exchange
Commission,  in  connection  with this Annual Report  on  Form  10-K,  including
specifically but without limitation, power and authority to sign for us  or  any
of  us  in  our names in the capacities indicated below, any and all  amendments
(including  post-effective  amendments) hereto; and  we  do  hereby  ratify  and
confirm all that said attorney-in-fact and agent shall do or cause to be done by
virtue hereof.

    Pursuant  to the requirements of the Securities Exchange Act of  1934,  this
report  has  been  signed  below  by the following  persons  on  behalf  of  the
registrant in the capacities and on the dates indicated.


   Signature                  Title                   Date
                       
\s\Young Soo Kim       President, Chief Executive Officer
Young Soo Kim          and Director                
                       (Principal Executive Officer)            March 28, 1997
                                        
s\Won Suk Yang            Senior Vice President, and Chief 
Won Suk Yank              Financial Officer
                          (Acting Principal Financial Officer)  March 28, 1997
                                                                         
\s\Mark P. de Raad        Vice President, Controller and
Mark P. de Raad           Principal Accounting Officer          March 28, 1997
                                                                            
\s\Kwang-Ho Kim           Chairman of the Board and Director    March 28, 1997
Kwang-Ho Kim                                                                   
                                                                             
\s\Safi U. Qureshey       Chairman of the Board, Emeritus
Safi U. Qureshey          and Director                          March 28, 1997
                                                                      
\s\Richard J. Goeglein                               
Richard J. Goeglein       Director                              March 28, 1997
                                                     
\s\Roger W. Johnson                                  
Roger Johnson             Director                              March 28, 1997
                                                     
\s\Ho Moon Kang                                      
Ho Moon Kang              Director                              March 28, 1997
                                                     
\s\Jack W. Peltason                                  
Jack W. Peltason          Director                              March 28, 1997
                                                     
\s\Bo-Soon Song                                      
Bo-Soon Song              Director                              March 28, 1997
                                                     
\s\Yong-Ro Song                                      
Yong-Ro Song              Director                              March 28, 1997
                                                     















                                                       SCHEDULE II


                               AST RESEARCH, INC.
           CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
        AT AND FOR THE YEAR ENDED DECEMBER 28, 1996, THE SIX MONTHS ENDED
DECEMBER 30, 1995, AND AT AND FOR THE YEARS ENDED JULY 1, 1995, AND JULY 2, 1994
                                 (IN THOUSANDS)

[CAPTION]
<TABLE>
------------------------------------------------------------------------------------------------------------------
                                                       Fiscal Year       Six Months
                                                          Ended            Ended              Fiscal Year Ended
                                                       December 28,      December 30,     July 1,       July 2,
                                                           1996               1995          1995          1994
------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>               <C>           <C>           <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance, beginning of period                             $    18,629       $ 17,452      $ 17,564      $ 11,671
Additions charged to expense                                   7,135          2,321         6,091        13,219
Reductions                                                    (5,521)        (1,144)       (6,203)       (7,326)
------------------------------------------------------------------------------------------------------------------
Balance, end of period                                   $    20,243       $ 18,629      $ 17,452      $ 17,564
==================================================================================================================


ALLOWANCE FOR SALES RETURNS AND
  PRICE PROTECTION

Balance, beginning of period                             $   26,233        $ 19,514      $ 15,137      $  9,120
Net additions (reductions) charged to sales                  20,457           6,719         4,377         6,017
------------------------------------------------------------------------------------------------------------------
Balance, end of period                                   $   46,690        $ 26,233      $ 19,514      $ 15,137
==================================================================================================================
 


RESERVE FOR EXCESS OR OBSOLETE INVENTORY


Balance, beginning of period                             $  49,351         $ 45,536      $ 65,268      $ 35,595
Net additions (reductions) charged to expense                3,870            3,815       (19,732)       29,673
------------------------------------------------------------------------------------------------------------------
Balance, end of period                                   $  53,221         $ 49,351      $ 45,536      $ 65,268
==================================================================================================================
</TABLE>