Opinion ID: 571326
Heading Depth: 2
Heading Rank: 3

Heading: The Workslate Product Line

Text: 20 NGEN, while representing a significant advance over the AWS/IWS workstation, was a continuation of the traditional Convergent business strategy: targeting sales of computer workstations to OEMs rather than the public. Workslate, by contrast, amounted to a revolution. Workslate was basically a portable laptop computer--far more common now than in 1983. Convergent intended to sell Workslate directly to the public through retail and direct sale channels. Efficient production of Workslate required different factory mechanization than that required by both the AWS/IWS workstation and NGEN. 21 In March of 1983, Convergent had only a preliminary idea of the final form Workslate would take. Convergent was still in the process of developing its marketing strategy, and had not crafted a wooden prototype. Nonetheless, Convergent disclosed in the March Prospectus some of the risks it anticipated Workslate to pose: 22 The Company's Portable Computer Systems Division currently is developing and plans to manufacture a family of modular portable workstations ... for business, engineering and administrative applications. The Company expects to introduce these products and begin delivery in the first half of 1984. The development of these products is anticipated to be complex and to require the development of proprietary technology; accordingly, product introduction may be subject to delay, which may adversely impact the Company's ability to market these products. 23 There can be no assurance that the Company will successfully complete the development of its new products, or that it will be successful in manufacturing the new products in high volume or marketing the products in the face of intense competition. 24 The August Prospectus repeated the risks described in the March Prospectus, and added some more. In the August prospectus, Convergent announced that Workslate required the implementation of advanced manufacturing processes and the development and management of retail distribution channels. The Prospectus acknowledged that Convergent had no experience with either of these requirements. 25 Workslate's manufacturing and distribution problems continued to mount as 1983 ended. By early December, Convergent management became aware it would not be able to manufacture Workslate in the volumes projected internally and to the press and analysts. 26 On February 16, 1984, Convergent revealed at a meeting of analysts that it would attempt to raise prices on Workslate, that Workslate was being sold at a price below its production cost and that the product had been prematurely released and needed redesigning. In response, over the next two days Convergent's stock price fell 3 1/8 points, a drop of 17%. The class period ended the day after the February 16 analyst meeting.