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Fury at Memory share dive

AIM's image suffers as investors target microchip firm
PRIVATE investors are up in arms over the dramatic collapse in the share price of the Scottish microchip repairer Memory Corporation in the biggest test yet for the Stock Exchange's fledgling Alternative Investment Market.

Memory's shares dived 30p to 155p on Friday, a 215p fall in a week, severely tarnishing the much-hyped image of what was AIM's largest company.

A warning of a collapse in computer chip prices prompted the plunge. But this is just the latest in a string of disappointments, including production delays and missed profit targets, which have raised doubts among industry observers over whether it will ever make any money.

Henry Cooke Lumsden, Memory's Manchester-based stockbroker, confirmed that clients - who stumped up pounds 5m in a placing of 1.2 million shares at 420p only last October - had vented their fury with a vengeance.

"I've had nothing but grief. I'm up to my ears in grief," said Stuart Forshaw, HCL's director of research.

"If you're going to quote us, bear in mind that this has been a very sensitive time for ourselves, Memory Corp and a number of clients," he added.

HCL told Memory to bring forward its results to a week last Friday after finding out about the collapse in chip prices "one or two days before". The US giant Intel started a price war at the end of 1995, and prices have plunged by two-thirds since - to a level the industry believes to be permanent.

Memory buys defective micro-chips and mounts them on a board that incorporates new fault-finding technology. It aims to sell these boards, known as Single In Line Memory Modules (Simms), on to computer manufacturers. It has estimated the market will be worth $34bn ($22.4bn) by 2000.

Cameron McColl, Memory's president and chief executive officer, said this weekend that the company had realised the seriousness of the price war only in February, hence the delay in warning the market. "We can make good profits and good margins even at these prices," he insisted.

Memory was floated at 45p in December1994, joined AIM last September and enjoyed a meteoric rise on the back of gushing reviews from brokers and tipsters of the sort that threaten the credibility of the market.

"That is always the danger of AIM. Companies with no track records get massively hyped," said one corporate financier.

This weekend, Memory is worth just pounds 87m against pounds 350m at last year's 585p share price high. Mr McColl's own paper fortune has fallen by pounds 63m to pounds 23m.

All the directors' shares are subject to a "lock-in" agreement until the end of 1996, and both Mr McColl and HCL said no directors had sold or agreed to sell any stock.

The collapse has left egg on City faces. At the end of January, broker UBS tipped the shares to go to pounds 10 by 1998, forecasting profits of pounds 16m this year against a loss of pounds 1.95m in 1995. That, and HCL's own pounds 20m forecast, have now been shelved.

Mr McColl was also upbeat at a seminar for UBS clients on 2 February, following a distribution deal with Sumitomo of Japan. That announcement did not mention falling chip prices, however, and also said Memory had failed to meet profit targets at the end of 1995 because of production delays.

As a result, its meagre pounds 450,000 of sales last year all came from old products, and it earned nothing in November and December.

Mr McColl admitted it had had problems keeping pace with the industry's new Pentium chip, but said these were now solved and it would be ahead on the next advance.