Alpha Microsystems Inc, the former mini-computer outfit whose revenues have been cut in half by endless divestitures, has attracted $20m in venture capital in its bid to re-emerge as a nationwide computer services and consulting company. ING Equity Partners has provided an initial $8m in cash, all of which Alpha has committed to buying Delta Computec Inc, a small $13m a year services company based in Rochester, New York, which was encountering cash flow problems. The acquisition will form a sizeable chunk of Alpha, which has just announced first quarter net losses of $1.0m, down from last year’s $1.1m loss, on revenues up 20% at $5.4m. Four years ago, Alpha was a $40m a year company, but after divesting of business units ranging from dental practice management to food services software, this 20 year old survivor is making its stand as a consulting and network services company. The services arm is a by-product of Alpha’s support for its original mini-computers, but with a current network of 50 offices throughout North America, Alpha and its new partner ING Equity feel the company has the geographical coverage to push into the services business after years of decline in its product sales. And so ING will pump in up to $20m in cash, for working capital and acquisitions. But the financing comes only with a heavy dilution of equity for Alpha’s existing shareholders. The initial $8m of cash sees ING obtaining warrants for a 20% stake, with the additional $12m giving rise to a potential 42% stake, subject to existing shareholder approval. Handing over such a huge slice of the company is more common for non-public companies, but Alpha’s board is clearly of the opinion that the change in direction merits such a radical financing initiative. The shareholders will be asked to vote as and when the money is needed.
