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Something went terribly wrong on the way to the computer systems market. Jamshed (Jim) Farooquee, chief executive of CMS Enhancements Inc., in Irvine knows that all too well.
A failed joint venture and other ills have cost his company $17 million in losses for the past two years and forced him to lay off more than 350 employees. Another year of such losses and Irvine-based CMS may have to seek bankruptcy protection, the company said last week in a filing with the Securities and Exchange Commission.
Once confident that he could parlay his success in selling computer enhancements, such as hard-disk drives, into marketing complete computers, Farooquee saw his strategy unravel during this year's industry price war.
"I unfortunately made more than one mistake," said Farooquee, 39. "We learned a few lessons, some very expensive lessons."
The rise and fall of CMS Enhancements, which has annual revenues of $115 million, may sound familiar. Like many other computer peripheral companies, CMS rode the success of the personal computer revolution only to make an ill-fated expansion into the saturated marketplace of selling complete computer systems.
This setback has been difficult to swallow for Farooquee, who emigrated from Pakistan in 1975 with a civil engineering degree and $40 in his pocket. He became a success as the quintessential salesman of everything from insurance to computers.
"Farooquee was living on the riches that CMS made years ago," said Ian Gilson, an analyst at L.H. Friend, Weinress & Co. in Irvine. "Now he is waking up."
Today, the company is in full-scale retreat. In August, Farooquee confirmed that CMS' joint venture with South Korea's leading computer company to sell PCs in the United States had failed.
The company's combined losses since 1990 are more than it has made in profit since going public in 1986. Arthur Andersen & Co., the company's auditor, said in a filing last week that the losses raise "substantial doubt" about CMS ability to say in business.
"Most companies cannot survive this level of losses, but we believe we are in a turnaround," Farooquee said. "The disclosure is a precautionary accounting requirement."
Besides cutting employees, CMS is saving money any way it can. Idled manufacturing plants in Singapore and Pakistan are up for sale. A...