Data General To Lay Off 1,000 Employees
BOSTON (AP) _ Data General Corp., which staged a rebound after suffering setbacks through the late 1980s, said Wednesday it will lay off 1,000 workers and absorb a $46 million charge to pay for the cutbacks.
Analysts said the layoffs, about 12 percent of the computer maker’s work force, reflect deep-seated problems in the company’s traditional minicomputer business, despite successes with newer products.
The move may portend future problems for the Westboro-based company, coming just two years after it implemented a new product strategy, said Thomas Willmott, vice president of the Aberdeen Group, a high-tech research firm in Boston.
The company ″is caught in an enormous financial vise,″ Willmott said. Profits from its newer ″open systems″ computers have not been enough to offset a loss in revenues in its minicomputer business, he said.
The company, which now employs about 8,100 people, said the layoffs will be worldwide with a significant number of administrative positions being eliminated. The $46 million charge for severance and other benefits will be counted against its second quarter, which ended March 28.
″This is a painful, but necessary, step. Competitive and economic factors are accelerating the need for companies both within and outside the computer industry to become more efficient,″ Data General President Ronald L. Skates said in a statement.
James Dunlap, a Data General spokesman, said the company may post an operating loss for the second quarter, but officials have not established how much that might be.
Dunlap said the majority of the layoffs would be in the company’s overseas operations.
Data General, which employed 17,700 people in the mid-1980s, laid off thousands as its minicomputers lost business to smaller and cheaper machines.
The company shifted its strategy, moving into the open systems arena where computers from different companies can work together. A big seller has been its AViiON server, which acts as a high-powered information hub for other computers.
In 1991, Data General reported its first profitable year since 1985. The company continued its string of profits into the first quarter of this fiscal year, when it earned $4 million.
Dunlap said the AViiON line had $100 million in sales in 1990 and nearly double that in 1991. But the line accounts for only about one third of the company’s total revenues, he said.
″The problem is it (AViiON) is not increasing fast enough to make up for the losses in the MV (minicomputer) lines,″ said Steven Widen, an analyst with WorkGroup Technologies Inc. of Hampton, N.H.
Given the sluggish conditions in the computer market, Data General had no choice but to make drastic cutbacks, analysts said.
″I think they have to continue to do exactly what they are doing, to make their profits on excellence in packaging and systems design and good service and good software. There will be a continuing market for that,″ Willmott said.
Data General’s stock was unchanged at $9.12 1/2 a share by the 4 p.m. close of trading Wednesday on the New York Stock Exchange.