Unisys Cuts 6,000 Jobs as High-Tech Field Softens : Joins a Growing List of Companies Suffering From General Slowdown in Computer Industry
The price wars and sluggish sales in the U.S. computer industry claimed another victim Friday when Unisys Corp. said it will cut about 6,000 jobs by the end of next year from its worldwide work force of 90,000.
For Unisys, the nation’s No. 3 computer maker and one of a growing number of office automation equipment makers to report difficulties, it is the second big retrenchment this year. The company, which just last week imposed a wage and hiring freeze, announced the elimination of 2,500 jobs in the spring.
“The demand in the United States for office equipment has been soft and we’re seeing the results across the board,” explained Ulrich Weil, a high-technology market analyst in Washington.
Competitors Struggling
International Data Corp., a Framingham, Mass., market research firm, has predicted that sales of all types of computers in the United States will grow by just 3% this year, compared to 7% last year. Although not nearly as serious as the slide of 1985-86, the current slump has made companies throughout the industry pay dearly for mistakes that in better times wouldn’t have been critical.
Among supercomputer makers, Cray Research has reported falling sales and squeezed profits, while one-time rival ETA Systems recently closed its doors. Mid-range computer makers, such as Sun Microsystems and Hewlett-Packard, also have reported financial disappointments.
In the personal computer market, software publishers such as Ashton-Tate of Torrance and system makers including AST Research of Irvine have announced layoffs, as have chip makers Advanced Micro Devices and National Semiconductor.
However, few companies seem to be feeling the pinch like Blue Bell, Pa.-based Unisys, a maker of large, medium and small computers that was formed in 1986 with the merger of the Sperry and Burroughs corporations. Its layoffs earlier this year stemmed from weak sales and declining profits. The latest job cuts, which will reduce the Unisys work force by about 8% through attrition and layoffs, are designed to slash at least $400 million of company spending.
A company spokesman said most of the pending job cuts, just as those made earlier this year, will be in the United States, where he said “the softest market conditions prevail, unfortunately.” The spokesmen said it was unclear whether any jobs would be eliminated at Unisys facilities in Southern California.
Unisys Chairman W. Michael Blumenthal said in a prepared statement Friday that although the company’s basic strategies are working as planned, its profits have been eroded by excess inventories, “weaker than expected U.S. demand and sharper competition in all industry segments worldwide.”
Last month, the company said second-quarter earnings fell to $53.6 million from $162.3 million in the year-earlier period. Unisys shares closed at $21.375, unchanged, in trading Friday on the New York Stock Exchange.
Large Inventories
Blumenthal acknowledged that Unisys’ problems partly stem from the growing popularity of desktop computer systems, both workstations and personal computers. Not only are these products less expensive than larger systems, they provide far lower profit margins because of the intense competition and cost cutting throughout that segment of the industry.
Although Unisys makes these systems and has had success with its product line, the company is now saddled with large inventories of them because demand hasn’t met expectations.
Analyst Weil said Unisys is experiencing greater difficulties than some of its competitors because it had taken too optimistic a view of the market for too long. And Weil said he believes that the company still has a greater-than-warranted optimism about the market going into the 1990s.
“The company’s program assumes a demand level in the United States that I seriously doubt,” he said. “And if the demand remains fairly soft, this cost-cutting program won’t do.”
As part of its overhaul, Unisys said it will accelerate its shift to in-house production of most of its major microprocessor system product lines. It also said it would cut manufacturing overhead worldwide and consolidate various administrative functions.
The company said its cost reduction program will have “positive benefits” in the fourth quarter and it is confident that it will achieve “positive results” and greater profits in 1990.
UNISYS CHRONOLOGY 1986
Nov. 10: New company formed by Burroughs Corp.’s $4.78-billion acquisition of Sperry Corp. Firm adopts the name Unisys.
Nov. 14: Company sells the former Sperry Aerospace Group to Honeywell for $1.025 billion.
1987
Aug. 7: Unisys Chairman W. Michael Blumenthal announces the resignation of President Paul Stern after four years in that post.
Dec. 28: Joseph J. Kroger, vice chairman and a director of Unisys, resigns.
1988
Aug. 18: Unisys pleads guilty in filings with the Securities and Exchange Commission to labor mischarges of $250,000 on contracts with the Army at Ft. Huachuca, Ariz.
1989
Feb. 22: Unisys announces that it is laying off about 2,500 workers and offers incentives to employees who retire early or voluntarily leave the company.
March 9: Former Unisys vice president Charles F. Gardner pleads guilty to bribing former Navy official Melvyn R. Paisley to win a multimillion-dollar Defense Department contract.
March 27: The Justice Department and Unisys reach a settlement under which the company agrees to pay up to $1.5 million in civil penalties for alleged false statements made by Sperry on an Air Force contract.
June 23: The Navy lifts its 3-month-old suspension of three Unisys units after the company agrees to reimburse the Navy $200,000 and clean up its defense contracting procedures.
Aug. 18: Company announces layoffs of 6,000 to 7,000 employees next year in a restructuring and cost-cutting effort.
UNISYS AT A GLANCE Unisys is the world’s third-largest designer, manufacturer and marketer of computer-based information systems and related products and services.
Year ended Dec. 31 1988 1987 1986* Sales (billions) $9.9 $9.7 $7.4 Net income (millions) 681 578 (43)**
* Formerly Burroughs Corp., which merged with Sperry Corp. in 1986 ** Reflects accounting change Assets $5.82 million Employees 90,000 Shares outstanding 158.7 million 12-month price range $19.875-33.375 Friday close (NYSE) $21.375, unchanged
