Recent Sales Flat Despite Record Fiscal ’85 : Micom Blames Layoffs on Sluggish Quarter
At first glance, it looks as if Micom Systems Inc., a leading maker of computer communications equipment, did pretty well during its last fiscal year: Sales were up 39% and profits were up 23% for the 12 months ended March 31.
But, partly because of an acquisition, the company’s fourth-quarter profits were off from the preceding year’s. Earnings per share of $1.48 did not measure up to analysts’ expectations, which were in the $1.50-$1.55 range. And sales remained flat in the quarter, management says. It predicts a stagnant or falling first quarter.
As a result, Micom on Friday announced the layoff of 80 workers and an unspecified number of part-timers from its 2,000-member work force. About 50 of the layoffs will occur at two facilities in the Los Angeles area: the corporate headquarters in Simi Valley, which has 800 employees, and a production plant in Northridge with another 400. Micom, the largest employer in Simi Valley, did not say how many layoffs would occur at each facility.
“Although we just completed another record year in fiscal 1985, with sales up by 38%, the year was not to our expectations,” company president William Norred said in announcing the layoffs. “In light of continued softness in the data communications market, which is not unique to Micom, we believe we must adjust our available resources to optimize both future profits and growth.”
Company officials also said Micom had embarked on a cost-cutting drive, and that, despite the layoffs, it would continue to expand its direct sales force, albeit not as rapidly as planned.
Micom’s acquisition was Interlan Inc., a Boston-area maker of computer communication systems of a different variety than Micom’s. Interlan had sales of $18 million before it was acquired.
“The addition of Interlan caused earnings to be diluted in the fourth quarter,” said Jay Samstag, who follows Micom for Duff & Phelps, a Chicago brokerage. Nevertheless, he said, the purchase was probably a good one for Micom because it expanded the company’s product line. “Strategically it makes sense,” he said.
He said Micom remains a strong company, and that its lower-than-anticipated earnings make it no different from most others in the computer industry.
“For many of the companies that we cover, surprises have been mostly negative,” he said.
The layoffs are “tiny, insignificant,” said Thomas Bliska, who follows the company for Robertson, Colman & Stephens, a San Francisco brokerage. He said the market for low-speed modems and data concentrators, two of Micom’s main products, has been particularly flat.
“We’re seeing slowness throughout the data communications markets,” he said.
Micom was founded in 1973 selling custom data products and went into the off-the-shelf business four years later. It claims to be the market leader in data concentration products, permitting many terminals to be hooked up to a single leased line for communication with a mainframe, the central processing unit of a computer.
It also publishes the Black Box Catalogue, which it calls the leading catalogue of data communication products for business, and this month plans to publish a similar catalogue for users of personal computers. The company said its catalogue operations, in Pittsburgh, Pa., would not be affected by the layoffs.
