Tandon to Cut 370 Jobs in Southern California
Beset by stiff competition, slumping sales and red ink, Tandon Corp. announced Thursday that it will eliminate 370 jobs in Chatsworth and Simi Valley.
The Chatsworth-based maker of computer disk drives and computer terminals said it will close its printed-circuit plant in Simi Valley over the next six to eight weeks, laying off 250 workers.
An additional 120 jobs will be eliminated today when the company consolidates some operations at its floppy-disk-drive division in Chatsworth and its Winchester hard-disk-drive unit in Simi Valley, the company said.
Tandon, which has posted three quarterly losses in a row, said in a statement that its “overall aim is to attain better utilization of its manufacturing resources at a time when the microcomputer industry continues to be under great competitive pressures.”
The statement said that, while no further layoffs are planned, the work force “may be adjusted on an ongoing basis” in the future, “depending on industry conditions.”
A company spokesman said an in-house placement program is under way to find new jobs for those laid off, almost all of whom are production workers. Leads on comparable jobs for about 200 of the employees have been found, the spokesman said.
Wall Street analysts reacted positively to the layoff news, which involves cutting about a quarter of the company’s domestic work force. Tandon’s stock, which trades over the counter, closed Thursday at $4.625, up 37.5 cents.
“It’s a step in the right direction,” said Thomas Rooney, an analyst with Donaldson, Lufkin & Jenrette in New York. “My guess is you’ll see more. You’ve got a very heavy cost structure there.”
Tandon laid off about 850 workers in March, 1984. But just days before Thursday’s announcement of further layoffs, a top Tandon executive declined to forecast whether any more jobs would be lost locally.
The new round of cuts will reduce Tandon’s U.S. employment from 1,480 to about 1,100, down from a peak of 3,000 in 1983. The company has 2,100 employees in Singapore, a number that has also been declining, it says, and also has some contract operations in India.
Tandon is a leader in the $3-billion-a-year disk-drive industry, but it has not had an easy time lately. (Drives are devices that spin floppy or hard disks so that data can be stored and retrieved.) Rocked by a slowdown in the personal computer industry and by competition from Japan, the company was also hurt by IBM’s decision to cancel some Tandon orders in favor of purchases from Tandon competitors. IBM had been Tandon’s biggest customer.
“This company has to try to lower their break-even point,” said David Moy, an analyst with Morgan Stanley in New York.
Tandon announced last week that it lost money for the third straight quarter, and analysts say it is likely to post a loss again for the current period. Tandon lost $19.9 million, or 39 cents a share, on sales of $61.1 million for the three months ended March 29. That compares to profits of $10.4 million, or 21 cents a share, on sales of $105.7 million for the same period last year.
For the fiscal year ended Sept. 28, 1984, it had profits of $29.4 million on sales of $400.8 million.
Rooney said he expects Tandon to move more in the direction of assembling personal computers overseas for other companies, such as Tandy.
“It’ll be a very cyclical business,” he said. “But it’s a way the company can survive.”
