Tandon Will Cut 370 Jobs in Simi Valley, Chatsworth
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 in the process.
Another 120 jobs will be eliminated today when the company consolidates some operations at its flexible drive division in Chatsworth and its Winchester disk drive unit in Simi Valley, the company said.
Tandon, which has posted three losing quarters 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.”
Staff ‘May Be Adjusted’
The statement said that, although no further layoffs are planned now, its 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 the layoff victims, almost all of whom are production workers. Leads on comparable jobs for about 200 of the employees have been located so far, the spokesman said.
Wall Street analysts reacted positively to the layoff news, which involves the elimination of about one fourth of the company’s domestic work force. Tandon’s stock, which trades over the counter, closed Thursday at 4 5/8, up 3/8.
“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 very heavy cost structure there.”
Declines to Forecast
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, the firm says. It also has some contract operations in India.
Tandon is a leader in the $3 billion-a-year industry of making disk drives, which record data on disks in computers. But it has not had an easy time lately.
Buffetted by a slowdown in the personal computer industry, and by low-cost disk drives imported 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 largest customer.
“This company has to try to lower their break-even point,” said David Moy, an analyst with Morgan Stanley in New York.
3rd Straight Quarterly Loss
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 quarter. Tandon lost $19.9 million on sales of $61.1 million for the three months ended March 29. That compares to profits of $10.4 million on sales of $105.7 million for the same period last year.
For the fiscal year ended Sept. 28, the company had profits of $29.4 million on sales of $400.8 million.
Rooney said he expects Tandon to move more toward assembly of personal computers for other companies, such as Tandy, overseas.
“It’ll be a very cyclical business,” he said. “But it’s a way the company can survive.”
