Slimdown at Dataproducts Is Applauded : Analysts Call Layoff Decision Timely, See Continued Profits
Dataproducts Corp., which plans to lay off 400 workers in the Los Angeles area by the end of next month, faces increasing competitive pressure but should continue to operate profitably as a leaner company, analysts said Monday.
Analysts lauded the decision announced last week by the Woodland Hills-based manufacturer of computer printers to cut costs by reducing its Southland work force from 2,000 to 1,600.
“They’ve decided to bite the bullet, and they’ve done it sooner than most people in the industry,” said Thomas Rooney, an analyst with Donaldson, Lufkin & Jenrette in New York.
Analysts said Dataproducts’ strong financial position and management will help it ride out the current slowdown in the computer industry. The also said that despite the recent resignation of Charles Dickinson, Dataproducts’ president and chief executive, and Russell Quinn, the senior vice president for finance, capable middle management remains intact.
Key Challenge
Rooney said the key challenge for Dataproducts is to reduce its costs to a point where it can turn a profit on as little as $90 million in revenue each quarter. During its last quarter, the fourth quarter ended March 30, Dataproducts posted a profit of $2.56 million on revenue of $113.8 million. Profits for the quarter were down 75% from the same quarter last year.
The analysts said Dataproducts and other printer manufacturers have to be prepared for a continuation of the slump in the computer industry that is crimping their sales. They said the slowdown has taken a particularly heavy toll on sales of Dataproducts most expensive printers, which commonly are used with mainframe computers.
The high-end printers, which have been Dataproducts’ most profitable products, also face stiff competition from more advanced equipment now coming onto the market. Dataproducts has made what are known as line printers, which use typewriter-style keys to tap out printed material.
Market Loss Seen
Analysts said they expect the line printers to lose sales to new, so-called laser printers that are currently being introduced at competitive prices. These printers use laser beams, rather than typewriter keys, to form images that eventually are translated to ink on a page, working much the way that photocopying machines do.
Dataproducts sells its own laser printer, but analysts said the company lacks the competitive advantage with that product that it had with its line printers.
“It’s still a good company, a big company, but it’s got its work cut out,” said George D. Elling, an analyst with Oppenheimer & Co. in New York.
