WMD Cuts Back to Stem Red Ink : Computer Wholesaler Lays Off 26, Closes 2 Warehouses
WMD Micro Distributors Inc. of Irvine, stung by the sagging fortunes of the personal computer industry, Wednesday confirmed that it has laid off about one-third of its work force and closed two of its distribution centers in an effort to stem its red ink.
The microcomputer wholesaler, which lost $2.6 million in its 1985 fiscal year, said it shut its Dallas and Chicago warehouses and will be distributing products solely out of its New Jersey and Irvine centers. The layoffs, vice president Donald Ackerman said, reduced the company’s employees from 74 to 48.
In addition, Ackerman said management employees’ salaries were cut at least 25% and benefits such as car allowances were eliminated.
Although Ackerman said the moves should make 3-year-old WMD profitable in the current fiscal year, analysts are less confident that wholesalers in general will find 1986 any easier than 1985.
According to Norm DeWitt of Dataquest in San Jose, personal computer manufacturers are increasingly bypassing the wholesaler and selling directly to computer retailers. DeWitt said Dataquest estimates that 97% of the personal computers sold in the United States are made by IBM, Apple, Tandy Corp., American Telephone & Telegraph and Compaq--none of whom use wholesalers to distribute their products.
Furthermore, DeWitt said Dataquest estimates that the number of personal computer manufacturers, which now stands at about 350, will shrink to less than 100 within the next two years, leaving distributors with crates of obsolete products and a vastly shrunken source of business.
“The trend is away from the two-tiered (wholesaler and retailer) distribution system,” DeWitt said. “Distributors are going to get squeezed.”
WMD is by no means alone in its problems. Last year Micro D of Santa Ana, once a high flyer among the nation’s distributors, sought to strengthen its money-losing operations by merging with a Massachusetts wholesaler. However, the merger fell through and within weeks a new president and chief executive was named to take over the company from founder Lorraine Mecca.
In December, Mecca sold her controlling interest in the company to Ingram Distribution Group Inc. of Nashville.
WMD’s Ackerman said his company’s problems in the fiscal year ended Oct. 1 stemmed from the general downturn in computer sales throughout the industry, not a move away from wholesale distribution. He said WMD wrote off inventory because of slow sales and wrote off debts it could not collect from strapped and failing retail stores.
“We had an enormous amount of bad debt,” Ackerman said. “I think 28 of our customers filed for Chapter 11 (bankruptcy reorganization.)”
Ackerman said WMD is stepping up its telephone and mail-order marketing programs in an effort to spur sales without having to add sales staff.
