Tandon Lays Off 270, Shuts Plant, Predicts Big Loss : Workers in Thousand Oaks, Simi Valley, San Jose Affected
Tandon Corp. said Friday that it has furloughed 270 workers in Thousand Oaks and Simi Valley for up to six weeks and permanently eliminated 225 jobs by closing a disk-drive manufacturing plant in San Jose.
The computer equipment company, headquartered in Chatsworth, also surprised analysts by disclosing that it will report a substantial loss for its third quarter, which ended June 29. Dan H. Wilkie, Tandon’s president and chief operating officer, said in an interview that the company expects to incur losses at least through December and possibly until March.
Wilkie said Tandon has suffered from design and production problems at the San Jose plant that were costing about $2 million a month. Tandon also was hampered by delays in setting up a retail network for selling personal computers, Wilkie added. The company is shifting from primarily making disk drives, which record and retrieve computer data, to manufacturing large numbers of IBM-compatible personal computers.
Tandon lost $135.4 million in the year ended Sept. 27, 1985, but had turned profitable again. The company earned $2.8 million in the six months ended March 28, despite sales that declined 30% to $105.9 million.
Analysts said the local furloughs signal that the company’s venture into computer manufacturing has been hurt by IBM’s recent price cuts and the proliferation of new, so-called IBM clones introduced by such major companies as ComputerLand, Businessland and Tandy.
“The personal computer market seems to be fairly confused, and confusion usually results in slower decisions on the part of dealers,” said Jean W. Orr, an analyst for the Drexel Burnham Lambert investment banking firm in New York.
Wilkie said he had expected IBM’s price cuts to come this fall instead of early last month, when Tandon was unveiling its brand-name computers in New York. But Wilkie, a former IBM executive who was a key figure in launching the computer giant’s personal computer business, said Tandon will not retreat from its new strategy.
He said the furloughs were necessary because Tandon has enough computers to meet current demand, and he added that orders usually are slow in the summer. The division affected, called Voyager, consists of facilities in Thousand Oaks and Simi Valley that now employ about 400 workers.
Wilkie said the company will take a writedown as a result of closing the San Jose plant and will show an operating loss when quarterly results are announced within two weeks. Analysts said they had expected the company either to break even or to report a small loss for the quarter.
In closing the San Jose plant, Tandon is consolidating all of its disk-drive manufacturing in Singapore and India, where parts and labor are cheaper. The San Jose plant made 30-megabyte and 40-megabyte hard disk drives, which are relatively fast, high-capacity drives.
