Convergent to Restructure; Lays Off 500

Convergent Technologies, a San Jose company that manufactures computers sold by other, large computer companies, laid off 500 employees--more than one-quarter of its work force--on Wednesday and announced its reorganization into two divisions.

The moves are a response to the weak market for computers and especially the declining business from American Telephone & Telegraph, formerly its best customer, said Paul C. Ely Jr., Convergent president and chief executive.

In the new corporate structure, the company’s current primary business of serving as an original equipment manufacturer for companies such as Burroughs, NCR and AT&T; will form one unit.

The second half of the company, called Small Business Services, will consist of companies that Convergent has been acquiring in the past year. It will make and sell specialized computer systems, including software, to customers such as lumber retailers and small accountancy firms. Those companies are expected to contribute $125 million in annual revenue and become customers for the Convergent machines.

In the Convergent division, the employee cutbacks will help bring the company’s break-even point down to $60 million in annual revenue, Ely said.

AT&T; contributed $48 million to Convergent’s revenue in the final quarter of 1985, but that figure is expected to drop to between $10 million and $15 million during the current quarter.

Convergent, said Ely, will no longer rely on the “grand slam” for sales but will attempt to broaden its customer base by seeking contracts with small and medium-size computer companies. To that end, Convergent will increase its sales force to 100 from 35.

The cutbacks and the additional sales staff will leave Convergent with 1,465 employees.