Shake--Ups : 7 Months Later, Emulex Is Enjoying the Fruits of Its Decision to ‘Trim From the Top of the Tree’

Emulex, which seven months ago underwent a management shake-up after three years of lackluster financial results, said Friday that its earnings soared 162% in fiscal 1988 on a 20% increase in revenue.

The Costa Mesa computer products manufacturer reported earnings of $9.1 million for the year ended July 3, contrasted with earnings of $3.5 million a year earlier.

Sales climbed to $125.1 million, from $103.8 million. From 1985 to 1987, Emulex’s sales remained stagnant at between $103 million and $104 million.

“Emulex today is a leaner, more efficient and better-focused organization than a year ago, with higher gross profit margins and reduced operating expense levels,” Fred B. Cox, chairman, president and chief executive, said in a statement.

Cox said the company has slashed expenses by eliminating management jobs, improving manufacturing efficiencies and better managing product inventories.

In January, Emulex eliminated the jobs of former president Stephen W. Frankel and three vice presidents. At the same time, the company consolidated its three product groups--data storage, data communications, and semiconductor and circuit boards--into a single unit. While the company was reducing its management staff, it was adding workers to its production payroll, Cox noted. Current employment is 860 people, up from 836 a year ago.

“We definitely trimmed off the top of the tree pretty good,” Cox said in an interview, referring to the management cuts. “It was a tough year for the chiefs and a good year for the Indians.”

Cox said last year’s revenue gains were helped by “renewed growth” in sales of storage products and peripherals for Digital Equipment computers. The majority of the company’s sales are tied to the Digital Equipment market.

“We’re looking for a good year coming up,” Cox said, noting that the firm’s backlog of orders is double that of a year ago.

For the fourth quarter, Emulex said, earnings rose more than tenfold to $2.8 million, up from $246,000 a year earlier. Sales grew 25% to $34.2 million, up from $27.4 million.