Western Digital to Cut Irvine Workers by 290

As part of a plan to reduce its total work force by 12%, Western Digital Corp. said Monday that it will lay off 200 permanent employees and fire 90 contract workers in Irvine by the end of March.

The cuts will be made at Western Digital’s circuit board manufacturing plant but will not affect workers at the company’s corporate headquarters or at its chip-manufacturing facilities, a company spokesman said. All three are in Irvine.

Western Digital also said that since August, it has eliminated 400 jobs in Singapore through attrition and laid off 40 employees in Northern California, 140 employees in Puerto Rico and 80 employees in Ireland.

Before the layoffs, Western Digital had a worldwide work force of about 7,500. The company employs about 2,700 in Orange County.

Greater Operating Efficiency

Western Digital Chairman and Chief Executive Roger W. Johnson said the cutbacks reflect a company bid to achieve greater operating efficiency and to respond to a slowdown in the growth of demand for its products. Western Digital is one of the nation’s largest suppliers of electronic components to the personal computer market.

The company also said the reductions reflect increased use of new, more efficient surface-mount technology that enables automation of a significant portion of the manufacturing process for circuit boards.

“Western Digital’s rate of growth has slowed from the tremendous pace the company experienced in recent years,” Johnson said.

He expects the company’s revenue growth to drop from 65% in fiscal 1988 to 15% to 20% in fiscal 1989, which ends June 30.

Western Digital’s revenue growth has consistently outpaced that of the personal computer industry, Johnson said, largely because the company has diversified the kinds of computer components it manufactures.

Industry analysts have applauded the diversification strategy under which firms with other manufacturing specialities were acquired.

60% Average Sales Growth

Western Digital’s sales have grown by an average of about 60% annually in the last 4 years, from $186 million in fiscal 1985 to $768 million in fiscal 1988. During the same time, employment more than tripled, from 2,000 workers to 7,500.

But the company’s earnings gains have not been as dramatic. While revenue jumped to $768 million in fiscal 1988 from $462.4 million the previous year, earnings increased only slightly, to $42.9 million from $42.7 million.

Johnson acknowledged that Western Digital’s earnings growth has been stunted by excess manpower and operating inefficiencies caused by the company’s acquisition activity.

The cuts in work force, he said, are part of an effort to consolidate recent acquisitions and increase the company’s profits.

Western Digital’s announcement was greeted favorably by industry analysts. Raj Rajaratnam, a securities analyst with Needham & Co. in New York, said he considers the reduction “a major positive. . . . It will increase the profitability of the company.”

‘Long-Overdue Step’

James Weil, a microcomputer analyst for Sound View Financial Group, a brokerage in Stamford, Conn., said the cuts are “a long-overdue step to consolidate manpower and operations following the acquisitions they have made over the past 18 months.”

But he said he is also concerned that the current softening in the personal computer industry may have a more harmful effect on the company’s profitability.

Weil said the continued expansion of personal computer sales will depend in large part on the ability of the industry to introduce new software applications for business and home use.

So far those introductions have been slow in coming, be said, and Western Digital is seeing increasing price competition within the industry.

Western Digital stock closed at $14.25 a share Monday, up 25 cents.