Control Data to Eliminate Costly Supercomputer Line
Money-losing Control Data Corp. today said it will eliminate its supercomputer business and make other cuts that will cost 3,100 jobs.
The computer maker decided it “can’t afford to continue product development across such a wide section of products,” spokesman Frank Ryan said.
The move will result in restructuring charges of $490 million, including $350 million from liquidation of ETA Systems, the subsidiary started in 1983 to compete with Twin Cities rival Cray Research Inc. and other supercomputer makers.
Asked if Control Data attempted to sell ETA Systems, Ryan said: “We looked at all options. The shutdown was the most practical.”
ETA has never made money for Control Data. In 1988 it had operating losses of about $100 million. It has sold 34 machines ranging in price from $1 million to $20 million.
ETA will account for 800 of the 3,100 layoffs, with the rest in corporate ranks and other sectors, Ryan said.
Ryan said the company will continue to service its supercomputer customers. Besides focusing on its Cyber mainframe computers, Control Data will also build its data storage business and businesses such as lottery equipment for states.
Control Data stock dropped 62 1/2 cents to $21.75 in early morning trading on the New York Stock Exchange.
Chairman Robert Price said the restructuring should result in a profitable second half of 1989 and set the stage for sustained growth. The company has had five consecutive years of financial difficulty.
Control Data has had two consecutive quarterly losses, including a $12.8-million loss in the fourth quarter of 1988. For the year, the company had a profit of $1.7 million after earning $19.3 million in 1987 and losing a total of $832 million in 1986 and 1985.