Founder’s Son Resigns From No. 2 Job at Wang : Move Follows $375-Million Quarterly Loss and Prompts Talk That Firm Is Ripe to Be Taken Over
Frederick A. Wang has resigned as the No. 2 executive at Wang Laboratories Inc. after presiding over the steady decline of the computer company that his father founded.
The news fueled a 20% rise in Wang Laboratories’ shares Tuesday on the American Stock Exchange and heated up already intense speculation on Wall Street that the company is a ripe takeover target. It also came just eight days after the company, which made its reputation a decade ago with advanced word-processing machines, announced a $375-million quarterly loss and said it was trying to renegotiate loan agreements with its banks.
The resignation by Wang, son of company founder and Chairman An Wang, was accepted at a special board meeting Monday night at the company’s headquarters in Lowell, Mass. The younger Wang, who held the titles of president and chief operating officer, was replaced on an interim basis by Harry H. S. Chou, currently a vice chairman and board member. A search committee for a permanent replacement from outside the company was formed.
Disastrous Decision
Although analysts generally applauded the news, they said the younger Wang’s departure was long overdue and that it might be too late to stem the company’s rapid descent. For its part, the company said it has retained investment advisers Salomon Bros. and Lodestar Group to help it evaluate its “financial options,” a move analysts said could signal that the company is actively seeking a partner or is willing to shed assets.
Analysts have blamed the company’s persistent problems on the failure of Frederick Wang, who has been president since 1986, and his father to bring in outside management expertise and to keep pace with the fast-moving march of office-machine technology.
At the beginning of the decade, when office workers moved from word processing machines--essentially fancy electronic typewriters--to sophisticated multi-use personal computers, Wang Laboratories stuck with its existing product line instead of adopting the newer technology. Analysts say it was a disastrous decision.
“The company now is in a technological cul-de-sac,” said Charles Foundyller, president of Daratech, a Cambridge high-tech market research firm. “The company needs to develop mainstream technology that has a future. It already has mainstream technology, but it’s for the past.”
Other analysts said the company may have trouble finding a strong, independent manager to lead it out of its troubles as long as An Wang, 69, continues to exert control. However, the extent of An Wang’s day-to-day role at the company is unclear, partly for health reasons. He underwent surgery three weeks ago for cancer of the esophagus and returned to the office on a part-time basis only two days ago.
Frederick Wang, a 38-year-old computer mathematician who has worked at Wang Laboratories for 17 years, said his decision to step aside was made in the “best interest” of the company and was designed to speed a resolution of its problems. He will remain on the board and undertake special projects, the company said.
‘Lot of Work to Do’
“Like a general who lost a battle, he accepted responsibility,” said Michael Geran, a computer analyst at Nikko Securities Co. “There is a general perception that (he) was in over his head.”
Paul Henning, a Wang Laboratories spokesman, said that the company “wanted to give a consistent message that we are doing everything and anything possible, even taking steps that are painful.”
“We have a lot of work to do,” he added.
Although analysts regard Wang as a takeover candidate, they rule out a hostile bid. The Wang family controls about 80% of the company’s voting shares and has so far resisted suggestions of giving up majority ownership. However, earlier this month Frederick Wang said the family would consider selling a minority interest in the company or some of its assets to raise funds, and analysts say an even more dramatic change could be in the offing.
Founded in 1951 in a Boston storefront, Wang Laboratories prospered in the early 1970s by making calculators. It then turned to small business computers and word-processing machines in the latter part of the decade. By the late 1970s and early 1980s, the company was riding high, and, at its peak in 1984, Wang’s stock traded for $42.50 per share.
In trading Wednesday, the company’s stock closed at $6.875, up $1.125.
Over the past several months, Wang has laid off at least 2,500 workers, leaving it with about 28,000 employees worldwide. At its peak in 1986, it employed about 32,300. In the fiscal year ended June 30, the company lost $424.3 million on revenue of $3.03 billion. In the previous year, the firm had a profit of $92.7 million on revenue of $3.07 billion.
WANG AT A GLANCE Wang Laboratories manufactures computer and communication systems, primarily for the office automation market. The company provides products and services for data and text processing as well as image and voice processing.
Year ended June 30 1989 1988 1987* Sales (billions) $3.03 $3.07 $2.84 Net income (loss) (millions) $(424.3) $92.7 $(71.0)
* Reflects accounting change Assets: $1.178 billion (1988) Employees: 28,000 Shares outstanding: 214.8 million 12-mo. price range: $5.375-$6.875 Tues. close (NYSE): $6.875
