Tustin-Based MAI Will Lay Off 400 in Wake of ‘Significant Loss’
A day after giving up its protracted fight for Prime Computer, MAI Basic Four said Friday that it will report a “significant loss” for its latest quarter and will slash 400 jobs worldwide as part of a major reorganization.
The Tustin-based computer company blamed the loss primarily on $25 million in expenses related to its ill-fated hostile takeover attempt for Prime, a Natick, Mass., computer company. MAI officials said that a downturn in the market for mid-range computers also contributed to the loss, the amount of which the firm did not specify.
MAI said the reorganization is unrelated to its unsuccessful bid for Prime and will result in a one-time charge against earnings of between $13 million and $15 million for the quarter ended June 30.
MAI had been chasing Prime--a computer maker more than three times its size--for nearly nine months. MAI dropped its hostile tender offer for Prime late last month, and on Thursday abandoned its latest effort to buy Prime’s minicomputer business for $575 million.
New York investor Bennett S. LeBow, MAI’s controlling shareholder, is still trying to purchase Prime’s minicomputer unit through an MAI affiliate. LeBow hopes to oust Prime’s directors by proposing an alternate slate of directors at Prime’s annual meeting on Aug. 24.
Prime has agreed to be acquired for $1.2 billion in a friendly deal by J.H. Whitney & Co., a New York venture capital firm.
MAI officials said the key element of its restructuring, which is expected to cut annual expenses between $25 million and $30 million, is a consolidation of its computer sales and repair divisions and the closure of more than half of its regional offices in the United States and overseas.
“I don’t think these cuts are the result of the Prime attempt,” MAI Chairman William Weksel said in a interview. “Clearly, had we been successful in acquiring Prime, there would have been a streamlining from the merging of the two minicomputer businesses. That would have been very similar to what we’re doing now.”
MAI laid off 100 employees on Aug. 4, reducing its worldwide work force to 4,100, said Fred D. Anderson, senior vice president and chief financial officer. That includes about 55 workers at MAI’s Tustin headquarters, including six vice presidents, reducing employment there to 840 people, Anderson said.
He said about 300 more jobs will be eliminated--most by Oct. 1--in the United States and overseas. He said he anticipates no more major reductions in Tustin.
Subtracting the expenses of the takeover and restructuring program, MAI said it expects to report an operating loss of between $5 million and $6 million for the June quarter. Anderson also said the firm expects to lose money in the current quarter, which ends in September, and return to profitability in the first quarter of fiscal 1990.
Analysts said MAI’s cost-cutting program was overdue, despite the Prime takeover bid.
“I think there was some cost-cutting that needed to be done for a long time,” said Robert M. Johnson, an analyst with the Houston investment firm Rotan Mosle Inc.
Another industry analyst suggested that the restructuring might be related to the unexpected resignation last June of William B. Patton, MAI’s president and chief executive. “Patton had let expenses build up heavily, especially in the sales area,” the analyst said.
At the time of his departure, MAI said Patton was leaving to pursue business and personal interests. However, several former MAI executives have said recently that Patton was asked by LeBow to leave. Patton could not be reached for comment.
Asked about Patton’s resignation Friday, MAI’s Anderson said only that “it was time for a change of leadership.”
