DEC Memo Hints at Huge Job Cuts in Response to High-Tech Slump
An internal memo at Digital Equipment Corp. suggests that the nation’s second-largest computer maker could respond to the ongoing high-tech sales slump by cutting an estimated 7,500 non-manufacturing jobs from its work force over the next two years.
The Maynard, Mass.-based company, which has already frozen the salaries of its 125,800 employees and instituted a partial hiring freeze, downplayed the significance of the memo, which was leaked to the Boston Globe earlier this week, and said it has no current plans to lay off workers.
“This is one memo written by one member of one task force at the company,” a spokeswoman said. “It is not a company policy. It is not a company plan.” Further, she said, the company remains “as committed as ever” to its 32-year-old tradition of no layoffs.
Nevertheless, analysts said it is no secret that Digital has been stepping up its efforts to cut costs in the wake of slowing sales growth that has affected the entire high-tech industry over the last year.
In the fiscal year that ended June 30, the company reported sales growth of 11% to $12.7 billion, half the rate of the previous year. Profits for fiscal 1989 were about $1.1 billion, 18% below the previous year.
“Sales growth has slowed dramatically, and Digital is going to be more aggressive about controlling its head count,” said Peter Rogers, an analyst at Robertson Colman, a San Francisco brokerage. “They’ll continue to use indirect ways like hiring freezes for the time being, but if push comes to shove, they may have to abandon the no-layoff policy.”
News of the Digital memo comes less than a week after Unisys Corp., the nation’s third-largest computer maker, said it plans to reduce its worldwide work force by 8% by the end of 1990, a cut of about 6,000 jobs that will include some layoffs. It was the second large work-force reduction announced by Unisys this year.
A variety of other high-tech companies, ranging from supercomputer maker Cray Research to personal computer software publishers such as Ashton-Tate in Torrance, have reported declining sales over the last nine months and several companies, including Ashton-Tate, National Semiconductor and Advanced Micro Devices, have resorted to layoffs over the last year.
