MAI to Lay Off 400 as a Result of Hefty Losses : Computers: Two-thirds of the job cuts will affect employees in Tustin, company president says. Transition to reselling other companies’ machines is blamed.
MAI Systems Corp. said Wednesday that it will lay off 400 employees after reporting a $64.5-million loss last year, which the Tustin firm blamed on its rapid transition from manufacturing its own computers to instead selling machines made by other companies.
MAI reported a loss of $68.8 million for the fourth quarter alone, including a one-time charge of $59.7 million related to its decision to stop manufacturing its own minicomputers.
Fred D. Anderson Jr., president and chief operating officer, said about two-thirds of the layoffs will affect employees in Tustin, with the job cuts concentrated among manufacturing, engineering and field service workers.
As part of its revised strategy, MAI announced a $250-million, three-year agreement with Hewlett-Packard Co. under which MAI will resell equipment made by the Palo Alto computer manufacturer.
The $64.5-million loss for MAI’s 1990 fiscal year ended Sept. 30 compares to a $39.9-million loss in 1989. The 1989 loss included a $40.2-million one-time charge related to costs of a failed takeover bid and a corporate restructuring. Revenue fell 2% to $389.5 million for the year, down from $396.9 million a year earlier.
The lower sales reflected the continued downturn in the minicomputer market, the category of computers between personal computers and the largest mainframes, Anderson said. The minicomputer industry has been pummeled as the cost of mainframes has dropped and personal computers have become as powerful as some minicomputers yet far cheaper, Anderson said.
“We’ve accelerated our transition,” Anderson said. “There’s no question that the computer industry is in turmoil and the mid-range computer market is in a slowdown.”
The fourth-quarter loss of $68.8 million contrasted with a loss of $1.6 million a year earlier. Revenue for the quarter was $105.4 million, up 7% from $98.5 million.
MAI’s stock closed Wednesday at 62 1/2 cents a share, off 25 cents in over-the-counter trading.
The layoffs affect nearly 12% of MAI’s work force, leaving the firm with about 3,000 employees worldwide. MAI said it is closing some of its regional sales and service offices throughout the country.
Troubles at MAI surfaced in November with the resignation of William Weksel as chairman and chief executive. The company hinted at a big quarterly loss earlier this month in a federal filing in which it sought an extension of the required filing date for its latest financial statement.
The company also said Wednesday that it has restructured its credit agreements with lenders to avoid default on its loans. Under the new agreements, MAI will make reduced debt payments of $6 million in March and September, down from $15 million under earlier payment schedules.
In addition, the company will receive a loan of $10 million and a credit line of $5 million from BGLS Inc., a parent company controlled by New York financier Bennett S. LeBow, who took over as chairman and chief executive of MAI after Weksel resigned. LeBow’s firm owns 69.9% of MAI’s stock.
MAI has been struggling ever since LeBow launched an unsuccessful hostile takeover bid for Prime Computer Inc., a Natick, Mass., minicomputer maker, in 1988. The 10-month battle was costly to the company and prompted its decision to cease manufacture of its own line of computers. For the past year, the company’s products were made by outside vendors and assembled by MAI. The company plans to further reduce its assembly operations.
Anderson said the restructuring would leave the company in a stronger financial position and enable it to continue its current business plan.
MAI will continue to market its proprietary computer systems, which run on both the company’s proprietary business software as well as software based on the popular Unix operating system, Anderson said, but the dependence on Hewlett-Packard sales will grow.
Under the agreement with HP, MAI will buy computers from the Palo Alto firm and develop software for special industries such as manufacturing, distribution, health care and retail. MAI will then sell the HP equipment and the software as a package.
“The agreement with HP is a critically important step in our transition to a worldwide” value-added reseller, Anderson said.
