Emulex Will Lay Off 90 Costa Mesa Employees : Computers: The decision to halt production of storage products for Digital Equipment systems will cost 70 more jobs worldwide.
Emulex Corp. said Monday that it will discontinue its line of storage products for Digital Equipment Corp. computer systems and lay off 90 people at its Costa Mesa facility.
The move will also mean laying off another 70 employees worldwide, said Robert N. Stephens, Emulex’s president and chief executive.
Data storage management products made up about 30% of Emulex’s sales for the first nine months of the company’s current fiscal year. The rest of its revenue was from computer networking products.
The company is talking with several parties about a potential sale of the product line, Stephens said, adding that he expects an agreement by the end of the week. In the meantime, he said, Emulex will continue to honor warranty and repair obligations.
Stephens said he gathered all Costa Mesa employees together Monday morning to tell them the news. “We were losing money on this business,” he said later in an interview. “You might continue doing that if you’re in a growing market and you expect to see a change. But we didn’t expect it to change.”
The layoffs will take effect this month, Stephens said, most of them this week. After the cuts, the company will employ 540 people worldwide, about 300 of them at its Costa Mesa headquarters.
The line to be discontinued includes 300 board-level and subsystem products that interface directly with the Digital Equipment VAX cluster computer systems. It was Emulex’s plan, Stephens said, to make compatible storage products that were better and cheaper than those Digital was making. But Digital has closed the quality gap recently, he said, and has been pricing its storage products more aggressively.
In August, Digital sued Emulex and two other companies over their manufacture of the compatible storage products. Emulex countersued, saying that Digital was trying to monopolize the market. The companies reached an agreement in December that Emulex and the others would phase out some Digital-compatible products by the end of 1992.
Now, Stephens said, Emulex will focus on its other two businesses, which are doing well: high-performance network and computer interface products.
As a result of the decision to discontinue the product line, the company will take a pretax charge of $15 million to $20 million in its fourth quarter, which ends June 28. The charge will cover the cost of the layoffs and of reducing facilities and manufacturing capacity.
Emulex laid off 150 people at the end of 1991, saying that it was losing sales because of the recession.
The company lost $3.85 million for the first nine months of its current fiscal year. That compared with a profit of $5.5 million for the same period a year earlier. Nine-month sales were $102.9 million, down from $112.8 million.
In Monday’s over-the-counter trading, the company’s stock fell 12.5 cents a share to close at $6.75.
