AST Moves High-Tech Jobs to Texas, Ireland : Costs, Price War Cited in Loss of 650 Jobs in O.C.

By DEAN TAKAHASHI and DEBORA VRANA

Nov. 10, 1993 12 AM PT

TIMES STAFF WRITERS

IRVINE —

In another sign of California’s difficulties in retaining manufacturing jobs, AST Research Inc. said Tuesday that it will lay off 650 workers in Orange County and create some jobs in Texas and Ireland.

AST, the nation’s fourth-largest computer maker, said it must cut costs in light of the price wars sweeping through the personal computer industry. In addition to trimming staff, the company said its recent acquisition of the computer manufacturing assets of Tandy Corp. made it more cost-effective to also move some jobs out of California.

“This is one of the toughest decisions I have had to make at AST,” said Safi U. Qureshey, chairman and chief executive. “We are a California company that grew from a garage.”

The cutback in Orange County includes a reduction of 450 of the company’s 1,000 assembly line positions in Fountain Valley and the elimination of 200 of 800 jobs at AST’s Irvine headquarters.

Overall, AST said it is laying off 1,050, or 16%, of its 6,700 employees worldwide. In addition to Orange County, the company is closing a plant in Scotland and another in Ft. Worth.

About 500 jobs will be added at two manufacturing plants in Ft. Worth, where AST acquired three Tandy computer and computer parts manufacturing plants. Another 350 jobs will be created in Ireland. The net effect will be the loss of 200 jobs companywide.

Qureshey said state officials asked if there was anything that would persuade AST to keep its jobs here, but he said he told them there was nothing that could be done fast enough to prevent the move.

Qureshey said direct costs are 10% to 20% lower in Texas compared to Orange County, not including lower taxes. He cited factors such as lower costs for wages, benefits, workers’ compensation costs and taxes in Texas, which has no personal income tax.

Employees who will lose their jobs will be notified over the next 90 days, which the company said allows enough notice for people to adjust their holiday spending. It leaves hundreds of computer assembly workers wondering about their future.

“I’m very worried because I don’t really know what’s going on,” said one AST supervisor in Fountain Valley, who did not give her name. “It just seems like things keep getting worse and worse in Orange County.”

AST is not the only computer maker to trim staff in recent years. Similar cuts have taken place at IBM, Apple and Compaq , as well as at smaller players such as rival Advanced Logic Research Inc. in Irvine. An industrywide price war, in which computer prices have fallen 40% a year for the past two years, had been relatively painless for Orange County.

AST was one of few that escaped major layoffs--until now. Qureshey has criticized other computer companies that laid off employees, and he has been a longtime proponent of keeping high-paying computer industry jobs in Southern California. AST was a rarity: a fast-growing company creating high-tech jobs in the wake of the aerospace cutbacks.

“This is not a company that hacks and slashes for the sake of hacking and slashing,” said Steve Eskenazi, analyst at Alex. Brown & Sons, an investment bank in Baltimore. “They’re pretty sensitive to employees and they’re running at a marathon pace, not a sprinter’s.”

The cutbacks at the 12-year-old company come within months of AST’s $105-million acquisition of Tandy’s computer manufacturing business. Its revenue is expected to surpass $2 billion in fiscal 1994.

Wall Street analysts anticipated a broad reorganization of AST after it agreed to buy the Tandy operations in July. Then, AST declined to hire 500 of Tandy’s 2,500 employees.

“This was expected by analysts because of the high costs of California relative to the low costs of making computers in Texas,” said Eugene Glazer, analyst at Dean Witter securities in New York. “They had to pay to merge the manufacturing. I still think there are a great deal of benefits they will get from acquiring Tandy that are yet to be realized.”

The company is expected to report a profit in the current second fiscal quarter, largely because it took a $125-million charge against earnings during the summer to account for the costs of merging the two companies.

In Nasdaq trading Tuesday, AST shares fell 50 cents to close at $21.50. The stock has risen from a low of $12.75 earlier this year.

AST at a glance

Headquarters: Irvine

Chairman: Safi U. Qureshey

Number of employees: 6,700

1993* financial data:

Sales: $1.4 billion

Net income: -$53.7 million

Loss per share: -$1.72

Tuesday’s closing price: $21.50, down 50 cents

*Fiscal year ending June 30, 1993

Sources: Standard & Poor’s Corp., Bloomberg Business News