Customers’ Losses Force Emulex to Lay Off 27

Caught with three major customers whose product sales slowed significantly last year, computer networking specialist Emulex Corp. said Thursday that it has laid off 27 of its 300 workers as part of a reorganization.

Most of the layoffs occurred at Emulex facilities in the Pacific Northwest, where the company cut back its Pacific Rim sales force and moved two software units from Washington to company headquarters in Costa Mesa. Only nine workers in Orange County were laid off, a spokesman said.

The company said it will take a $1.3-million write-off in its fiscal 1997 first quarter to account for the reorganization and layoffs.

Emulex also reported Thursday that it lost $9.3 million, or $1.56 a share, for the fiscal year ended June 30. The company posted net income of $3.9 million, or 64 cents per share, the previous year. Revenue dropped 32%, to $51.3 million from $75.5 million.

Emulex officials said the sharp drop in revenue occurred because several major clients who use the Costa Mesa company’s computer and printer networking devices in their finished products saw sales plummet.

“They either had reached market saturation or had products that the market just didn’t accept,” said Chuck McBride, chief financial officer at Emulex.

Many of the company’s products are sold as components used in name-brand computers and printers made and sold by so-called OEMs, or original equipment manufacturers, such as IBM.

“We sold $1 million worth of product to one printer maker in 1996 that we’d sold $10 million worth of product to in 1995,” McBride said. “Overall, 90% of our revenue decline was due to a reduction in OEM sales to just three companies.”

Emulex has developed new products, including a line of devices enabling computers to connect to fiber-optic communications networks, and has found new customers, like Data General Corp., to use those products, he said.

Such sales helped boost the company’s fourth-quarter revenue 22% over third-quarter revenue.

But Emulex is not yet receiving sufficient orders to offset the lost sales. The deal to supply Data General with the Emulex fiber-optic connector, for example, was just announced Thursday. Emulex would not place a dollar value on the agreement.

In its fiscal 1996 fourth quarter, Emulex lost $554,000, or 9 cents per share, compared with a net profit of $1.1 million, or 17 cents per share, a year earlier. Despite the improvement from the third quarter, revenue of $15.5 million still was off 21% from $19.6 million in the prior year’s final period.

Emulex announced its fiscal 1996 results after the markets closed Thursday so its stock performance wasn’t affected. The company’s shares closed in light Nasdaq trading at $15, up 62.5 cents for the day.

The company said Thursday that it began consolidating operations this month.

Emulex also said that it had no outstanding bank debt as of June 30 and has received an additional $2 million in credit from a primary lender, boosting the credit line from Silicon Valley Bank to $7 million.