Costa Mesa’s FileNet Corp. Plans Layoffs
FileNet Corp. said Tuesday it plans to lay off an undetermined number of its 1,650 employees and move a Boston-area subsidiary to Orange County to help offset an anticipated $9-million first-quarter loss.
Other expenses, including a $2.5-million to $3-million charge related to the subsidiary relocation, are expected to dampen second-quarter results as well.
Company officials said the anticipated first-quarter loss, amounting to 60 cents a share, stems from costs incurred in boosting FileNet’s sales and product development operations to handle several large contracts that never materialized.
FileNet plans to announce results for the first three months on April 23.
The company, which makes computer-based document storage systems, said quarterly sales this year fell almost 30% to $47 million from $66.7 million a year ago.
“New orders were unexpectedly weak” both in Europe and in North America, said Ted M. Smith, president and chief executive officer of the Costa Mesa company.
Industry analysts said FileNet, which acquired three small software companies last year, apparently has had difficulties integrating the operations. One was immediately moved from New York and merged into FileNet’s Orange County operations. The others remained on opposite sides of the country--in Seattle and Boston.
“There seems to be something fundamentally wrong with management either in its financial controls or its communication with the sales staff,” said Patrick Mason, an analyst with San Francisco brokerage Volpe Brown Whelan & Co.
While the loss of several anticipated contracts would hurt any business, he said, FileNet’s sales slump “is so extreme you’ve got to question what else is going on.”
Mark St. Clare, the company’s chief financial officer, said that one problem has been melding the sales operations of its new software subsidiaries with FileNet’s own operation. The subsidiaries’ procedures and policies, as well as the personalities of some staff, just haven’t meshed well with FileNet’s, St. Clare said.
“It is taking us longer, and has been more difficult than expected, to integrate these companies,” he said.
FileNet lost $2.6 million in 1996 after posting an $11.8-million loss in the first quarter related to costs of acquiring the three software companies. The companies gave FileNet technology that made its products compatible with the Windows NT operating system for computer networks.
The company announced its expected loss after the stock market closed Tuesday, so its stock price was not affected. FileNet shares closed in moderate Nasdaq trading at $15.875, down 25 cents for the day.
