Pinnacle Micro Fires 25% of Staff

Financially troubled Pinnacle Micro Inc. on Thursday fired 25% of its staff, citing weak sales of one of its major product lines and a need to cut back on operating expenses.

The Irvine-based company, which makes compact disc storage systems, laid off more than two dozen workers at its Irvine and Colorado Springs, Colo., offices.

The company also named its founder, William F. Blum, as chairman and chief executive partly to replace Daryl J. White, who resigned as chairman in June. The company also said Roger Hay will resign as chief financial officer, effective next Thursday.

“We’re in a restructuring mode, so we’re just trying to get as lean as possible,” said Megan Morrow, a company spokeswoman.

The firm said in July that it was having difficulty paying trade debt. It hired a consulting firm to help turn the business around and a bankruptcy law firm to deal with creditors. It also hired an investment banker to raise cash or seek a buyer.

Shares of Pinnacle Micro rose 2 cents to close at 73 cents in Nasdaq trading.

Thursday’s announcement marks Pinnacle’s second round of layoffs this year. Earlier, it fired 16 employees from its Irvine and European sales office in Amsterdam. It now has 85 employees, mostly at the Irvine headquarters and at its Colorado Springs manufacturing plant.

Analysts said the firm’s problems started in 1995 when it changed its focus and began producing its Apex drive, a high-capacity optical storage system. But the company didn’t begin shipping the product until late last year, which hurt sales.

“This company is really in trouble,” said Wolfgang Schlichting, an analyst for International Data Corp. in Framingham, Mass. “They’ve been losing money for quite some time. And with the emergence of [digital videodisc] products, I think their market is going to shrink even more.”

The company has not posted a profit since the third quarter of 1995.