Rockwell Might Cut 4,800 Jobs Amid Slow Sales
Rockwell International Corp., the world’s largest maker of computer modem semiconductors, reportedly may cut as many as 4,800 jobs because of slumping demand for its chips and slowing sales in its industrial-automation business.
The possible job cuts, which could affect as much as 10% of Rockwell’s 48,000 employees, were first reported Friday in the Wall Street Journal, which cited unidentified people close to the company. Terry Francisco, a spokesman for the Costa Mesa-based electronics giant, declined to comment.
Rockwell has about 5,000 employees in Southern California, including 2,500 at its semiconductor systems division in Newport Beach, 150 at its Costa Mesa headquarters and 100 corporate workers in Seal Beach.
It also has about 1,000 workers at its Collins avionics plant in Pomona and 400 at a research and development facility in Thousand Oaks. The semiconductor unit also has 600 employees in San Diego and 200 in Newbury Park.
Rockwell has undergone a major restructuring in the last few years. It sold off its aerospace business to Boeing Co. for $3.2 billion in August 1996 and spun off its auto-parts business late last year.
The company’s focus shifted toward making modem chip sets and other electronic gear. It is the leading maker of microchips and chip sets for fax, voice and data modems, with a 65% market share for PC modem chips.
Rockwell also is one of the world’s largest industrial automation companies.
But lately, Rockwell has been hurt by a computer modem price war, and that has taken a toll on profits. In its fiscal second quarter, ended March 31, net income declined 42% to $109 million, or 53 cents a share, from $189 million, or 85 cents a share, a year earlier.
Its second-quarter sales were $1.94 billion, up 2% from $1.9 billion a year before.
The company has warned that it faces continued pricing pressures and falling demand for its new modem chips.
Also, Asia’s economic crisis is hurting revenue at its large factory-automation unit.
Rockwell stock fell 50 cents Friday to $48.44 on the New York Stock Exchange. Its stock has fallen 20% since hitting a 52-week high of $60.75 in March.
“If this happens, the job cuts are a sensible thing,” said analyst Ivan Obolensky of Shields & Co. in New York. “They thought business was going to come back up sooner, but that’s not happening.”
Analyst Anthony Ginsberg at Fourteen Research in New York said: “Rockwell has gone through tremendous changes. Obviously, they went into this thinking, ‘It’s going to be great; we’re opening up new market opportunities.’ I guess this is more serious than they thought.”
The company also has been hit by a strike of about 630 electrical workers at its semiconductor plant in Newport Beach, who voted down a five-year contract a month ago. Francisco said talks were held with the International Brotherhood of Electrical Workers Local 2295, which represents the striking employees, on Friday. No other details of the discussions were available.
“We are meeting our customer demands for products” despite the strike, Francisco said.
Analysts have said the company has some breathing room in resolving the strike because of the slowdown in the modem semiconductor business. Rockwell can draw on its inventories for a few months, they said.
Bloomberg News and Associated Press contributed to this story.
