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Cipher Data Inc. to Lay Off 450, Close One Plant

October 23, 1986|GREG LUCAS | Times Staff Writer

San Diego-based Cipher Data Products will lay off as many as 450 employees between now and June, 1987, as it prepares to shut down its Garden Grove computer parts manufacturing facility and move much of its production to Singapore.

"We must have cost savings to stay in the market," said Cipher spokesman Peter E. McGuirk. "The market has developed, and competitive pressures and further research have indicated (that production has) to go to Singapore."

Louise Biggs, an industry analyst with Dataquest Inc., a marketing firm in San Jose, described Cipher as "one of the market leaders in adapting to change." The move to increase overseas production is based on a good analysis of the market, she said.

Cipher's move overseas means it will be able to keep pace with its major competitors, Biggs said.

Cipher, which makes computer tape and disk drives, began the calendar year with 2,485 employees. It also has manufacturing plants in San Diego and Mountain View. Since January, it has laid off 300 employees, about 200 of them from the Garden Grove plant.

The Garden Grove plant, which was established in 1982, employed 800 people at its peak production period in 1985. However, the company laid off about 140 employees there in June of that year as part of a companywide cost-reduction campaign in which 212 employees were laid off.

Cipher has been considering closing the Garden Grove plant since June, when Cipher moved production of its quarter-inch tape drives to its plant in Singapore.

Since then, the Garden Grove plant has been producing half-inch tape drives, which will now be produced in Singapore.

Cipher, which announced the closing at its annual meeting in San Diego Wednesday, plans to give Garden Grove employees first crack at 150 jobs that may be created in San Diego. Whether those jobs will be created, however, depends on market conditions in the computer industry, McGuirk said.

The San Diego facility conducts research and development on new products and also supplies the U.S. market with certain half-inch tape devices. The Mountain View plant manufactures controllers for the company's line of tape and disk drives.

The San Diego facility now employs 600 people. There are 71 employees at the Mountain View plant, and 800 in Singapore.

Cipher posted net earnings of $1 million for the first fiscal 1987 quarter, ended Sept. 30--a 53% increase over earnings of $655,000 for the comparable period in fiscal 1986. Revenues for the quarter were $44.8 million, up 27% from sales of $35.2 million during the same period last year.

But, McGuirk said, Cipher is "not pleased" with the drop in earnings from its fourth quarter 1986 to its first quarter 1987. Earnings in the fourth quarter were $3.8 million on revenues of $50.6 million.

"Part of (the drop) is the continuing margin erosion we see," he said. "There's more and more pressure, more and more competition."

For its fiscal 1986 year ended June 30, the company posted earnings of $7.2 million on revenues of $163 million.

In 1986, Cipher purchased 87% of Optimem in Sunnyvale, Calif., for $6.3 million. That subsidiary manufactures optical disk drives--the latest development in the computer memory storage field. Because Optimem is not a wholly owned subsidiary, McGuirk said, its employees are not counted as part of Cipher's work force.

Cipher acquired its Mountain View facility when the company bought Spectra Logic Corp. in a 1984 stock trade.

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