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3,500 to Lose Jobs in Digital's First Layoffs

January 10, 1991|From Reuters

NEW YORK — Digital Equipment Corp. said Wednesday that it will lay off 3,500 employees, the first such move at the giant computer maker.

The layoffs are part of an ongoing attempt to slash $1 billion in costs at Digital, the nation's second-biggest computer company, a spokesman said.

Like many companies in the computer industry, Digital has been hard hit by the deteriorating economy, which has dampened spending by consumers and businesses. Digital posted a whopping 83% plunge in profit in the quarter that ended Sept. 30.

Some 3,700 employees have left under a voluntary program to reduce staff, but even further job cuts were necessary, the spokesman said.

Wall Street analysts have anticipated that Digital would reduce its staff by 5,000 to 6,000 workers by mid-1991.

"It's still not enough," said David Wu, analyst at S. G. Warburg & Co.

Bear, Stearns & Co. analyst Clifford Friedman said Digital could stand to slash 15,000 more workers from its payrolls.

Maynard, Mass.-based Digital employs 123,000 workers, specializing in large mainframe machines, smaller minicomputers and the software to run them.

Rival computer maker Hewlett-Packard Co. posted revenue of $13 billion last year, roughly equivalent to Digital's revenue, with 92,000 employees, Friedman noted.

Moreover, Digital just acquired a majority stake in a German software company, adding 3,900 workers to its payroll.

"They essentially negated these layoffs with that move," Friedman said.

The company had said that it might resort to layoffs if it did not lose enough staff through the voluntary program by year-end 1990.

The layoffs of the 3,500 employees are the first for the computer maker, which embarked last summer on the campaign to cut $1 billion in costs in a year's time.

Digital had hoped to avoid layoffs, but "it seems circumstances aren't going to allow it," the spokesman said.

The layoffs will take place by the end of June, the spokesman said.

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