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Digital to Cut 20,000 Jobs and May Sell Units

May 07, 1994|From Reuters

BOSTON — Digital Equipment Corp., still reeling from an unexpectedly heavy third-quarter loss and warning that its "entire enterprise could be at risk," said Friday that it will slash 20,000 jobs and consider selling parts of its business.

Chief Executive Robert Palmer said the deep cuts in the troubled computer maker's 85,000-strong full-time work force will be carried out over the next two years.

The Maynard, Mass.-based company has racked up losses of more than $3 billion over the past three fiscal years. It stunned Wall Street last month when it reported a $183-million loss for its fiscal third quarter, sparking a run on its stock.

In an address broadcast to employees Wednesday and released to reporters Friday, Palmer vowed to return Digital to profit this calendar year.

"Failure to act promptly will result in greater loss of employment," Palmer warned. "In fact, the entire enterprise could well be at risk."

He said that to be competitive with its current revenue base, Digital needs to cut its work force to 65,000 people or fewer.

In the speech, Palmer said some units will be sold. He said Digital plans "to focus our investments in the segments of the business where we know we can prosper and to disinvest elsewhere."

Richardson declined to say what divisions might be spun off.

Analysts said the company, which has laid off about 40,000 workers over the past 18 months and announced plans to cut another 7,000 jobs, will need to carry out the reorganization swiftly if it hopes to return to profit this year.

"The key here is how quickly they can get through this and move forward," said Stephen Smith, an analyst at PaineWebber in New York. He noted that yet another restructuring will cause massive disruption in a company already suffering from low morale.

Digital's stock rose 75 cents to $22.125 on the New York Stock Exchange.

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