More Layoffs at High-Tech Firms
MASSACHUSETT'S ROUTE 128
WANG LABORATORIES INC.'S announcement last week that 2,000 employees would be out of work by Jan. 1 came as no surprise to high-tech watchers here. Declining sales have prompted many such firms to cut costs heavily. Ten percent of the state's 300,000 high-tech employees have been laid off over the past two years (sidebar), according to Howard Foley, president of the Massachusetts High-Tech Council, a group of about 200 business leaders from high-tech fields.
But industry watchers say the slowdown is temporary and that the shake-up will ultimately prove healthy.
Computer manufacturers are the core of the high-tech industry concentrated 10 miles west of Boston near Route 128. By streamlining operations and developing new products and services, many of those companies - but not all - will turn the sales slump around.
Mr. Foley says, ``My sense is that a number of the good companies will come out in good shape and some will fall by the wayside.''
Prime Computer announced last month that it will be laying off 2,500 employees, about half of its work force in the state, as part of a restructuring plan. Data General Corporation said it would eliminate 2,200 jobs over the next 12 months, reducing the company's work force by 16 percent.
One of the hardest hit has been Wang. The company laid off waves of employees in the past few years, but still had to announce a $375 million quarterly loss last July.
Wang's problems are similar to those of many Route 128 firms. Industry experts blame top-heavy management and built-up bureaucracy, as well as a changing computer market. Recently Wang named a new president, Richard Miller, to help streamline operations.
Different factors have contributed to the computer industry slowdown. Most larger businesses already have computers. Replacement demand is low, says Charles Casale, president of the Aberdeen Group Inc., a consulting firm. Also, computer prices have a deflation rate of 25 percent every year, he says. Manufacturers are receiving less money for their products.
Times are particularly rough for makers of minicomputers - a Route 128 specialty. ``What you are seeing is an industry very accustomed to a double digit growth rate which is now seeing a 5 to 7 percent growth rate per year,'' says Norman Weizer, a consultant at Arthur D. Little & Co. Inc. Minicomputers face increased competition for what demand there is. More businesses these days are buying microcomputers, better known as desktop or personal computers. PCs are faster and are less expensive than minicomputers. In addition, manufacturers of the bigger mainframe computers are introducing cheaper models, Foley says.
Although cautiously optimistic about their industry's future, some of Route 128's high-tech leaders are concerned in turn about the Bay State. High taxes and a weakening economy will discourage people from coming into the state, the industry leaders hold.
High-Tech Companies in Massachusetts
Mass. Employees '88 sales
(millions) Digital Equipment Corporation 33,208 $12,700 Raytheon Company 30,900 $8,192 GTE 9,467 $16,500 Wang Laboratories 8,800 $3,068 Polaroid Corp. 7,600 $1,863 Foxboro Co. 5,000 $539 Prime Computer Inc. 5,000 1,595 Analog Devices 2,600 $439 Source: Boston Globe, individual companies.