New Layoffs at High-Tech Firms
MASSACHUSETTS'S famed high-tech heartland, ``Route 128,'' is down, but not out. Layoff announcements from Data General and General Electric on Aug. 24, indicate that rough times for many high-tech companies in the Boston area are not yet over.
Yet many smaller companies in software and other related areas are doing well, despite New England's economic slump.
``There are a number of them moving along quite profitably,'' says Ann Palermo, an analyst with International Data Corporation in Framingham, Mass.
And Wang Laboratories Inc., one of the region's most-troubled computer makers, recently won a contract from the United States government to supply computers to the State Department - an estimated $841 million of business over the next five years. While giving a needed boost, the contract won't mean more jobs for Wang, which eliminated 8,000 positions and lost $716 million in the year ending June 30.
``This does not mean that Wang is going to survive,'' says George Colony, President of Forrester Research in Cambridge, Mass. Wang still needs a new strategy, Mr. Colony says.
Wang and other computer companies in the area, including Digital Equipment Corporation, Prime Computer Inc., and Data General Corporation, are adjusting to an ongoing decline in the market for minicomputers - once the region's strongpoint.
The computer market is moving toward toward networks of smaller desktop computers, and away from the more expensive minicomputers, midrange systems designed to occupy a niche between mainframes and desktop personal computers.
The transition also involves a move toward computers with commodity hardware (computer chips) and standardized operating systems, Ms. Palermo says. ``Open'' operating systems that allow more flexible software use are replacing proprietary systems that offer the customer less flexibility.
``The computer industry is not maturing; it's simply changing,'' Colony says. West Coast companies are gaining from this industry-wide transition, he says, while ``companies on Route 128 were not fast enough to respond.''
Now, Massachusetts-based firms are slimming down. Wang's work force has dropped from 31,500 in 1988 to 20,000.
Data General will lay off 2,000 workers over the next few weeks, bringing it's payroll to 9,500. In 1985, the company's last profitable year, the payroll was 17,700.
``Our hope is that ... [this is] the final major reduction,'' says Jim Dunlap, a Data General spokesman. The company expects sales of its new AviiOn line of desktop machines to exceed $100 million this year. Minicomputers still provide the lion's share of the company's revenues.
Citing a decline in US military spending, General Electric Company's aerospace division has said it will cut 650 of 950 jobs by 1992 in a Burlington, Mass., facility for making test equipment.
Digital, the region's giant, said in July that it will cut about 6,000 of its 124,000 jobs through voluntary layoffs. The news came as the company posted a first-ever quarterly loss of $257 million.
Nor are Digital's troubles over, Colony says. He predicts ``the next shoe to drop'' on Route 128 will be layoffs of 20,000 to 30,000 more Digital employees - with 5,000 to 8,000 of those in Massachusetts.
This is not welcome news for the local economy.
But local high-tech companies may face their hardest challenge if a national economy enters a recession, says Tom Hubbard of the Massachusetts governor's office of ecomomic development. These firms, he points out, depend on out-of-state customers to buy their products, and that a business slowdown would mean lower sales.
Yet observers say the long-term outlook is not so bleak.
The region, Colony notes, has a strong educational system, an experienced work force, and many healthy companies, such as Lotus Development Corporation, Index Technology Corporation, and Banyan Systems Inc. He also expects the formation of many new companies over the next few years to provide software and equipment for the growing field of computer networks.
``We're well positioned over the next 10 years or 15 years,'' Mr. Hubbard agrees.