Data General is to axe 400 jobs and its Thiin Line thin server development, in a reorganisation that will refocus heavily on the Clariion storage business.
The latest restructuring to come out of Data General's yo-yo financial fortunes will result in a $125 million charge in the current third quarter.
Significant extra resources will be ploughed into the Clariion Advanced Storage Division, rekindling Wall Street speculation that DG is gearing up to spin off its most successful business.
Clariion will increase its salesforce and its research and development funding as a result of the changes. As well as laying off eight per cent of the workforce, DG will transfer 100 employees, mainly from US businesses, into Clariion. And $10 million of the $50-55 million annual savings it expects to make from its cuts will also be ploughed into the storage business.
The official line is that the reallocation of resources is to boost Clariion's emerging Fibre Channel Raid range of storage systems, which are targeted at a corporate market that is being aggressively chased by all the main players. But "I'm sure there's a spin-off in the offing," said one financial analyst.
The savings from the reshuffle will come not just from the smaller payroll but the merging of some units and facilities, said DG, though it did not give further details.
One of the casualties will be Thiin Line, a range of Internet appliances that DG first announced with great fanfare 18 months ago. These would have provided 'thin servers' for running Net applications and for controlling appliances such as Webphones and even home equipment.
DG would not comment on the decision to dump Thiin Line, but sources within the company said the market potential had not proved as great as expected, and that the vendor wants to focus more narrowly on its most successful lines, Clariion and the Aviion servers.
President Ron Skates said the cuts were partly down to "constant margin pressure from competitors that use the lower cost PC server distribution model" but would not say whether DG would also look at a new channel approach to bring its cost efficiency in line with rivals such as Compaq, which have come from the PC environment rather than the corporate world inhabited by DG.
The reorganisation will also affect Aviion, which will step up its focus on NT server and high end Unix software in areas such as system management, and will expand its sales and marketing to the US healthcare sector.
A consensus of analysts predicted that DG would make a loss of 20 cents per share in its third quarter, ending 27 June.
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