Struggling communications vendor Glenayre Technologies Inc. Wednesday disclosed plans to abandon its wireless messaging division and lay off about 700 workers, a cutback that would slash the company's workforce by about 55 percent.
Charlotte, N.C.-based Glenayre, which reported losses in the past two quarters, said it's being hit by "a dramatic market contraction" that's affecting sales of wireless paging infrastructure technology. The company predicted that its revenue from such products, including two-way messaging devices and the network software that supports them, will drop 70 percent this year and amount to only about US$20 million.
"The wireless messaging market has been extremely challenging," said Eric Doggett, Glenayre's president and CEO, in a statement. The drop-off in infrastructure sales has been "much more rapid and deeper than any of our previous expectations," making it difficult for the company to fund its planned investments in two-way devices, Doggett said.
Glenayre said its wireless messaging operation is being "significantly downsized" right away and will be shut down altogether within the next 12 months. However, the company added that it will honor existing service contracts with customers and continue manufacturing its current wireless messaging products to meet contractual obligations.
The planned layoffs are mostly related to the discontinued operations and should be completed by the end of the third quarter, according to Glenayre. The company, which had total revenue of $251.6 million last year, now plans to focus on a division that makes technology for use in providing access to voice mail and e-mail via the Internet and cellular phones.
Phillip Redman, an analyst at Gartner Group Inc. in Stamford, Conn., said the planned shutdown of Glenayre's wireless messaging division "is not entirely a surprise." Wireless carriers that sell Glenayre's keyboard-equipped messaging devices haven't done as well as those offering Waterloo, Ontario-based Research in Motion Ltd.'s rival BlackBerry pagers, he added.
In addition, Redman said, Glenayre was hurt last week when RIM filed a lawsuit charging it with infringing on a newly issued patent covering the process of rerouting corporate e-mail messages to handheld devices. The suit "was the straw that broke the camel's back," Redman said.
However, a Glenayre spokeswoman said there "definitely" was no connection between the filing of the lawsuit and today's announcement of the planned wireless messaging shutdown. The restructuring has been in the works since March, following a $2 million loss in last year's fourth quarter, she added.
Glenayre, which lost another $5.7 million in the first quarter of this year, said it expects to take charges of up to $250 million as part of the restructuring process. The company also announced the resignations of several top executives, including its chief financial officer and the head of its marketing operations.
In addition, Glenayre said its remaining executives and the company's board of directors have "voluntarily agreed" to take 10 percent pay cuts for the rest of this year. Doggett, meanwhile, plans to relocate from corporate headquarters to Atlanta in order to oversee Glenayre's Enhanced Services Platform/Unified Communications Systems division.