The stringent new cost-cutting measures instituted by Fred Wang at his new charge, Wang Laboratories, detailed briefly on today’s front page, ensure that the founder’s son will face a baptism of fire in his first year in control at Lowell – and underline the fact that a return to sustained prosperity from the horrible fall from grace in early 1985 is still a long, hard way off. The latest round of cuts have been triggered by a realisation that the company needs to trim expenses by 4% to 5% to have any chance of a return to profitability this fiscal year – yet the $35m loss in the first quarter was seen by the company at the time as an aberration that should have corrected itself by now. Wang’s problem seems to be that while the VS business computers are holding up fairly well – particularly the top-end VS300, the distributed word processing systems are showing their age and their inability to embrace industry standards, while the company’s foray into personal computers has been about as successful as that of arch sibling rival DEC. The company says that despite record new orders, it is acting in anticipation of reporting an operating loss for the second quarter to December 31 1986, of not less than the $35m of the first quarter. The job losses of about 1,000, from a workforce of 30,900 will result from a very comprehensive restructuring and consolidation of operations.
The restructuring will combine operations to improve economies of scale throughout the company, and Ray Cullen, senior vice president of the customer service organisation, will move to the new position of senior vice president, chief of staff to the president and will work directly with Wang to co-ordinate and monitor the restructuring. One of Cullen’s primary responsibilities will be to ensure that the actions taken have a positive effect on the quality of Wang’s products, services and customer relationships. Customer service and manufacturing distribution will be combined into a single operation. Some technical service functions now in the customer service organisation, research and development and manufacturing distribution functions also will be combined into one unit, while home office sales support functions will be moved to US operations, headed by senior vice-president Ian Diery, who must also try to squeeze more orders out of existing users as well as winning new accounts, coupled with a 25% increase in the company’s worldwide workforce, with increasing stress in the US on the high-end VS systems. Employees having to suffer a pay cut will be rewarded with a grant of Wang Class B shares, provided they are still with the company on January 1, 1988, the shares to be equal in value, at $11.625 per share, to a half the amount of the lost salary. If the employee is still there on January 1 1989, he or she will get shares equal to the other half. The company expects to distribute 1.3m shares under the programme. All the efforts should reduce expenses by $50m over the next six months and are seen as a precondition to achieve a return to solid levels of profitability by the fourth quarter – an objective which the company is determined to achieve, according to Fred Wang. On the positive side, the company says December orders for the VS 300 more than doubled those of any previous month.