3Com workers wait as layoffs loom
As executives of the company work out plans to cut costs by $1 billion, employees are bracing themselves for layoffs that could come by mid-May.
3Com executives are figuring out a new business strategy--and they'll soon decide what products and which of the remaining 8,400 employees they will keep, 3Com spokesman Brian Johnson said.
The decisions on layoffs and other cost-cutting measures are expected by mid-May. In fact, 3Com Chief Executive Bruce Claflin is planning a special forum to discuss 3Com's future with employees May 17, according to an internal memo Claflin sent to employees Monday.
"It's fair to say the next set of decisions will be done by then," Johnson said, referring to Claflin's memo. "I think those decisions are being done as quickly as we can."
Like other tech companies that are laying off employees, 3Com has been ravaged by the economic slowdown as sales of equipment to telecommunications carriers and businesses have slowed. Competitors such as Cisco Systems and Nortel Networks, among others, are also in the throes of layoffs. 3Com, which has announced profit warnings the past two quarters, announced in March a restructuring plan to save $1 billion a year.
3Com--which has been continually reorganizing the past two years--has made some cost-cutting measures recently, including the laying off of 1,200 employees this spring and the killing off of its consumer business, which included its Audrey Web-surfing appliance and Kerbango Internet radio.
To reach $1 billion in cost savings, 3Com is cutting expenses such as travel and plans to decide what to do with excess office space. But no matter what, the company needs to lay off more employees, 3Com's Johnson said.
Sources within 3Com say layoffs are likely to be in the vicinity of at least 30 percent, depending on the business unit, and that the decisions could be made as early as the end of April or early May.
"Over the next few days they are going to have working groups to determine which product lines and which people are cut," said a 3Com employee who declined to be named.
Another source has heard a wider range of layoff numbers. "What I've heard is small to big," a source said. "I know they're coming. To what scale, I have no idea."
Johnson declined to comment on the percentage of employees who will lose their jobs in the latest round of cuts, adding that the decision hasn't been made. He said that 3Com executives have been meeting to discuss the company's reorganization since December.
Claflin, in his internal memo Monday, was positive about 3Com's future prospects and made no hints of future layoffs. "We do not intend to just 'cut our way to success,'" Claflin wrote in his memo, announcing the creation of two new business units. "Over the past several months, senior management, with the assistance of experts from McKinsey and Company, have been developing the plans and actions necessary for long-term success."
As part of the latest reorganization, the company on Monday formed two independent units: a networking hardware business, which makes wireless technology and Net-based phone systems; and a network adapter business, which makes products that connect office PCs to each other. With the move, 3Com will consist of three independent units that will share the same corporate infrastructure such as human resources. Late last year, 3Com turned its service provider business, CommWorks, into its own independent unit.
Claflin said in the memo that the new business units will allow them to be nimbler and serve their customers better in the competitive market. He added that more restructuring changes will come soon. "There are many decisions still to be finalized, such as organization, key processes, interdependencies across units and the company," he wrote.
Meanwhile, one 3Com employee said the mood is bleak at company headquarters in Santa Clara, Calif.
"Everyone feels it's going to be a big cut. It's a sense of gloom," the employee said. "You see groups of two or three people hanging out with furtive glances, waiting to see where the ax will fall."