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Toshiba to shift manufacturing, cut 500 jobs

Toshiba will stop making computers in the United States and cut 500 jobs, or roughly a quarter of the work force in its U.S. computer unit, an executive told CNET News.com.

Toshiba will stop manufacturing computers in the United States and will cut 500 jobs, or roughly a quarter of the work force in its U.S. computer unit, an executive told CNET News.com on Monday.

The Irvine, Calif., plant that had served as a site for making laptop and desktop computers will now serve as a final configuration center, where workers will add hard drives and memory to computers manufactured at sites in Japan and the Philippines.

Workers are being notified of the cuts Monday. The company will give workers 60 days notice and severance pay based on the length of their employment.

"What we're doing basically is shifting our engineering and manufacturing to other Toshiba facilities. It saves a lot of time and a lot of costs," said Joe Formichelli, executive vice president of Toshiba's computer systems group. The unit it part of Toshiba America Information Systems, the U.S. computer-making unit of the Japanese electronics giant.

Formichelli said the move had been in the works even prior to a lackluster fourth quarter for the computer industry.

"We've been working on this for at least 18 months," Formichelli said. "We would have done this even if it was a banner fourth quarter."

Toshiba dropped from first to third in worldwide market share of the laptop market in the fourth quarter of last year, according to preliminary sales figures from market researcher Dataquest. IBM claimed the top spot with a 13.5 percent market share, followed by Dell Computer at 13 percent and Toshiba at 12.5 percent.

"Toshiba has been losing share in the corporate space, and most of that is going to Dell," Dataquest analyst Mostafa Maarouf said recently.

Formichelli said a key benefit of the shift is moving the manufacturing lines closer to Toshiba's suppliers, cutting the inventory of parts the company must keep on hand.

"You want to build these things as close as possible to the component supplier," he said.

The move follows job cuts at Gateway, which said last month it would cut roughly 3,000 jobs, or more than 10 percent of its staff, amid slower sales. Hewlett-Packard also said last month that it will cut about 2 percent of its work force by the end of April as it restructures its sales and marketing efforts.

News.com's Michael Kanellos contributed to this report.