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Intergraph to take $20 million charge, lay off 400

The computer workstation maker, which blames chip giant Intel for many of its problems, outlines a recovery plan.

Intergraph, a maker of computer workstations and software, announced that it will take a $20 million charge and lay off 400 people as part of a restructuring.

Included in the charge, which is in the quarter ending September 30, are the costs of eliminating the jobs and the revaluation of hardware inventory caused by the company's exit from the PC and generic server business, Intergraph said in a statement.

The company blames chip giant Intel for many of its troubles. Intergraph and Intel have been entangled in a lawsuit for months regarding whether Intel has withheld chips and technology information from Intergraph.

Late last month, the dispute flared up again as Intergraph filed a motion in the U.S. District Court of the Northern District of Alabama that maintains Intel failed to comply with an April 1998 injunction.

Last week, Intergraph chief executive Jim Meadlock told CNET that his company was laying off 200 people and ceasing sales of servers and relatively low-end PCs. That number now has increased to 400, most of them in the computing systems group and the services group to support it, Meadlock said in a conference call today.

The company is focusing on services and on integrating its high-end computer systems into specific, narrow markets such as road engineering projects, Meadlock said. Intergraph aims to be profitable again in the first quarter of 2000.

Meanwhile, the company is organizing into nine business units that will be more financially independent, he said. The company seems to be packaging up three of those units to make it easier for other companies to take partial or total control, he said.

Some wonder if the plan spreads Intergraph too thinly.

"It would seem like this nine-unit structure leaves three businesses somewhat in limbo," said SG Cowen analyst Richard Chu. Those three divisions are in charge of Intergraph's high-performance workstations, its Intense3D graphics cards, and its VeriBest unit for making products to help in the design of electronics.

In the case of Intense3D, "what we would prefer is [to] have people in the industry invest in Intense3D as partners with us," Meadlock said.

In the case of the workstations, Intergraph is trying to figure out how to capitalize the quality of the employees and products into "the mutual benefit of the people in the organization, the customers, and the shareholders," Meadlock said.

Intergraph isn't the only company to struggle with high-end Intel-based hardware. SGI is in the process of divesting from its own line of Intel-based Visual Workstations, a design the company is all but abandoning after investing years in its design.

Intergraph's workstations are in a better position than SGI's, though, Meadlock said. For one thing, its graphics cards are sold to other competitors, and for another thing, it has new products that will debut in October.

Meadlock blames its computer troubles on Intel and said the friction spills over to hurt the graphics-card design work as well. "It's very clear that Intel would like to see us not to succeed," perhaps to set an example for the rest of the industry, Meadlock said. "We are the first company that has not given in to them. It costs us a lot of money, and we expect to collect a lot of money."

An Intel spokesman denied last week that it was violating the court injunction.

The layoffs and cost-cutting will save the company $6 million to $7 million a quarter, but one financial analyst was skeptical that would be enough. "Six million to seven million [dollars] per quarter savings doesn't really do a lot," he said.

Intergraph also is hobbled by its 33 percent investment in engineering software company Bentley, a privately held company, Meadlock said.

"Because it's not a public company, we've had a hard time divesting ourselves of any reasonable value of those shares," he said. "It would be our hope that they could find a mechanism by which they could do a public offering. I know they would like to do that," he said.

Intergraph president Manfred Wittler is leading the search for partners to help out the company.