Network Equipment Technologies Inc (NYSE: NWK) said Thursday it plans to cut its workforce by 7 percent and take a charge of between $3 million and $4 million against second quarter earnings.
Shares closed at 9 13/16 Thursday, beneath their 52-week high of 17.
The details of restructuring come on the heels of wider-than-expected second quarter losses. This isn't the first time the supplier of multi-service wide area networks has pared its workforce.
The 7 percent will come out of a workforce of 1,200, already trimmed by the company's restructuring last March when it cut 10 percent of its workforce to focus on infrastructure for global communications companies. Most job cuts will be made at the company's headquarters in Fremont, Calif.
The move is part of a restructuring expected to create a more streamlined company focused on wide-area networking, according to a company release.
This time restructuring is bound to be more effective since NET's new Chief Executive Hubert Whyte is doing it a more surgical manner, said analyst Joel Achramowicz of Preferred Capital Markets.
"There's been a rift between IP and ATM camps at the company," Achramowicz said. Internet Protocol is part of the TCP/IP protocol that routes messages through packets, Asynchronous Transfer Mode is a network technology that supports multimedia and data transmissions using switches.
Whyte recognizes where the switching business is going, and knows NET has the IP experience to become a leading player, Achramowicz added.
Thought the company has yet to prove itself, Achramowicz said the new CEO should bring costs in line with revenue, and maintains an "accumulate" rating on NET.
Four of six analysts covering NET rate it a "hold" according to Zacks Investment Research, the other two call it "moderate buy."