Saturday, June 27, 1998

Report: Asia crisis, drop in semiconductor business, push Rockwell toward layoffs

By MICHAEL WHITE / AP Business Writer

LOS ANGELES (AP) -- When former defense heavyweight Rockwell International Corp. recast itself as a supplier of automation gear and semiconductors, it bet heavily on two seemingly insatiable demands: the world appetite for computers and Asia's need to modernize its factories.

Now, facing an Asia economy that's in tatters and slumping demand for its modem chips, Rockwell executives are planning layoffs to cut costs and shore up the company's sagging stock price.

The company may slash as much as 10 percent of its workforce of 48,000, the Wall Street Journal reported Friday.

Terry Francisco, a spokesman for the Costa Mesa, Calif.-based company, declined to comment. "We don't comment on speculation or rumors," he said.

One analyst said that cutting payroll may be the best way for Rockwell to offset declining revenue in its core businesses.

"You don't fight to the last soldier. You want to live to fight again and you take the action that is appropriate, and that is downsizing," said Ivan Obolensky, an analyst with Shields Associates in New York.

"This is a good management. I think there are a lot of companies out there that will have to take some similar activity" as the Asia crisis continues to clip U.S. exports, he said.

Because Asia's recovery appears to be more than a year away, Obolensky said he planned to downgrade his 1999 earnings estimate for Rockwell. Other analysts also have cut their earnings estimates in recent weeks.

In late afternoon trading on the New York Stock Exchange, Rockwell was off 50 cents a share at $48.43 -3/4. That's down from a 52-week high of $61.62 in March.

In August 1996, Rockwell sold its defense and aerospace operations. Last year, it spun off its automotive-parts operations.

The company acknowledged in its first-quarter earnings report that Asia's economic slowdown had taken a toll on its industrial automation business, although no specific figures on sales to the region were supplied.

Rockwell has also faced continuing problems in its semiconductor-systems division. The company, the world's largest maker of computer-modem chips, has cautioned that it faces pricing pressures and diminished demand for its new chips.

Rockwell's industrial automation business, with headquarters in Milwaukee, employs about 27,000 people and generated $4.5 billion in fiscal 1997, or about 60 percent of the company's total revenue.

The semiconductor segment, with about 6,000 employees nationwide, has its headquarters in Newport Beach, Calif., and took in $1.5 billion last year.