Glenayre to discontinue wireless messaging
Glenayre's restructuring is being driven by the continued rapid decline in both the paging infrastructure market and certain paging carriers' financial health, as well as concerns about the impact of the ongoing ReFLEX® operator consolidation on channels for the device market. Glenayre's paging infrastructure revenue declined over 27% in 2000 from 1999. The company expects 2001 paging infrastructure revenue to decline over 70% from 2000 levels due to a dramatic market contraction.
The company announced that it would reduce its headcount by approximately 55%, or a net of about 700 positions worldwide over the next two quarters, with most of the reductions relating to the Wireless Messaging discontinued operations. This reduction in force affects approximately 95% of the company's Vancouver, B.C. work force; approximately 55% of the company's Quincy, Illinois work force; and 100% of the company's Santa Clara, California work force.
The company also announced that it expects to record charges to earnings in the second quarter of 2001 related to the discontinuance of the Wireless Messaging segment. The details of these charges will be announced with second quarter 2001 results, and are currently expected to range from $200 million to $250 million. These include both cash and non-cash charges related to severance, expected loss from discontinued operations, and asset writedowns associated with exiting the Wireless Messaging segment.
"The wireless messaging market has been extremely challenging, with Glenayre's infrastructure revenue expected to total only about $20 million in 2001," stated Eric Doggett, Glenayre's president and chief executive officer. "This decline is much more rapid and deeper than any of our previous expectations, and significantly impacts our ability to fund our two-way device growth strategy. After thorough review of our markets, businesses, structure, and opportunities, Glenayre is taking the actions necessary to focus on our growth opportunities in the enhanced services platform/unified communications systems segment."
"Although Glenayre is discontinuing operations in the wireless messaging segment, we do plan to fulfill our contractual obligations to our customers. Current Glenayre Care service commitments will be met, and we do plan to complete the delivery of ReFLEX release 2.7 on our infrastructure this year, as scheduled. We intend to continue manufacturing existing infrastructure products to meet current commitments as well as future contractual requirements as they occur. Additionally, we will explore opportunities to make our core 2.7 device architecture available for license or sale to third party consumer electronics companies, and are working through both logistics and Motorola licensing arrangements to make that happen," stated Doggett. The company expects this to be complete within 12 months.
Doggett continued, "Obviously this is a massive restructuring, and it will require a balance of focus on both the ESP/UCS business, as the growth engine for the company going forward, as well as all the activities required to discontinue operations in the Wireless Messaging business. To ensure a successful transition, I am pleased to announce that Ray Ardizzone, currently a director, and also a previous CEO and Chairman of Glenayre, has accepted the position of Vice Chairman. In this capacity, Ray, with the help of Glenayre Chairman Clarke Bailey and other key people, will oversee the activities required to discontinue these operations. I will personally relocate to Atlanta, where our ESP/UCS business is located, to put my full effort into continuing the growth of this dynamic business." Doggett further stated, "I will be working with the management team to determine which corporate positions and functions should be relocated to Atlanta. In the interim, the Charlotte office will continue providing corporate support functions."
The company also announced that the above work force reduction numbers include a reduction of its ESP segment workforce relating mainly to the wind down and transfer of the current ESP related activities in its Vancouver, B.C. and Quincy, Illinois locations. The costs related to the work force reductions, estimated to be in the range of $2 million to $3 million, would be charged against the continuing operations in the second quarter of 2001. In addition, the second quarter results of continuing operations will be reduced by charges to earnings of $5 million to $10 million relating to the discontinuance of its Prepaid product line.
Glenayre also announced that several executives would be affected by the company's organizational restructuring and will be leaving to pursue other interests. These include James Kelly, Senior Vice President and Chief Marketing Officer, Wayne Chester, Senior Vice President, Wireless Messaging, and Bert Klein, Senior Vice President and Chief Financial Officer. Klein will continue to support and advise the Company as a consultant during the transition period. Doggett said that Debra Ziola would assume the role of Chief Accounting Officer and interim Chief Financial Officer and Joellyn Sargent will take on new responsibilities in her current position as Vice President of Marketing Communications. Further, the company announced that the remaining executive management team as well as the Board of Directors has voluntarily agreed to a 10% reduction in pay for the remainder of 2001.
Doggett commented, "I would like to extend my thanks and appreciation to these members of my senior management team, all of whom have been very supportive during this difficult time. Just as importantly, I would also like to thank the entire Wireless Messaging team for their dedication, professionalism, and innovation. I have been honored to lead such an organization. Our decision to discontinue wireless messaging operations in no way reflects on that team, or our belief in the longer-term opportunities in that segment. Rather, these decisions reflect the current economic reality and Glenayre's inability to continue funding the investments required to position Glenayre for the future of the wireless messaging market.
About ESP/UCS:
Glenayre's core technologies in the ESP/UCS segment are the @ctiveMessaging Large Solution platform, which supports 6,000 ports and up to 5 million subscribers and the @ctiveVision Unified Messaging platform that allows users to access their messages from a wireless phone, a WAP phone, or a website.
The Glenayre @ctiveMessaging Large Solution platform combines the advantages of a modular, distributed architecture with the efficiencies of a common database and centralized SS7 administration and new services deployment. It is designed to provide central office grade network reliability, and allows carriers to support from 500,000 up to 5 million subscribers and 6,000 ports on our Large Solution platform.
The @ctiveVision(TM) Unified Messaging platform allows subscribers to manage voice mail, e-mail, fax and alphanumeric messages from multiple devices through a single, unified mailbox. In addition to VAS, subscribers have the option to view this mailbox from a Web interface or any Wireless Application Protocol (WAP) handset and can also hear all of their messages, including e-mail messages, from any phone. This gives users a much more intuitive interface for managing their communications.
About Glenayre:
For more than 38 years, Glenayre has developed and provided leading-edge personal communication systems for the global market. We are focused on delivering our Solutions for an @ctive World portfolio through an array of Enhanced Services Platform/Unified Messaging products featuring voice mail, fax messaging, voice-activated services and personal one-number services. Glenayre, headquartered in Charlotte, North Carolina, has 1,300 employees located in 14 countries with 2000 net sales exceeding $251 million. For more information on Glenayre, its products, and services, visit www.Glenayre.com.
Glenayre, the Glenayre logo, Solutions for an @ctive World and the Solutions for an @ctive World logo are trademarks of Glenayre Electronics, Inc.
Source: Glenayre
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