Aether to cut more jobs

Sources say at least 70 are being let go, 60 of them here

Payroll halved in a year

Local wireless firm's cash reserves give it `a lot of breath'

March 02, 2002|By Andrew Ratner | Andrew Ratner,SUN STAFF

Aether Systems Inc., the Owings Mills wireless technology company whose battered stock has lost half its value this year, has begun informing employees of the third major round of layoffs there.

Although the company declined to confirm layoff reports yesterday, sources said that Aether is cutting about 60 jobs at its headquarters in Baltimore County. It is also closing a software development lab in McLean, Va., and an office with about 15 employees in Boca Raton, Fla., sources said.

The latest cuts will drop the company's work force to roughly 700 - about half of what it was a year ago. Employment in Owings Mills will drop to roughly 300, sources said.

"We'll have a news announcement Monday," an Aether spokesman, Greg Abel, said yesterday. "We can't talk for reasons that have to do with employee communications and sensitivity to employees."

Two months ago, top company officials said they did not anticipate further layoffs, believing attrition would suffice if the company had to shrink its work force further.

Aether successfully cut its cash spending rate from $140 million in the first quarter of 2001 to an estimated $15 million by the second quarter of 2002. On New Year's, Aether had $500 million in reserve.

But the bottom has begun to drop out more quickly than expected.

Shares of Aether's stock gained 5 cents yesterday to close at $4.25 on the Nasdaq, down from $10.65 at the beginning of the year.

Investment brokers Merrill Lynch & Co. Inc. and Salomon Smith Barney both downgraded their recommendations on the stock last month to "neutral" from more positive ratings.

Under chief executive David S. Oros, a former Westinghouse Electric official, the company is widely considered an innovator in developing software to transmit data through the air.

But last year's recession cooled corporate spending on new technologies. Aether's strategy of helping brokers and investors research and trade stocks via hand-held devices also soured.

Aether has since pounced on homeland security as a new line of business, providing hand-held devices to law enforcement agencies at major events such as the Super Bowl and the Winter Olympics in Utah. The company also has made inroads with government and trucking industry clients.

But Aether also faces increasing competition from computer and communications giants such as International Business Machines Corp., Oracle Corp. and AT&T Wireless Services Inc.

The company's fast pace of acquisitions in 2000 - it was adding workers at the rate of three a day - proved a huge burden. Aether was forced to lay off 600 people last year before the latest cuts.

"New layoffs would be in line with their guidance toward more cuts," said Thomas A. Sepenzis with CIBC World Markets in San Francisco.

Richard Piotrowski, a broker with SWS Securities in Dallas, said homeland security will prove to be a promising area for Aether as federal investment in that area has only begun heating up.

"I don't think there's a risk of them going under with $500 million in cash," Piotrowski said. "They've got a lot of breath left."

The company last month announced a loss of $118 million for 2001, better than its loss of $132 million in 2000. Revenue was flat, at roughly $25 million both years. But the company's fourth-quarter loss of $1.02 a share was worse than the 94 cents analysts predicted, according to Thomson Financial/First Call.

"These guys actually have some good management and good technology, but they were out ahead of the pack in this wireless space," said one industry analyst who didn't want to be named. "Their customers really like these guys, but wireless communications for trash trucks in Topeka just isn't going to cut it with investors."

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