Aether will trim 225 jobs, or 25% of its work force

3rd round of layoffs amid disappointing outlook for revenue

55 cuts in Owings Mills

March 05, 2002|By Andrew Ratner | Andrew Ratner,SUN STAFF

Market research that said spending on corporate technology wouldn't pick up as quickly as they'd hoped has prompted Aether Systems Inc. executives to cut a quarter of their staff, or 225 jobs, the company announced yesterday.

About 55 layoffs are at the Owings Mills headquarters of the wireless-technology company. There are also about 85 cuts at a software development office in McLean, Va., 10 at a Boca Raton, Fla., site that is being closed and about 75 at satellite offices in Massachusetts, Virginia and Florida. The McLean operation will remain open, with about 100 people.

The cuts, most of which take effect immediately, leave about 650 employees total for Aether and about 300 in Owings Mills.

The 6-year-old company employed 1,400 about a year ago before two earlier rounds of layoffs.

"Through the first couple of months, we've done a lot of data collection and market analysis, and they've all culminated to tell us the market is not going to turn around as fast we hoped it would," said George M. Davis, president and vice chairman. "We don't see tremendous accelerated growth, at least not to the level we anticipated last year. We're controlling what we can control on the expense side."

Aether officials hope that as they add wireless-data customers in areas such as law enforcement, homeland security and trucking, they'll strengthen the potential for future partnerships with larger companies that have been getting into this area, such as International Business Machines Corp. and Microsoft Corp. Aether last year signed deals to provide wireless-data support to Internet provider America Online Inc. and a pocket-size computer to Sharp Electronics Corp.

Aether officials also believe that this year's launch of faster "3G" -- third-generation -- networks by Verizon Wireless, Sprint PCS and others should aid their business as customers gain confidence that they'll be able to send data quickly and securely through the air.

The company will take a charge of about $11 million in the first quarter for the job reductions, as well as the paring of other expenses, consolidation of facilities and streamlining of a European venture. Aether plans to slow spending on Sila Communications, a joint venture in London with Reuters to deliver business news and other information to handheld devices.

Aether maintains that its strength is its cash reserve, about $500 million. With the recent cuts, the company expects operating expenses to continue to decrease, from the low $40 million range in the current quarter to the mid- to upper-$20 million range by the fourth quarter of this year.

"Aether made a tremendous amount of acquisitions and they have had a strong cash position they'd like to hold on to; they paid too much for some of these companies," said Steve Drake of IDC, a technology research firm in Framingham, Mass. "It's a challenging market. Is Aether still competitive in this market? Yes."

Said Aether Chairman and Chief Executive Officer David S. Oros in a statement: "We remain committed to our path to profitability and will not yield from this goal. At the same time, it is never easy to let go of dedicated and talented employees, and we regret that the economic environment along with slower than anticipated adoption of some wireless data solutions has forced us to make these difficult decisions."

Aether's shares gained 27 cents to $4.52 yesterday on the Nasdaq stock market.

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