Heavy losses force Madge to restructure
Heavy second quarter losses have forced Madge Networks founder and CEO Robert Madge to admit defeat in his attempt to make the company a one-stop shop networks solutions provider. The company has pulled out of ATM, axed its ATM staff and restructured into four divisions.
Madge is creating four new divisions focusing on separate customer segments including Token Ring users, Madge's Ethernet users, companies deploying video conferencing, and carriers deploying ISDN. Investment in ATM research and development has been "scaled back" according to the company, although sources close to Madge suggest this means pulling out of Madge-branded ATM products altogether.
The company announced results earlier this week reporting revenues of $102.1 million for the second fiscal quarter, down from $112.5 million for the same period in 1996. The Company reported a net loss for the second quarter of $6.7 million, or $(0.15) per share, compared to a net loss of $5.5 million, or $(0.12) per share for the same period last year.
Madge admitted that the company "under performed," in the quarter and blamed "weakness in system product sales, especially in the Americas," for not producing the expected revenue.
The company is now looking to make savings of around $19 million a quarter from its ATM exit as well as from reducing the number of its worldwide business centres, "both resulting in reduced headcount," admitted the company, although other divisions as well as ATM are expected to be affected. The UK will be used to consolidate European operations and act as the European headquarters.
"Madge will no longer try to compete in an over-crowded end-to-end solutions market by trying to provide a full range of networking products to the general marketplace," said Madge. "It also means that we can significantly reduce our internal infrastructure, which was built to support a full end-to-end networking solution, thus reducing our costs and helping us return to healthy profitability."
Madge's European representatives were locked in a meeting today discussing the company's future. "They're deciding on what the new Madge will look like or whether there will be a Madge at all," said a UK spokesperson. "By that I mean they are looking at perhaps changing the way the whole company operates."