I did a quick scan of the thread, and didn't see this. My apologies
if it's a repeat......
San Antonio Business Journal
Data Race cuts one quarter of its work force
Data Race Inc. has cut approximately a quarter of its work force,
citing a steady decline in revenue from custom-modem production as
the cause of the downsizing.
The job cuts, which occurred in January, reduced Data Race's work
force from approximately 120 employees to about 90, according to
Data Race Chief Executive Officer W.B. Barker.
The cuts targeted employees who worked on custom-modem product
lines at the company's 12500 Network Blvd. headquarters.
"As a reflection of the current drop-off in that business, and the
changing nature of that business, we did reduce our work force in
that area," Barker says.
According to industry experts and company officials, the
custom-modem business is characterized by production order peaks and
valleys - a small number of large contracts requiring high-volume
deliveries over a short period of time.
The instability stems from the short marketplace life cycle of
laptop computers, for which Data Race's modems are designed. Laptops
last approximately six months in the consumer marketplace - before a
new model is introduced.
In addition, PC makers have come to favor standardized modems,
which work in a variety of models, effectively reducing the demand
for custom modems, according to Jim McIlree, an analyst with
Lowenbaum & Associates Inc. in Austin.
"Their (Data Race's) custom-modem business has been in decline for
a long period of time now," McIlree says. "They were hanging on to
too many people given the level of custom-modem business and what
they could expect to get in the future."
During the first six months of the 1998 fiscal year, modems
generated approximately $1.15 million in sales for Data Race. During
that period, Data Race posted revenues of $2.728 million and a net
loss of more than $5 million.
Anticipating the decline in orders for custom modems and its other
core product line, network multiplexers, Data Race has invested
heavily in Be There! - a unique remote-access product that combines
the company's expertise in modems and multiplexers.
By distributing the bandwidth in a single phone line, Be There!
lets users simultaneously access all the features of a
communications system - including the Internet, e-mail, fax and
telephone - through a PC connection at home or on the road.
Data Race has attempted to sell the promising product through
large networking firms, who can incorporate the product into their
service offerings. In 1997, Data Race announced distribution
agreements with Data General Corp. and Inacom Communications.
But during the second quarter of this year, Be There! accounted
for only 9 percent, or approximately $140,000 worth, of sales.
Analysts warn that Data Race may soon face financial difficulties
if sales of Be There! don't pick up quickly, pointing out the
company has about $5 million in cash reserves, but has been losing
about $2.5 million per quarter.
In recent trading, Data Race's stock price has dropped to below
$3, an all-time low.
The cash isn't the bottleneck in terms of Data Race's future,
according to Barker. He did say, though, that the stock price has
been disappointing.
Barker says he is confident that sales from Data General and
Inacom should materialize over the next two quarters. He says both
companies have now had sufficient time to integrate the product into
their offerings and to dedicate and train sales personnel.
And Data Race officials say they are currently exploring possible
strategic alliances. Possibilities include networking and technology
companies and Internet service providers, according to Barker.
According to Barker, a U.S. Securities and Exchange Commission
filing slated to be released this week reveals that Data Race will
postpone, from Jan. 29 until April 5, a commitment by a group of
institutional investors to purchase $3 million in Data Race
convertible preferred stock.
"We concluded it would be more advantageous not to have the
convertible preferred out there at this time," Barker says.
The pending $3 million investment is part of an $8 million private
placement orchestrated by the company in November.
"We're at the time now where the next two to three months will
determine Data Race's future," says Jay Somaney, an analyst with
Hoak Breedlove in Dallas. "It's a critical but exciting juncture of
their existence. If things fall into place and partners are able to
sell (Be There!), this could be huge. But if that doesn't happen,
Data Race has few alternatives."
Despite the job cuts, Barker says Data Race will continue to
pursue opportunities in custom-modem production.
"We are actively bidding jobs and working on new technologies. I
wouldn't be doing that if I thought that business was gone," Barker
says.
However, Data Race's approach to the modem market is changing
considerably. With volume manufacturing opportunities diminishing,
the company is now focusing on engineering-design applications and
licensing deals.
Barker says considerable opportunities exist for modem
applications in low-power devices, such as palm-top computers.
"I think we have interesting opportunities there," Barker says. |
