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Glenayre quits paging

Glenayre Technologies Inc. announced a massive restructuring plan last week that includes cutting 55 percent of its work force-a full 700 positions-and completely dismantling its wireless messaging infrastructure division. Glenayre officials said the company would refocus its energies on its unified messaging products and services.

The company said the restructuring moves could cost up to $250 million, which includes severance pay, lost revenue from discontinued operations and drops in asset values.

“These past months have been challenging for the communications industry,” said Eric Dogget, the company’s president and chief executive officer. “This decline is much more rapid and deeper than any of our previous expectations.”

Dogget said the reasons behind the drastic restructuring come from the dizzying decline of the paging infrastructure market and the abysmal financial health of the remaining messaging carriers. Dogget’s words had added force because WebLink Wireless Inc., one of the nation’s largest messaging carriers, filed for Chapter 11 bankruptcy protection the same day Glenayre made its announcement.

Glenayre’s declining revenue provoked company executives to go ahead with the restructuring. The company’s infrastructure revenue declined more than 27 percent last year compared with 1999. In addition, Glenayre said it expects its infrastructure business to continue to decline at a staggering 70 percent this year compared with last year.

“We’re taking the dramatic actions required to position us for growth going forward,” Dogget said. “We have a lot of work to do over the rest of this year.

Glenayre’s job cuts primarily will come from the company’s wireless infrastructure business. Glenayre’s Santa Clara, Calif., operation will be completely shut down, 95 percent of the work force in Vancouver, Canada, will be laid off and 55 percent of the company’s Quincy, Ill., work force will be fired.

In addition, the company’s executive management team will undergo some significant changes. A variety of senior management officials will leave the company, including Senior Vice President and Chief Marketing Officer James Kelly, Senior Vice President of Wireless Messaging Wayne Chester, and Senior Vice President and Chief Financial Officer Bert Klein. Debra Ziola and Joellyn Sargent will pick up the duties of the vacant positions. Also, Glenayre’s Director Ray Ardizzone will become the company’s vice chairman, and Dogget will relocate to Atlanta, where the company’s unified messaging business is located. Glenayre’s remaining management team voluntarily agreed to a 10-percent salary reduction for the rest of the year.

As for its infrastructure business, Glenayre said it expects to completely shut it down within the next 12 months.

“Although Glenayre is discontinuing operations in the wireless messaging segment, we are committed to fulfilling our contractual obligations to our customers,” Dogget said.

Glenayre said it plans to complete the delivery of its ReFLEX 2.7 release this year, and will continue manufacturing existing infrastructure products to meet current as well as future contractual requirements. Also, the company said it will make its 2.7 architecture available for license or sale to third-party consumer electronics companies.

“Our goal is to exit the business entirely within 12 months,” Dogget said.

Dogget expressed optimism over the company’s plan to refocus entirely on its unified messaging products and services.

Glenayre’s Enhanced Services Platform/Unified Communications Systems segment includes two technologies: the @ctiveMessaging Large Solution platform and the @ctiveVision Unified Messaging platform. The @ctiveMessaging platform supports large-scale platforms, Web-based services and voice-activated interfaces and portals. It is designed to provide central office-grade network reliability, and allows carriers to support up to 5 million subscribers and 6,000 ports. The @ctiveVision platform allows subscribers to manage voice mail, e-mail, fax and alphanumeric messages from multiple devices through a single mailbox.

Glenayre’s unified messaging products drew fire this month when Research In Motion Ltd. received a patent for its BlackBerry Single Mailbox Integration technology and promptly filed a patent infringement lawsuit against Glenayre.

Dogget didn’t directly comment on the move, but said it won’t affect the company after its restructuring.

“To be honest, we’re kind of at a loss as to how it affected us even prior to the exit of this business,” Dogget said. “We’ll be working toward business resolution of that.”

As Glenayre moves out of the messaging infrastructure market, other companies see it as their chance to take advantage of Glenayre’s vacant position.

One company, Zetron Inc., manufactures paging infrastructure for regional paging carriers. Company executives said they were ready to fill the vacuum created by Glenayre’s departure.

“We are going to take over some of their market,” said Bill Hughes, Zetron’s director of marketing.

“We’re actively pursuing the nationwide one-way paging market, just as we have done the last 15 years,” said Steve Walters, the company’s product manager.

Glenayre’s Dogget said he regrets the effects of the company’s restructuring plan, and said he hopes to continue to provide value to the company’s stakeholders.

“It’s truly been an honor to lead such an organization,” Dogget said. “Glenayre remains committed to our shareholders and we look forward to being able to demonstrate our growth as we move forward.”

Wall Street seemed to greet Glenayre’s news with a significant amount of distaste. The company’s stock fell by almost $1 per share after the news, dropping from about $2.50 to $1.53 per share-a new 52-week low. Glenayre’s stock hovered around $1.75 per share by week’s end.

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