Then, in late 1990, 500 jobs will be eliminated at the company's computer mainframe manufacturing facility on Swedesford Road in Malvern, Chester County, near the Great Valley Corporate Center. An undetermined number of them will be offered jobs in other Unisys facilities.
The work will be transferred to Clear Lake, Iowa, by mid-1990. Unisys will close its plant in St. Laurent, Canada, in 1990 and shift its engineering support to Rancho Bernardo, Calif.
Most of the manufacturing at the Unisys Peripherals Group in Santa Clara, Calif., hardest hit with 350 job cuts, will be consolidated into other facilities.
The layoffs will hit all levels of non-union employment at the nation's third-largest computer company, according to Charlotte LeGates, a company spokeswoman.
The company's few union workers - mostly maintenance employees - will not be affected.
"This has been very painful for us," said LeGates. "Even though the employees have known (an announcement was coming) since August, it is still very difficult."
The company, which employs about 90,000 people internationally, has been dogged by lagging profitability and a sluggish computer market. The layoffs are part of an effort to cut costs by $400 million a year, according to the August announcement by Chairman W.H. Blumenthal. By 1991, the company's employment is expected to drop to as low as 80,000.
In addition to layoffs, the plan involves eliminating overhead and consolidating administrative and technical-support functions, reducing manufacturing overseas and increasing the move toward in-house production of the company's major microprocessor lines.
In his explanation for Unisys' predicament, Blumenthal said in the August announcement that the company has suffered from weaker-than-expected demand in the United States and sharper competition than anticipated. One result has been that Unisys made much more equipment than it could sell last year, and was caught with $500 million in excess inventories at the end of 1988, he said.
"The actions being announced today will reduce our costs in 1990 significantly, and along with other planned improvements, this will lead to a substantial lowering of our break-even point," said Blumenthal, in a prepared statement yesterday. The company expects the program to lower its break- even point by more than $1.5 billion, according to Unisys spokesman J. Peter Hynes.
"By simplifying our organizational structure and shortening lines of communication, we will be better able to meet our customers' needs," Blumenthal added.
The company lost nearly $80 million in the first quarter of 1989, and its second-quarter profit of $53.6 million was down 67 percent from the second quarter of 1988. The company blamed a drop in inventory, pricing pressure from competitors and a temporary suspension of Pentagon work.
Blumenthal said the cost of restructuring would be announced later this month with the third-quarter financial results. He said company officials hope to see savings in the fourth quarter.
Analysts yesterday called the restructuring and layoffs "a necessary part of survival" for the company.
"Basically, Unisys has to adjust the size of the cloth to fit the body," said Michael Geran, an analyst with Nikko Securities in New York. "They must adjust the indirect cost of the product as well as the direct cause. It's no secret that they need serious measures."
Geran said he was not sure the cutbacks were adequate to stem Unisys' decline.
"A big part of their problem is that they are heavily reliant on debt," said Michael Kamen, an analyst at Neuberger and Berman in New York. "If you have structured your company that way, you have to make major adjustments to market pressures."
Blumenthal, who was treasury secretary under former President Jimmy Carter and later became chairman of Burroughs Corp., masterminded the formation of Unisys in 1986 through the merger of Burroughs and the Sperry Corp.
He predicted at the time that the combined strength of the two companies would make the new Unisys a potent force against IBM Corp., whose $60 billion in annual revenues make it six times Unisys' size.
An important part of Unisys' strategy was to commit heavily to computers and computer equipment that could work interchangeably with equipment made by other manufacturers. This "open systems" approach ran counter to the traditional IBM "closed architecture" approach, which assured that IBM computers could work only with IBM or IBM-approved equipment.