Varian slump delays turbines Nearly 500 employees laid off over last year

Sat. November 01, 2008; Posted: 06:25 PM

Varian Semiconductor Equipment Associates has laid off nearly 500 workers over the last 14 months and is now expected to delay construction of two wind turbines at its Blackburn Industrial Park plant.

The layoffs include an unspecified number of cuts made in October, after the Gloucester-based company had already reduced its worldwide workforce to 1,739 employees in September of this year from a high mark of 2,006 in September 2007.

Although company executives did not announce precisely how many workers were laid off last month, they told financial analysts in a teleconference Thursday that 25 percent of the workforce had been cut since October 2007, bringing the total number of employees down to around 1,500.

The majority of the cuts were in Varian's Gloucester manufacturing plant, which has slowed output considerably this year in response to declining sales of the company's tools for making computer chips.

As of September, around 1,200 Varian employees worked in Gloucester with another 100 at a training facility in Newburyport.

How long declining sales will delay the installation of the wind turbines, planned as the tallest in Massachusetts and capable of generating enough power cut into Varian's $2 million annual electric bill, is unknown.

When the city approved permits for the two towers last October, Varian officials said the windmills could be up and running within 16 months, but did not have a firm construction schedule.

The 30-story windmills would be built by a manufacturer now experiencing a backlog, and Bob Halliday, Varian's vice president and chief financial officer, said it is unclear how long it would take for the Varian windmills to hit production.

In addition to delay from the supplier, Halliday said the price of the units had gone up in the past year and Varian may wait until the economy improves before actually buying them.

"I think it is going to be delayed either by the backlog or the financial situation," Halliday said. "We are still positive about the project."

Varian, Gloucester's only publicly traded, locally-based company, makes equipment used to manufacture the microchips that go in computers, cell phones, video games and other products that require memory or computing.

The company's profits have grown steadily in recent years, but sales have slowed this year and slumped considerably as the national economy has slid into recession.

In the fourth quarter of its fiscal year, which ended Oct. 3, Varian brought in $142.1 million in revenue -- down from $182.6 million in the third quarter and $298.7 million in the fourth quarter of last year, according to earnings announced Thursday.

The company's fiscal 2008 year-end revenues were $834.1 million, down 24 percent from last year's $1.1 billion.

In their earnings report, Varian executives forecast business getting worse before it gets better. After making $2.4 million in net income in past last three months, the company anticipates losing $6 million in the next three months.

"The bottom has fallen out of the industry," Halliday said yesterday. "Even though our situation looks bad, our competitors' is worse. We are getting the business that is out there, there just isn't as much business."

Before this year's global economic slowdown, Varian expanded significantly as profits climbed after the dotcom bust and the company captured more and more market share.

When the economy bounces back, Varian executives said in Thursday's teleconference, the company is well positioned to profit with 68 percent of the total market, up from 30 percent 2004.

Varian executives said Thursday that the company had not suffered directly from the banking crisis and did not have exposure to mortgage-backed assets.

In addition to shrinking its workforce, Varian has cut costs to get through this downturn by instituting a salary freeze, trimming discretionary spending and having a series of temporary plant shutdowns.

The Gloucester plant was shut three times this summer and two more week-long shutdowns are scheduled for the week of Thanksgiving and the week between Christmas and New Year's Day.

Halliday said Varian had used the shutdowns, announced months ahead of time so workers could use them as vacations, to avoid as many layoffs as possible.

"We have tried to be as careful as possible because we know our employees personally and know how it affects people's lives," Halliday said. "We have tried to get everything done before the holidays.

"We value our employees greatly," he said, "but it has been a terrible year."

Patrick Anderson can be reached at panderson@gloucestertimes.com

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