Transcrypt cuts 26% of EF Johnson’s employment

Transcrypt International, in an effort to enhance its “focus on higher-value products with the most attractive growth opportunities,” eliminated 69 positions at its subsidiary EF Johnson earlier this month.

In a letter to Transcrypt’s shareholders, Michael Jalbert, Transcrypt chairman, stated that the company would not reach its 2000 financial goals.

“We are taking major steps—painful but necessary—to further reduce operating costs and to accelerate the re-positioning of our company that is already well underway,” Jalbert said.

The letter read that the company now expected revenues of $46 million for the current year, which was down $7 million from 1999. “While we’ve made steady progress in our transition from the analog to digital world, legacy products still exert a negative drag on revenues and gross margins,” he said. “ The moves we are now announcing will accelerate that transition.”

Transcrypt is also realigning its EF Johnson product line, which will take the product group offerings from 42 to 20, according to Jalbert.

The company plans to save $3 million annually by cutting 26% of EF Johnson’s total employment. “Over coming months, we will apply the same stringent margin analysis to identify any additional product realignment and outsourcing opportunities at both EF Johnson and Transcrypt Secure Technologies,” Jalbert said. “We would expect this to result in further workforce reductions and other associated restructuring charges.”

Jalbert stated that the company would be redirecting its sales efforts to de-emphasize EF Johnson’s “low-end commercial markets, where achievable margins and growth are increasingly unattractive.” Instead, Transcrypt will focus on the federal, county and local government and high-end commercial markets.

“As one of only four companies offering products compatible with APCO 25, the mandated standard for federal applications, we expect continued strong sales growth in 2001.”

The new revenue target for Transcrypt is $45 million in 2001. Jalbert also commented that they anticipated the pending SEC investigation would be resolved shortly without the imposition of any financial penalties against the company.