Sync Announces Layoffs, Change of Chief Executive

IRVINE — Sync Research Inc. said Monday that it has laid off an unspecified number of employees and managers and that its founder and chief executive officer will relinquish control of daily operations of the struggling computer networking products company.

Roger Dorf, the former AT&T; executive hired 14 months ago as Sync’s president and chief operating officer, will become president and chief executive. He replaces founder John Rademaker in what the company said is a long-planned change of command.

Rademaker, who described himself as “an entrepreneur . . . not an operations guy,” will become vice chairman.

Dorf would not say how many employees money-losing Sync laid off in its drive to cut costs, but acknowledged that total employment has fallen to 170 from about 200 in March.

Sync has taken investors on a wild ride since it debuted as a public company in November 1995. It became the second-hottest initial offering of the year as its stock soared from $20 to $44 a share on its first trading day. A month later, shares climbed to a high of $55.50. But since then, Sync--which has never had a profitable year--has seen sales of its products fall off sharply, and its stock price has plummeted.

Analysts said at the time that the company was a risky investment because of its profitless history and because of stiff competition in the networking products market.

Sync shares fell to $24.50 by January 1996, and had slumped to $13.063 by the beginning of this year. After the company announced in March that it expected a huge first-quarter loss, the stock went into free fall, bottoming out at $2.25 a share on April 7.

The stock closed Monday in moderate Nasdaq trading at $3.44 per share, down 6 cents.

Sync last month reported a first-quarter loss of $6.2 million as sales fell 44%. At the time, Dorf said preliminary figures for the quarter had given “a clear signal that we needed to make some adjustments.”

The company’s major problem, said Rademaker, is that “we underestimated the resistance” of users of older IBM mainframe computers to making wholesale changes to their complex computer information networks.

Sync makes devices that help extend the life of aging IBM mainframes by enabling them to transmit data in much the same way as newer, less-expensive computer networks do. Its products, and those of competitors, allow users of the old IBMs to eliminate special phone lines for their computers, which can cost thousands of dollars a month. But those savings come at a steep initial cost.

For most customers, the mainframe controls a computer network that is the backbone of the business and cannot be taken out of operation.

Sync and IBM recently won a contract, for example, to update Bank of America’s networks. The job, Rademaker said, involves installing new equipment and switching telephone lines connecting computers in 3,000 branches.

“At some point during this transition, the job will involve switching phone circuits and reconfiguring the system at 20 branches a day, all without ever losing service to a branch,” he said. “It is a significant operational challenge” that has kept many potential customers from buying what Sync is selling, he added.

Rademaker said he will concentrate on product development and marketing.

“Even when we were still a private company, I made attempts to look for a professional chief executive,” he said. “As it became clear we were evolving into a larger company, I knew we needed to get a strong operational person in here. . . . So we hired Roger [Dorf] with the specific intent of making him CEO.”

Dorf said Monday that Sync has improved its marketing efforts by consolidating its sales force with that of a Massachusetts networking products company it recently acquired.

He said previously that Sync was cutting expenses by more than 20% through operational changes and consolidations. He declined Monday to provide details.

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Sinking Feeling

Sync Research became the second-hottest public stock offering of 1995 when its share price rose 120% to close at $44 on the first day of trading. A few weeks later, it soared to $55.50. Subsequent slow product sales helped drive down the price to the $2.25-$3.75 range. Monthly closing prices and Monday’s close:

November 1995: $50.75

April 1997: $2.91

Monday’s close: $3.44

Source: Bloomberg News; Researched by JANICE L. JONES / Los Angeles Times