(Nasdaq:ECIL)has confirmed that it is dismissing 400 workers from all divisions, as first published by TheMarker.com on Thursday. But the company may trim its workforce by as many as 500 people.
ECI will be cutting down in all its divisions as it reorganizes ahead of splitting up into five independent companies.
While announcing the dismissals, ECI also said it is still seeking strategic partners for the new companies, which will begin to operate independently from January 1, 2001. ECI also disclosed that it will be extending a $450 million credit line to the new companies.
ECI, which is controlled by
(Nasdaq:KOR), employs 4,700 people around the world. Most work at the company's plants in Petah Tikva and Ofakim, a town that has come to symbolize the ravages of chronic unemployment in southern Israel.
About a month ago rumors circled that ECI, under the leadership of CEO Doron Inbar, intends to fire hundreds of workers ahead of its de-merger. The story was that ECI would be firing mainly workers originating from Tadiran Communications, who would have no function in tighter companies to be generated by the conglomerate's split-up. But the former Tadiran workers are employed under a collective agreement and have meanwhile been threatening labor sanctions. Laying them off requires the approval of the Labor Ministry.
ECI is splitting up into a holding company and five independent firms: wireless, relay, optic, sound compression and aDSL. The purpose of the split-up is to expose hidden value.
Koor took over in ECI three years ago from the Claridge group and the Tel Aviv Stock Exchange-traded Clal concern, at $29 to $34 a share. ECI stock today is down to $15 and it market cap is down to $1.3 billion. But analysts from leading investment houses put the combined value of ECI's five divisions at between $5 billion and $10 billion.
InnoWave ECI Wireless Systems
has already been incorporated as a separate entity. ECI hopes to float the company during the first quarter of 2001. Koor is concurrently looking to bring in strategic partners to the other divisions.
ECI's spokesman said the company's management does not comment on rumors.
ECI recently announced that its fourth quarter performance would not meet expectations, due to lower than expected sales of traditional Digital Circuit Multiplication Equipment, and lower than expected growth in the company's optic products division. ECI will report a $15 million to $25 million operating loss for the fourth quarter. The company's sales for the quarter will come to no more than $330 million.