The worldwide pullback in spending and investment into telecommunications equipment and products caused the shutdown of one San Diego business and the layoff of 150 employees in a manufacturing division here recently.
Boston-based Teradyne Inc. laid off 150 workers at its San Diego plant earlier this month as part of a larger staff reduction of some 400 positions in its Connections Systems division.
NeoPoint Inc., a San Diego maker of a smartphone, which includes functions of Internet access and a cell phone, closed in Rancho Bernardo. It had about 170 employees. Teradyne spokesman Tom Newman said the job cuts at the company’s local plant were directly related to an overall slowdown in the capital spending by some of the company’s largest customers, including Cisco Systems, Lucent Technologies, Sun Microsystems, EMC, Alcatel and Ericcson.
As global telecom equipment manufacturers pare spending, suppliers to these companies are also hurt, he said.
The local layoffs by Teradyne left the plant, formerly called Herco Technologies, with about 450 employees, Newman said. Teradyne purchased Herco, which makes printed circuit boards, and a 100-person component supplier firm based in La Verne, last September for an undisclosed price. At the time, Teradyne said it was increasing its manufacturing capacity for printed circuit boards.
Teradyne, which had annual sales in excess of $2 billion last year, is a maker of equipment for semiconductor and electronics testing, as well as a maker of interconnections systems used in both the telecom and networking industries.
At NeoPoint, the problem was more a lack of capital that led to its apparent demise.
Founded in 1997 by former Qualcomm Inc. director William Son, the company produced a communications device that combined aspects of a personal digital assistant and Internet access with a cell phone. Its products generated rave reviews from the likes of the New York Times and the Wall Street Journal, as well as industry awards.
In January 2000, it filed a $75 million initial public offering, but shortly after that, the tech capital market collapsed, leaving it and other startups without the necessary financing to keep operations going until it reached profitability.
“In order for (NeoPoint) to gain market penetration, they needed a significant amount of upfront capital, which they hoped to get from their IPO. They couldn’t get enough money to support the ramp-up they planned for their branding launch,” said Bruce Ahern, a San Diego-based high-tech industry analyst.
Calls and e-mails to NeoPoint for comment were not returned.
It also attracted investments from the likes of Siemens, LG Information and Communications of South Korea which were part of its overall venture funding of some $54 million.
However, because the manufacture of cell phones and the Internet access devices is dominated by much larger players such as Nokia, Ericcson, Motorola and Kyocera, smaller startups such as NeoPoint are facing incredibly difficult odds in succeeding, Ahern said.
As for Teradyne’s cuts, Ahern said as the economy slows, San Diego should expect more of the same.
“In the last recession, the same thing happened, notably at General Dynamics,” he said. “When there are problems in the home office, they generally make the cuts in the outlying division offices faster.”
Kevin Carroll, executive director of the San Diego chapter of the AeA, the electronics trade association, said the silver lining to the layoffs is that most employees should find new jobs.
“I have a hunch most of those people will be picked up pretty quick,” he said, citing several large cell phone manufacturers and developers in the region.
