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Sunbeam boss swings ax quickly

On Wednesday, his third day at Sunbeam Corp., Albert J. Dunlap, the company's tough-talking new chairman and chief executive, used the announcement of disastrous second-quarter earnings as an occasion to begin housecleaning.

He dismissed the 43-year-old chief operating officer, James Clegg, and replaced him with a longtime associate, Russell A. Kersh, also 43, who was named executive vice president for finance and administration at the company, a struggling maker of small appliances.

Then, in an aggressive conference-call pep talk to securities analysts, Dunlap, a former paratrooper who has dropped into eight companies to turn them around, said he would be "implementing a massive and swift restructuring."

Asked whether shareholders were frustrated with prior management, Dunlap said, "I would have hung them," explaining, after a pause: "A little frivolity."

Wall Street seemed to respond to his blunt message, and Sunbeam shares rose 75 cents, closing at $19 on the New York Stock Exchange.

The company announced that net income had fallen 36 percent to $7.2-million, or 9 cents a share, from $11.4-million, or 14 cents a share, in the comparable quarter last year, below most analysts' expectations.

"It was a surprise that he made the personnel announcement so quickly," said Scott Graham, a securities analyst with Oppenheimer & Co. "I think it's a good idea he brought in someone he knows, and I think it's a good idea that Kersh has global perspective, since only 10 percent of Sunbeam's sales are international."

In his first two days at the company, Dunlap said, he learned that Sunbeam has "too many people, too many products, too many facilities and too many headquarters," adding: "We're going to be getting rid of products that are incremental, or low-margin, or losers."

Dunlap said the company would take a charge later in the year to cover restructuring costs. Second-quarter operating margins were only 4.6 percent, down from 6.6 percent in 1995 and 16.1 percent in 1994. And earnings were down even though second-quarter sales were up 12 percent to $345.9-million.

"Since the company is grossly underperforming, I want to improve the balance sheet," Dunlap said, "and then maximize the value of Sunbeam products. The company has a household name and the Sunbeam, Oster and Mixmaster brands. All we have to do is get the product mix to something we can make money at."

Susan Gallagher, a securities analyst at NatWest Securities Corp., said Dunlap has a challenge before him. "Sunbeam has given shareholders an unending series of disappointments," she said, "even though the bar keeps getting lower and lower."

She added that the company has low productivity, excess manufacturing capacity, a high cost-structure and a board that has been slow to take corrective action.

Graham said another problem for Sunbeam is that 30 percent to 40 percent of its revenues "are tied to weather patterns."

He said, "They need cold weather in the winter to sell their vaporizers and humidifiers, and warm, dry weather in the summer to sell their outdoor grills and furniture products."

Nevertheless, Dunlap, 58, speaking from the company's Fort Lauderdale headquarters, told the analysts that "the company is going to become innovative, it will be fiercely competitive _ and a whole new company."

Discussing the restructuring, Dunlap said that "by the end of the year all plans will be in place."

Neither Dunlap nor analysts would speculate about how many of the company's 12,000 employees worldwide would be subjected to a "headcount," the corporate locution for layoffs.

Dunlap eliminated about a third of Scott Paper Co.'s employees, or 11,200 jobs, after he took over in 1994. That included 71 percent of the corporate staff. He sold off more than $2.2-billion worth of businesses and unloaded the company's 750,000-square-foot corporate headquarters.

But stockholders were rewarded. When Dunlap took over, Scott shares traded at $18.62{. Eighteen months later, when Dunlap sold the company to Kimberly-Clark, the company's shares sold for more than $46.

"I bought $3-million worth of stock in Sunbeam with my own money because I believe that executives should take the risk," Dunlap said in an interview. "I'm here to maximize my own investment." At Scott Paper, Dunlap bought $4-million worth of stock.