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Telrad Networks is laying off 35 to 40 employees from its Lod production plant, about 15% of the communication hardware company's workforce.

Sources in Telrad, which is owned by Koor (61%) and Yuval Cohen's Fortissimo fund, said Koor management had asked department heads to prepare a list of workers to be sent packing, focusing on long-time veteran employees and those with relatively low output.

Liquidity problems necessitate urgent cost-cutting steps, said management.

Telrad once had a workforce of 1,000 employees, but stiff competition has forced it to pare down its activities. Many in the business say, the company has been too slow to adapt. The firm has also suffered from frequent labor disputes that have led to sanctions and strikes.

Telrad currently develops optic fiber-based switching systems and communications systems. Most of Telrad's activity surrounds production of equipment for the Canadian firm Nortel, but it has been considered Koor's biggest cash sink for many years. Although Telrad revived somewhat in 2007, with profits of NIS 13 million, it's long-term results are cheerless. In 2006 the company lost NIS 100 million, and the year before it lost NIS 90 million.

Nevertheless, the company reports that it has scored several large international deals, including a joint development project with U.S. giant LSI and other companies.

A spokeswoman for Telrad refused to comment on what she described as rumors, but said the company adjusts its human resources from time to time. Adjustments are made in keeping with structural changes reflected in the sale of hardware production lines and the transfer of others to the Philippines, where labor costs are lower.

"As the nature of the company changes, changes to the workforce become necessary. As part of these changes, we are also hiring new workers, mainly hardware engineers," the Telrad spokeswoman said.