RICHMOND -- The largest restructuring in the history of James River Corp. surprised shareholders and employees of the paper manufacturing company, but industry analysts have given the changes a positive reaction.

In an announcement last week at the company's annual meeting, James River said it will sell off business lines in which profits were disappointing and will concentrate on cost-effective operations with a high market share.

The restructuring, expected to be completed within a year, will shrink the company's annual sales by more than $1 billion dollars and will transfer about 7,300 workers to the buyers of the divested operations.

In making the announcement, James River Chairman and chief executive Brenton S. Halsey called the plan "perhaps the most important and complex endeavor James River has ever undertaken."

"It is not a program that we undertake with a great deal of enthusiasm," Halsey said.

"James River has throughout its history been a company of growth, and it is clearly not as much fun to consider growing smaller," he said.

Halsey said the operations to be sold contributed about $1.3 billion, or about 22 percent, to last year's sales of $5.9 billion.

Cash raised by the divestitures will be used to expand capacity in the company's remaining businesses and to buy back up to 8 million shares of the company's stock, a step that sometimes is taken by companies to bolster support for their stock price.

When the program is finished, the company will operate mainly in four business areas: towel and tissue products, Dixie food service products, food and consumer packaging, and communication papers.

George Shipp, an analyst who follows James River for Scott & Stringfellow Investment Corp., said his preliminary reaction to the announcement was generally positive.

"To me it makes a great deal of sense," he said. "I think there's a realization that capital is in short supply in the '90s and that the company can't do everything."

"Long term, I think this is very positive for earnings, financial returns and the stock price," said Jeanne Carroll, an analyst at Morgan Stanley & Co.

James River, based in Richmond, reported $6 billion in sales for the fiscal year ended April 29, up from $5.87 billion in 1989. Profit fell 13 percent, to $222 million from $255 million.