LSI to Cut Jobs, Exit CDMA, DSL Markets
Wednesday January 16 1:16 PM ET
NEW YORK (Reuters) - Custom chip maker LSI Logic Corpannounced plans on Wednesday to cut about 1,400 jobs, or 20 percent of its work force, take a charge of up to $70 million and divest two units as it sheds costs in an effort to return to profitability in the second half.
Milpitas, California-based LSI, maker of specialized chips focusing on wireless and data networking, said it would cut 1,400 positions worldwide. It also said it is in talks to sell its CDMA phone handset and DSL product units.
LSI said it was also restructuring its Tsukuba, Japan, manufacturing operations. The company recently closed plants in Colorado and California, as specialty chipmakers last year saw sales tumble and losses mount in the industry's worst downturn on record.
The restructuring will result in a first-quarter charge of $50 million to $70 million, LSI said. The steps should cut sales and operating expenses about $30 million per quarter.
``We believe that both our semiconductor component and storage systems businesses have bottomed and we expect our overall revenues to grow in line with the semiconductor industry this year,'' LSI Chairman and Chief Executive Wilfred Corrigan said in a statement.
``We are emphasizing our core strengths and concentrating on those parts of the communications, storage and consumer electronics businesses where we have leadership positions,'' said Corrigan.
RESTRUCTURING HAILED ON WALL STREET
Analysts applauded the moves, saying LSI appeared to have located areas that it could afford to trim spending.
``They are getting their costs down especially on the manufacturing end, and getting out of things they weren't doing well,'' said Gerard Klauer Mattison & Co. analyst John Geraghty. ''They are trimming what they can trim and not hurt the company.''
Friedman, Billings, Ramsey analyst Alvin Kressler said the product areas LSI will exit are probably overserved.
``Their ability to get paid for the value they bring to the table is a lot lower because competition is so high and intense in that area,'' he said.
LSI STANDS BY REVENUE GUIDANCE
LSI said it will meet its guidance for 2001 fourth-quarter revenue growth of flat to 5 percent over the $397 million reported in the third quarter. It will meet its projection of a pro forma fourth-quarter loss of 23 cents compared with the pro forma third-quarter loss of 29 cents, the company said.
While LSI will probably post a loss in 2002, some analysts think the company, one of the largest makers of application specific integrated circuits, or ASICs, has a thin chance to make money for most of the year.
Analysts also believe LSI's share price could be poised for a solid rebound late this year and in 2003 as investors turn to smaller semiconductor makers whose shares have not yet enjoyed the rally big-name players have.
``The steps they are taking will probably reduce the operating costs enough so that the gap between loss-making and profitability narrows,'' said Kressler, who projects the company could turn a pro-forma profit in the first quarter of 2003.
LSI Logic is expected to report its 2001 and fourth quarter financial results on January 23 after the close of market. |
