Benhamou bit ear! Opponent threw in towel!!
Rockwell to Spin Off Chip Unit;
Firm Plans Job Cuts and Charge
By FREDERICK ROSE
Staff Reporter of THE WALL STREET JOURNAL
LOS ANGELES -- Rockwell International Corp., recasting itself for the third time in as many years, said it will spin off its big semiconductor unit, cut its remaining work force by 9% and take charges of $625 million in the current quarter.
Rockwell to Eliminate Up to 10% of Its Staff Amid Persistent Woes (June 26)
Rockwell's divorce from the world's largest computer-modem chip operation means the company will continue with just two businesses, its industrial automation and aircraft-avionics divisions, and projected revenue of $6.8 billion this fiscal year, which ends Sept. 30. That is a shadow of the company previously known as the builder of the Space Shuttle, the B-1 bomber, truck axles and even printing presses -- a concern that had nearly $13 billion in revenue in fiscal 1995.
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Painful Changes
Mr. Davis staunchly defended his mentor's view that semiconductor operations added spice to Rockwell's mix. But painful changes in technology and a pricing battle over emerging high-speed modem chip designs have battered the semiconductor division's once-high margins. "They kind of threw in the towel," said Lior Bregman, financial analyst at CIBC Oppenheimer, Monday.
Analysts and institutional holders, many of whom had for months urged the sale of the semiconductor operation, Monday worried about the shape of Rockwell's future, with two oddly related businesses confronting swift-changing economic conditions. Even so, Mr. Modzelewski of PaineWebber, who has long called for separation of the semiconductor operations, welcomed the spinoff as "a great strategic move."
Confronting Rockwell now, analysts say, are questions of further separations or changing ownership. "Given what they've been doing in the past, there's more to come," said Mr. Bregman.
Generating Savings
But Rockwell Monday said it planned to slim down and drive on. Overall, its work-force reductions and other cost-cutting are expected to generate about $100 million, or 33 cents a share, of pretax savings in fiscal 1999 and about $200 million in yearly savings by fiscal 2001, the company said.
With the semiconductor business classified as "discontinued" until its expected spinoff later this year, Rockwell said it expects earnings from continuing operations to be about 45 cents a share for the fiscal third quarter ending Tuesday, off about 20% from 56 cents a share a year earlier. Revenue for the quarter will total about $1.7 billion, up about 5% from the year-earlier period. Automation-division profit will fall about 10% from a year earlier, while avionics-division profit will be reduced by a $35 million charge for changes in government programs, the company said.
Forecast for Fiscal 1999
Rockwell said that "on a very preliminary basis" it believes its continuing business will see about 7% growth in revenue and net income of between $2.90 and $3 a share for fiscal 1999, up from about $6.8 billion in projected revenue and per-share operating earnings of $2.30 for the current fiscal year, which excludes all anticipated one-time charges.
Rockwell's semiconductor division, meanwhile, is about to begin independent life with operating losses for both the current quarter and year, the company said. Revenue is projected to remain at $1.3 billion for the year.
Technological change is the main problem. The last generation of standard telephone "modem" designs for computer communications is giving way to far higher-speed digital signals, sent through either television cables or special digital telephone circuits, that are expected to be the core of future Internet connections to the home.
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