Scumbria - Looks like IDT is in Worse Shape than previously believed! They have mucho excess capacity (read - FEW customers) yet they are going to have IBM make additional wafers for them?
Look for that deal to be canceled real soon.
The WinCHIP is shaping up like a LoseCHIP.
Paul
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businesswire.com
BW0504 SEP 08,1998 20:08 PACIFIC 23:08 EASTERN
( BW)(IDT)(IDTI) IDT Updates Restructuring Plan for Q2FY99
Business Editors/Technology Writers
SANTA CLARA, Calif.--(BUSINESS WIRE)--Sept. 8, 1998--IDT (NASDAQ:IDTI) today announced it will record in its second quarter a write-down of the asset carrying value related to its wafer fabrication facility located in Hillsboro, Ore.
IDT announced on July 22, 1998 that in its second fiscal quarter it would record non-recurring charges of between $50 and $60 million, on a pre-tax basis, associated with initiatives to improve profitability. These include a reduction in headcount and the closure of its San Jose, Calif. wafer fabrication facility.
In light of continuing conditions in the semiconductor industry as well as changed product volume expectations within IDT, and as required by accounting standards, IDT initiated an asset impairment review. The Company concluded that despite the closure of its San Jose
facility, it would still be in a position of significant overcapacity.
The overcapacity is the result of both the size of the Oregon facility as well as the significant progress IDT has made in scaling process technology down to 0.25 microns.
The review revealed that currently projected production volumes and related cash flows from the Oregon facility would not be sufficient to recover the carrying value of that manufacturing facility.
Therefore, an additional charge of between $115 and $140 million, on a pre-tax basis, will be recorded in the second fiscal quarter. Also, as part of the provision for taxation, IDT will provide a reserve of approximately $40 million for the deferred tax assets which it carries.
Including all of the charges outlined above, the total non-recurring charges specifically identified in the statement of operations or recorded in accordance with the nature of the
charge, are expected to approximate $205 to $240 million.
Only $15 to $20 million of these charges represent anticipated cash payments associated with deinstallation of equipment, facility decommissioning and restoration, and employee severance costs. In addition, IDT previously announced anticipation of an operating loss in the current quarter.
"The Oregon facility is key to IDT's future success," said Len Perham, IDT's president and chief executive officer. "However, the global slowdown in the semiconductor industry,
the proliferation of foundries in Asia, and the increase in 'hidden capacity' resulting from technology advancements have created widespread overcapacity.
"This situation and IDT's own technology advancements have created significantly more capacity than we can reasonably absorb in the near term. During the past two years, the impact of the costs reported on IDT's statement of operations associated with excess capacity has been significant, and revenue has not grown to absorb the cost of the
Company's manufacturing assets.
"Our action acknowledges this overcapacity and is consistent with other operating initiatives taken to bring IDT's costs and revenue in line. While our recent decisions have been difficult to make, these steps and the continued funding of new product development will help ensure IDT's long-term viability and success."
About IDT
IDT enables a digitally connected world by providing innovative semiconductor solutions to leading-edge designers in communications and computing. IDT's broad product mix consists of communications memories, networking devices, both RISC and x86
microprocessors, high-speed SRAMs and high-performance logic.
Headquartered in Santa Clara, Calif., the company employs approximately 5,000 people worldwide and has manufacturing facilities in California, Oregon, the Philippines and Malaysia. IDT stock is traded on the Nasdaq stock market under the symbol "IDTI."
Additional information about IDT is easily accessible through the World Wide Web (www.idt.com), CD-ROM by calling 800/345-7015, or via fax-on-demand at
800/9-IDT-FAX. The investor hotline is 408/654-6420.
Forward-looking statements in this release involve a number of risks and uncertainties
including, but not limited to, product demand, manufacturing, capacity and costs,
competition, pricing, patent and other intellectual property rights of third parties, timely
development and supply of new products and manufacturing processes, availability of
capital, cash flow, and other risk factors detailed in the Company's Securities and
Exchange Commission Filings.
Actual results may differ materially from the Company's projections.
--30--azs/sf*
CONTACT: IDT Investor Relations
Michael Tierney, 408/654-6676
michael.tierney@idt.com
Investor Relations Hotline: 408/654-6420
KEYWORD: CALIFORNIA OREGON
INDUSTRY KEYWORD: COMED COMPUTERS/ELECTRONICS |
