Communications chip maker Agere Systems is to cut 500 jobs and will almost certainly close its fab at Orlando, Florida by the end of the year, where a further 600 are employed.
CEO John Dickson said the measures are absolutely necessary to align expenses with revenue. The issues we faced with three major customers now seem to have broadened into an industry-wide inventory correction, as reflected by a spate of earnings warnings from most companies in our industry, he said.
The reductions are designed to cut its R&D and general expenses from a current level of $195m a quarter to between $170m and $175m by the third quarter of its 2005 fiscal year which begins in April. Charges for the reductions will be between $340m and $360m, and $130m to $140m of this will be recorded in its current fourth quarter that ends September 30.
Agere has been trying to sell its Orlando fab as a going operation since 2002, so prospects look bleak for the facility unless a buyer suddenly emerges.
The company expects revenue for its first quarter of fiscal 2005 that ends on December 31 to show a 5% sequential fall as a result of inventory adjustments by customers of 2.5G/GPRS mobile phone and telecommunications products. It also blames a seasonal decline in IP revenues and shipments of chips for satellite radio. This will put a squeeze on margins with a lower utilization of capacity.
Agere is sticking to the forecast that it gave in July that revenue in the current quarter to September 30 will be in the $420m to $445m range.