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Atmel refocuses strategy to accelerate growth, cut costs

Posted: 14 Dec 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Atmel? wafer fabs? wafers? wafer? semiconductor?

Atmel Corp. will undergo restructuring, focusing on redeploying its resources, selling some of its fab lines and adopting a fab-lite strategy. The company estimates it will record one-time restructuring and impairment charges of about $200 million this fourth quarter, a significant portion of which coming from selling its fabs.

The company expects cost savings of $70 to $80 million in 2007, reaching an annual rate of $80 to $95 million by 2008. Included in the cost savings is approximately $55 million per year resulting from the expected sale of the wafer fabs.

Atmel will sell its wafer fabs in North Tyneside, United Kingdom and Heilbronn, Germany. This is to increase its manufacturing efficiencies in its remaining wafer fabrication facilities while reducing future capital expenditures. Atmel also expects to enter into a transition sourcing agreement with the eventual buyers of the wafer fabrication facilities.

To focus on its high-growth, high-margin proprietary product lines, Atmel plans to redeploy resources to accelerate the design and development of products for expanding markets and to halt development on lesser, unprofitable, non-core products. The company will also adopt a fab-lite strategy founded on optimizing the use of its remaining fab and expanding foundry relationships. Through this, Atmel aims to reduce manufacturing costs for design and development of its new products.

"These initiatives follow a thorough analysis of the company's operations and strongest opportunities for growth," said Steven Laub, Atmel president and CEO. "While this decision was difficult given the company's many dedicated employees, these actions are essential to better position Atmel to compete and drive value for our shareholders. Focusing on our core business competencies, expanding our foundry relationships and the adoption of a fab-lite model are the right strategies for Atmel to better serve our customers, reduce manufacturing costs and enhance shareholder value."

Meanwhile, Atmel expects its non-manufacturing workforce to be reduced by 10 percent or 300 employees, through a combination of voluntary resignations, attrition and other actions. It anticipates headcount to be reduced by approximately 1,000 additional employees upon completion of the sales of the North Tyneside and Heilbronn facilities.

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