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ST cost-cutting scheme affects 4,500 jobs

Posted: 29 Jan 2009 ?? ?Print Version ?Bookmark and Share

Keywords:ST cost cutting? lay off? recession?

STMicroelectronics Inc. has outlined a major cost-cutting effort in 2009, which includes plans to shed 4,500 jobs amid loss and poor outlook.

In total, ST plans to reduce its costs by over $700 million in 2009. The actions are focused on "resizing" the company's manufacturing operations and streamlining expenses. The company also set a capital spending budget of about $500 million for 2009, representing a 50 percent reduction in comparison to 2008.

ST also reported sales of $2.276 billion in Q4 08, compared to $2.696 billion in the third period and $2.742 billion in the like period a year ago.

Reflecting the sharp downturn in the global economy, the company said Q4 net revenues decreased 15.6 percent sequentially and 17 percent y-on-y, "driven by significant weakness across most geographies and market segments, in particular automotive, telecom and computer."

For Q4 08, the company reported an operating loss of $139 million and a net loss of $366 million, or minus $0.42 per share, compared to the year-ago quarter operating loss of $15 million and net income of $20 million, or $0.02 per diluted share. In the previous quarter, ST lost $289 million or minus $1.54 a share.

ST also said Q4 08 restructuring and impairment charges totaled $91 million and largely related to previously committed restructuring programs. ST-NXP Wireless, a joint venture owned 80 percent by ST, is consolidated into ST's operating results. The fourth and third quarter 2008 financial review includes the ST-NXP Wireless joint venture.

In a statement, president and CEO Carlo Bozotti said: "Fourth quarter net revenues came in at the mid-point of our updated outlook and reflected the accelerated level of order push-outs and cancellations and decrease in demand as the quarter progressed."

Net revenues for the full year were $9.84 billion compared to 2007 revenues of $10 billion. Net loss, as reported, was $786 million in 2008, or minus $0.88 per share, compared to a net loss of $477 million, or minus $0.53 per share in 2007.

Net loss included pre-tax restructuring and impairment charges ($481 million), in-process R&D costs ($97 million), inventory step-up charges from NXP Wireless purchase accounting ($88 million), other-than-temporary impairment charge on financial assets ($138 million) and the impairment related to the Numonyx equity investment ($480 million) of $1,284 million with a tax impact of $141 million ($1.28 impact to earnings per diluted share in total) and $1,295 million ($1.29 impact to earnings per diluted share impact in total) for 2008 and 2007, respectively.

Going forward, the company is currently planning for revenues to be in the range of $1.5-to-$1.85 billion. As ST works to reduce inventory levels during this timeframe, fab loading will run at levels of about 50 percent.

Lay offs, plant shutdowns
It's been a tough time for the chip industry. AMD, Intel, IBM, NXP, On Semi, TI and others have announced layoffs amid poor results.

This week, Texas Instruments Inc. said it will lay off 12 percent of its workforce, or approximately 3,400 employees, as it restructures operations following one of the worst sequential and y-on-y quarterly performances in the history of the analog and digital signal processor company.

The other shoe recently dropped at Intel Corp., as the chip giant will close two fabs and three IC assembly factories.

The actions at what comes to four sites, when combined with associated support functions, are expected to affect between 5,000 to 6,000 employees worldwide.

- Mark LaPedus
EE Times

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