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Freescale's restructuring strategy: drop DSPs, cut jobs

Posted: 30 Oct 2012 ?? ?Print Version ?Bookmark and Share

Keywords:restructuring strategy?

Freescale Semiconductor Inc. has recently announced plans to cut jobs as part of a restructuring strategy to focus the company more narrowly on fewer product areas. The strategy hopes to improve the company's revenue and profitability.

Although Freescale did not disclose the number of planned job cuts, the company stated that it expects to take charges of $35 million to $40 million for employee severance.

Gregg Lowe, Freescale's president and CEO, said in an interview that he expected the jobs cuts to equal less than 5 per cent of Freescale's overall headcount, which stands at about 18,000 worldwide. Lowe said the restructuring plan was not a cost-cutting move, but part of his previously disclosed plan to focus the company's resources on markets where Freescale has a chance to be a leader.

Lowe also said Freescale would restructure around five product areas!general purpose microcontrollers, digital networking processors, automotive microcontrollers, RF power amplifiers and analogue/sensors. To head each product group, Lowe chose three veteran Freescale execs and two recent additions from elsewhere in the industry.

As a result of the restructuring, Freescale will discontinue its stand-alone digital signal processor (DSP) business, Lowe said. Texas Instruments Inc.!Lowe's former employer!has an established lead in DSPs. Although Lowe said Freescale would continue to use and develop DSP technology for its multi-core products, he acknowledged that the company had little chance of challenging TI.

"It's a real stretch to say we can be the leader in that area," Lowe said.

Consolidating manufacturing
The company also announced it would focus all of its manufacturing operations under David Reed. Reed was a longtime TI exec who more recently led Globalfoundries Inc.'s 28-nm production in Dresden, Germany. Lowe said Freescale's manufacturing operations were previously split among several groups, unlike most chip companies.

"I think [Reed's] balance of having worked at a semiconductor company and having foundry experience is really going to be helpful to Freescale because we have our own fabs and also use foundries," Lowe said.

Lowe!who took the reins as Freescale's CEO in June!had said previously that he would spend his first few months on the job developing a plan to improve Freescale's market share by growing the company faster than the overall semiconductor industry.

Freescale said it would also re-align its R8D spending to focus about 90 per cent of spending on the company's product areas of focus. The company said it would also shift sales resources to align with industry growth in China and select opportunities in Korea, Taiwan and Japan.

Freescale said its restructuring moves are expected to save the company $35 million to $40 million per year.

Also Thursday, Freescale reported financial results for the third quarter, ended Sept. 28, and provided a forecast for the fourth quarter.

Freescale (Austin, Texas) reported quarterly sales of $1.01 billion, down 2 per cent from the second quarter and down 11 per cent from the third quarter of 2011. The company reported a net loss for the quarter of $24 million, or 10 cents per share, narrowed from both the previous and year-ago quarters.

For the fourth quarter, Freescale said it expects sales to fall to between $920 million and $960 million.

Lowe cited general economic malaise as the biggest reason for the projected sales decline. Freescale, like other chip firms, has been hurt by weak macroeconomic conditions.

While he said he was hesitant to make predictions about next year, Lowe said the projections given by chip companies point to a sixth straight quarter of revenue decline versus the year-ago quarter, which he said would match the industry's longest streak ever. On the other hand, he said, negative economic news abounds, from the Eurozone crisis to an economic slowdown in China.

"It's a conundrum," Lowe said.

- Dylan McGrath
??EE Times

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