Macom to lay-off 250 employees and close facilities
Company to close of seven product development facilities as part of restructuring plan
Macom Technology, a US semiconductor firm, has announced it has implemented a restructuring plan that will provide an expected annual expense savings of approximately $50 million once fully implemented.
The restructuring plan Includes a permanent reduction in Macom’s hourly, salaried and management workforce of approximately 250 employees, or 20 percent of the total workforce—including personnel in R&D, production, sales and marketing and general and administrative functions.
Substantially all affected employees have been notified and customary transition assistance will be provided as a result of the restructuring.
The company also announced it will no longer invest in the design and development of optical modules and subsystems for datacentre applications. Going forward, Macom will be a merchant supplier of semiconductor integrated circuits (ICs) and photonic devices and will support optical module manufacturers at the semiconductor component level.
“We do not make these decisions lightly, however, these actions are necessary in order to strengthen our strategic plan,” said Stephen Daly, president and CEO.
The company expects approximately $14 million in restructuring charges including $7 million for employee severance obligations, a majority of which are expected to be incurred during the third fiscal quarter of 2019. In addition, the company is performing a recoverability assessment for its long-lived assets, most specifically its intangible assets that may be impacted by the restructuring plan.
As of March 29, 2019, Macom’s intangible assets had a carrying value of $472 million. To date, Macom has identified approximately $15 million of non-cash impairment charges in addition to the restructuring charges discussed above, associated with these restructuring actions.
Updated Q3 2019 Guidance
Revenue in the quarter is expected to be between $107 million and $109 million, compared to prior guidance of $120 million to $124 million. The updated guidance reflects the impact of discontinuing shipments to Huawei Technologies and certain of its subsidiaries and affiliates as a result of the US Department of Commerce action of adding Huawei to its Entity List. In addition, the updated guidance also reflects reduced shipments to certain of Macom’s distribution channel partners.
Non-GAAP gross margin is now expected to be between 39 percent and 41 percent, which includes approximately $14 million in inventory reserves, or 1,300 basis points of gross margin impact. These inventory reserves are primarily associated with certain datacentre products and products that would otherwise be shipped to Huawei. This compares to prior non-GAAP gross margin guidance of 53 percent to 55 percent.
Non-GAAP adjusted earnings per share is now expected to between be a loss of ($0.41) to ($0.45), and does not include any restructuring- or impairment-related charges. This compares to prior guidance for non-GAAP adjusted earnings per share of ($0.08) to ($0.04).