Litigation and inventory charges hit AXT
US-based substrate manufacturer AXT is set to record $3.5 million in charges when it reports its current financial quarter.
The company, which makes germanium, GaAs and InP substrates, will record a $1.4 million charge following a "tentative settlement" with rival substrate vendor Sumitomo Electric Industries of Japan.
The settlement includes a global patent cross-licensing agreement, although the precise details of this have yet to be decided.
AXT will record another $2.1 million charge because of excess product inventory and obsolescence. This charge comprises $1.6 million worth of products for which orders never materialized, while the remaining $0.5 million was described as "excess".
The charges will have an adverse effect on AXT s current financial quarter, with total revenue now expected to be $8.3-$8.5 million. Its previous forecast was $8.2-$8.9 million.
When it reported its June quarter results on July 21, AXT said that it had sufficient cash and funding to operate for a further 12 months. Cash and cash equivalents stood at $14.8 million at that point.
With gross margin running at an expected negative 25% in the current quarter, the latest charges will eat into the company s reserves.
AXT has had other problems this year, notably a senior management reshuffle in May that was prompted by an internal investigation that revealed non-compliance with certain product testing requirements.
The reshuffle saw previous CEO Morris Young shipped off to oversee the company s Chinese operation, where AXT now manufactures most of its products, while Donald Tatzin stepped up from CFO to become interim CEO.
In an attempt to return to a breakeven financial position, AXT cut jobs at its Fremont, CA, facility and transferred more production to China.
