RFMD curtails WLAN chipset development
RF Micro Devices (RFMD) is to stop its internal development of wireless LAN chipsets.
However, the company will continue to work on transceivers, power amplifiers and front-end modules for WLAN applications.
The move affects employees at RFMD's San Jose location, while the company will also be closing its Moscow, Russia, and Leuven, Belgium, offices.
While some employees will now switch to more profitable parts of the business, there will be some staff cuts.
Although the decision is expected to cost RFMD $37 million-$41 million up front, including $3 million-$4 million in cash due to employee severance payments and building lease termination, it should have a positive effect on future company operations.
No product revenue was associated with the discontinued activity, and the move will significantly reduce RFMD's research and development expenses.
Overall, operating expenses are expected to drop by $18 million-$22 million per year. RFMD's operating profit in the first nine months of the current fiscal year was $1.7 million.
CEO Bob Bruggeworth said that RFMD had struggled to get the WLAN chipsets to market, something that the company believes is generally one of its core strengths.
"It's never easy to let good people go, and this decision was not taken lightly," remarked Bruggeworth. "[But the decision] was made with the overall growth and profitability of the company in mind."
RFMD entered the WLAN chipset business when it acquired Resonext in a $133 million stock deal two years ago (see related story), at which point it had planned to become the leading supplier of WLAN chipsets.
While the chipset activity has failed to live up to expectations, RFMD remains confident about its WLAN products in general, despite fierce competition and price erosion of 15-20% per year. It struck a deal to supply GaAs HBT WLAN transceivers to Japanese gaming giant Nintendo last year.