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Avanex to make deep cuts at French facility

Opto chip manufacturer Avanex is to slash its workforce in France by around 60% in the key part of its cost-cutting program.

Avanex, the Fremont, CA, photonic chipmaker, is to make major cuts to its manufacturing operations in Nozay, France.

The move, which Avanex CEO Jo Major described as "the most significant piece of its restructuring plans", will see the French workforce reduced by approximately 60% as the company strives to cut operating costs.

Avanex has already begun closing its North American manufacturing operations, and switching production to a low-cost operations center in Bangkok, Thailand. In addition, it has outsourced much of its component manufacturing as it aims to make an operating profit by June 2006.

The company expects to wipe out $28 million in annual expenses through the restructuring of its French operation, but at a one-time cost of $26 million "“ mostly in severance payments to its workers.

In its most recent quarter, Avanex saw its revenue decline slightly on the prior quarter because of annual price reductions, but at $40.3 million, the sales still represented a 34% increase compared with the same period last year.

Although still relatively dependent on Alcatel as its key customer, Avanex has also managed to diversify its client base, with Ciena and Cisco both accounting for over 10% of sales revenue.

While it waits for the effects of the restructuring to kick in, Avanex is still operating at a gross loss, and it posted a net loss of $18.9 million for the three months that ended on March 31.

That is still a major improvement on the same period last year, when it made a loss of $41 million.

Major added that Avanex had scored some design wins in the all-important Asian market, and that the fiber-to-the-home (FTTH) sector was picking up momentum.

Noting growing confidence and improved market visibility, Major is expecting to see 4-6% sequential growth in revenue in the current quarter.

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