The current economic environment has dramatically reduced demand for our customers’ products. They therefore need fewer products and services from us. This is resulting in new order delays, as well as in rescheduling and cancellation of some of our backlog said George Chamillard, Teradyne’s chairman and chief executive officer. Our sales and earnings for the March quarter will therefore be lower than previously expected.
Our previous guidance was for sales to be down about 20% from the $789 million of the fourth quarter (pre-SAB 101), and we anticipated about $0.30/share in earnings. We also said that there would be an additional $0.25/share in earnings from sales recorded in the first quarter due to the effect of SAB 101, for a total of $0.55/share. Our current view is for sales to be down about 35% from the fourth quarter level (pre-SAB 101), with a corresponding reduction in EPS. We expect that the additional $0.25/share from sales recorded in the first quarter due to the effect of SAB 101 will still be realized. Chamillard added that Our visibility is very limited at this point and we don’t know how long the current downturn might last. We are, therefore, also implementing a series of cost-cutting measures to bring our expenses more in line with the conditions we find in the marketplace.
Some of the expense control measures which Teradyne has implemented include a cutback of its temporary workforce by more than 1400 people since the peak level; a company-wide hiring freeze; production furloughs in some areas; a delay in several capital spending projects; and the imposition of tight expense controls.
Historically, our broad range of businesses -including semiconductor test, connection systems, DSL line test and PC board inspection & test — gives us the ability to sustain our businesses more effectively in the down part of the cycle. In past downturns, the leaders in our customer base have invested in next generation products to leverage themselves out of the slowdown. As the technology leader in our businesses, Teradyne has recently introduced the largest collection of new products in our history, all of which are shippable in volume in 2001. If this cycle is like past cycles, we stand to benefit from this investment in technology to a greater degree than most other companies, Chamillard concluded.
