Semiconductor manufacturer Cirrus Logic Inc says it has started making moves to cut 70% of its total fixed wafer fabrication capacity and the related costs – and will take a charge of nearly half a billion dollars to do so. The Fremont, California company said the move will allow it to concentrate on its profitable linear and mixed-signal products in the mass storage, audio and high-precision data conversion markets. The restructuring will also include phasing out its under-utilized joint manufacturing ventures with IBM Corp and Lucent Technologies Inc – the Micrus business in New York state, and the Cirent Semiconductor business in Florida, respectively. Cirrus says cutting off the dead wood should an immediate positive impact on the company’s earnings and margins. But they come with a steep price, as the total workforce will be reduced by 400 to 500 and restructuring charges will reach as high as $500m. The company will outline the timing of the charges in its second-quarter earnings report on October 21. The actions come as Cirrus moves toward a fabless business model, without the distraction of having to keep its fixed-capacity fabs filled. The business that will be jettisoned had first-quarter revenue of only $33m and gross margins of less than 10%, Cirrus says. It’s currently in talks with IBM and Lucent about getting out of the troubled ventures. The company claims that its core businesses of mass storage, audio and high-precision data conversion are operating profitably even in a global semiconductor market that has thrown many companies into financial disarray. Cirrus said it expects revenues for the second-quarter to be between $160m and $170m and earnings per share to be roughly break-even.
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