According to the company, the majority of these measures will be initiated by the end of January 2009 and a significant portion of the savings is expected to be recognized in the first half of 2009.
In mid-December 2008, the company initiated actions to wind down its Korea-based handset manufacturing operation. This wind down will occur over the next six months to enable the company to meet current customer commitments in North America and the process will be complete by July 2009. Additionally, the company has initiated actions to disband its custom solutions business unit by the end of the first quarter 2009. Additional 10% savings through headcount and SG&A reductions
In the fourth quarter of 2008 and first quarter of 2009 the company will reduce its global employee base by approximately 10%. This reduction is in addition to the employees impacted by the identified non-core business rationalizations discussed above.
Over the past twelve months the company has implemented a number of IT systems and operational enhancements. With the improved operational capability, the company is now able to eliminate functional duplication and consolidate a number of back office functions into its China operations. This process will start in the first quarter of 2009 and be executed over the first three quarters of 2009.
The company also expects to incur a restructuring charge in connection with the worldwide reduction in workforce not related to the wind down of the Korea-based handset manufacturing of approximately $8 million comprised of one-time severance benefits. This charge is also expected to be taken in the fourth quarter of 2008.
Peter Blackmore, CEO and president of UTStarcom, said: Over the past 12 months, we have achieved a year-over-year OPEX reduction of 20% and streamlined our business to improve our competitive and financial position. These additional measures will reduce our annualized expense base by another 25% or $100 million. Importantly, these actions will advance our strategic goals by increasing our focus on our IP-based portfolio targeting the developing regions of the world.
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