Product category: Communications ICs (Wired)
News Release from: Zarlink Semiconductor
Edited by the Electronicstalk Editorial Team on 11 November 2002

Zarlink losses less than expected

Zarlink Semiconductor has released second quarter results for the fiscal 2003 period ended 27th September 2002

As expected, second quarter revenue was US $46.2 million as compared to US $48.0 million for the previous quarter and US $50.5 million for the same period last year. Sales continue to be affected by the general state of the semiconductor industry, and of communications semiconductors in particular.

Zarlink recorded a better than expected second quarter net loss of US $11.9 million, or US $0.10 per share.

In comparison, the company recorded a net loss of US $19.7 million, or US $0.16 per share in the second quarter of fiscal 2002.

Adjusted net loss for the quarter was US $11.7 million, representing a loss of US $0.10 per share.

This compares with an adjusted net loss of US $16.2 million, or US $0.13 per share for the same period last year.

"We are not relying on hopeful market rebounds to improve our business", said Patrick J Brockett, President and CEO, Zarlink Semiconductor.

"We remain focused on intelligently reducing our costs while strengthening our product portfolio".

Gross margin for the second quarter was 45% of revenue, down slightly from the 46% gross margin recorded in the previous quarter.

Zarlink continues to make improvements in its operations that are expected to affect positively product margins by the fourth fiscal quarter.

Ninety-day order backlog at the end of the second quarter was US $31.5 million up from US $28.0 million in the previous quarter.

Cash and short-term investments at the end of the second quarter were US $132.7 million, down from US $153.1 million in the previous quarter.

The reduction in the company's cash and short-term investments is due principally to the timing of certain scheduled annual payments, primarily for technology licenses and insurance premiums, cash operating losses of US $8.0 million and unfavourable currency fluctuations amounting to US $5.3 million.

"We are actively managing our cash reserves through this downturn and will significantly reduce our cash burn in coming quarters as further cost reductions take effect", said Brockett.

Zarlink continued to maintain its strong commitment to research and development in order to build a compelling product portfolio.

For the second quarter, R and D investments totalled US $23.2 million, or 50% of revenue, up from the US $20.7 million invested in the previous quarter and the US $19.5 million for the same period last year.

The company continued to carefully manage its spending to be in line with industry and sales forecasts.

Selling and administrative expenses were US $11.3 million, down from US $11.8 million for the previous quarter and US $12.8 million for the same period last year.

Cost containment and reduction efforts continue to be a priority in fiscal 2003.

Zarlink continued to set milestones and build industry leadership by developing compelling new products and technologies.

In the second quarter, the company launched a record 24 new products.

In the second quarter, Zarlink embarked on a programme of workforce reductions numbering approximately 200 people worldwide.

In the second quarter, the results from operations included approximately US $1.3 million in severance payments primarily related to reductions in Zarlink's operations and administrative functions.

In the third quarter, the company expects to record severance costs of approximately US $3 million associated with previously announced recent restructuring activities in the company's R and D organisation.

In the fourth quarter, Zarlink expects to begin realising the financial benefits of these actions.

Revenue in the third quarter is expected to remain flat at approximately US $46 million and Zarlink expects to record an adjusted net loss of approximately US $0.11 per share.

The company expects its cash and short-term investments will total approximately US $125 million by the end of the third quarter, down from US $132.7 million recorded at the close of the second quarter.

As a result of its cost reduction efforts and assuming the same level of sales at US $46 million in the fourth quarter of fiscal 2003, Zarlink expects that its quarterly cash burn from operations will be reduced to less than US $5 million.

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