Keithley discontinuing test product line, plans further job cuts
The parametric test product line discontinuation and 6% layoff statement comes just days after Keithley Instruments announced that it was notified by the New York Stock Exchange that it is no longer in compliance with continued listing standards and follows on other cost-cutting actions taken in 2008.
By Suzanne Deffree, Managing Editor, News -- EDN, February 26, 2009
Keithley Instruments Inc will discontinue its S600 Series parametric test product line and has announced a 6% layoff, as the Cleveland-based measurement company continues to cut costs.
The moves comes after Keithley Instruments in its fiscal 2008, ended September 30, announced it would cut 5% of its headcount as the economic picture began to darken. In its fiscal Q1, the company further announced an additional 7% headcount reduction and a 10% pay cut for the majority of its US employees, suspended its annual management bonus program, reduced sales commission payments, and temporarily halted its 401(k) match program for fiscal 2009.
The line discontinuation and 6% layoff statement made Wednesday also comes just days after Keithley Instruments announced that it was notified by the NYSE (New York Stock Exchange) that it is no longer in compliance with continued listing standards. The more than 60-year-old company is considered below criteria established by the NYSE because its total market capitalization has been less than $75 million over a consecutive 30 trading-day period, and its last reported shareholders’ equity was less than the exchange’s $75 million requirement.
With the announced actions, Keithley Instruments aims to save $4 million a year. The company said it will continue to accept orders for S600 Series testers until February 2010 and will continue to provide technical support, calibration, and repair services through February 2014.
“The financial crisis that has precipitated the global economic recession has analysts now projecting capital equipment spending for semiconductor production applications down 25 to 40% in 2009 after contracting roughly 25% in 2008," Joseph P Keithley, the company’s chairman, said in a statement.
He continued to note that device companies have pushed out new 300-mm fabs to 2010 and beyond from dates given earlier and that foundries do not expect device demand to return to 2008 levels before 2012.
"Orders for our S600 Series product line serving these customers have been declining now for many quarters," the chairman said. "Based on these facts and because we do not expect to be able to achieve results from this product line that are consistent with our business model, we have made the extremely difficult decision to discontinue the product line. We remain focused on managing our liquidity and aligning our cost structure with the current economic reality."
According to the company, sales of its S600 Series products have not represented a significant portion of total revenue since mid-2007. Further, Keithley Instruments said that the product line has been characterized by quarterly order volatility over the years and that exiting the line should lessen the company’s overall volatility.
“Although we will no longer pursue fully automated high-volume parametric test applications, we remain focused on serving the industry’s R&D and low-volume production test applications with our DC instrumentation, Model 4200 Semiconductor Characterization System, and Automated Characterization Suite family,” Keithley said.
The company estimated the line exit and layoffs will cost it between $5 million and $6 million on a pre-tax basis, which includes approximately $1.2 million for the headcount reduction and approximately $4 million to $5 million for non-cash asset impairment charges. The majority of the costs are expected to be incurred during the current quarter.
As of September 30, 2008, the company employed approximately 696 persons, 213 of whom were located outside the United States.
