LSI cuts 900 jobs, sells consumer products biz
By Colleen Taylor, Contributing Editor -- EDN, June 28, 2007
In an aggressive set of moves aimed at streamlining its operations, LSI Corp. Wednesday announced plans to cut 900 jobs, or about 13 percent of its non-production workforce, and sell its consumer products business to Magnum Semiconductor Inc.
Financial terms of the sale, which was funded by private equity investment, have not been disclosed. The transaction is expected to close in Q3. Under the terms of the agreement, Magnum will purchase the LSI DoMiNo, Domino[X] and Zevio architectures, products and related IP of the LSI consumer products business. Additionally, Magnum said it will offer employment to a "significant number" of LSI employees associated with the business.
The company said that the restructuring is a result of a portfolio review that LSI has been conducting under a three-phase business acceleration plan the company adopted after its $4 billion merger with Agere Systems on April 2. At the time the merger became effective, LSI was said to be considering job cuts and facilities consolidation as part of an effort to save about $125 million in 2008.
Aside from the merger, LSI has been working on honing its business focus for more than a year: In March 2006, LSI moved away from ASIC technology and in July 2006 announced plans to sell its DSP unit. LSI said Wednesday that its latest sale was another move intended to increase its focus on its businesses in the storage, networking, and mobility market segments.
LSI said that its latest initiatives put it ahead of schedule on its merger integration and are expected to reduce its non-GAAP operating expenses to between $255 million and $265 million in Q3 and to between $245 million and $255 million in Q4—in contrast to the $295 million to $305 million in non-GAAP operating expenses the company expects to incur for Q2. The company said it expects to make further progress on operating expenses in 2008.
"We are accelerating our timetable for aligning the resources of the new LSI with market opportunities and focusing on those markets where we possess leading technology and sustainable competitive advantages," Abhi Talwalkar, LSI president and CEO, said in a statement. "[Wednesday's] actions will position the company to improve our gross margins in our semiconductor business and to grow profitably in a competitive, fast-changing market."
