Atmel Axes Jobs, Sells Fabs

By Colleen Taylor -- Electronic News, 12/13/2006

Atmel Corp. has announced plans to implement a set of "strategic restructuring initiatives" that include selling two fabs and axing 1,300 jobs.

In a statement Tuesday, Atmel said that in an effort to halt development on "lesser, unprofitable, non-core products," it will seek to sell its wafer fabrication facilities in North Tyneside, U.K., and Heilbronn, Germany. Atmel also said it will adopt a "fab-lite" strategy, by utilizing its remaining wafer fabs and expanding its foundry relationships.

Through a combination of voluntary resignations, attrition and other actions, Atmel said it expects a reduction in its non-manufacturing workforce of approximately 300 employees, or 10 percent. The company said it anticipates headcount to be reduced by approximately 1,000 additional employees upon completion of the sales of the North Tyneside and Heilbronn wafer fabrication facilities.

The big changes should leave Atmel with big payoffs: The company said it anticipates cost savings in the range of $70 million to $80 million in 2007, reaching an annual rate of $80 million to $95 million by 2008. Included in the cost savings is approximately $55 million per year resulting from the expected sale of the wafer fabrication facilities. Nevertheless, Atmel said it also estimates it will record one-time restructuring and impairment charges in excess of $200 million in Q4 for fixed asset write-downs, severance and other expenses associated with the restructuring.

"These initiatives follow a thorough analysis of the company's operations and strongest opportunities for growth," Steven Laub, Atmel president and CEO, said in a statement. "While this decision was difficult given the company's many dedicated employees, these actions are essential to better position Atmel to compete and drive value for our shareholders."

The company may be trimming its ranks partly in anticipation of the hefty charge it may soon take for backdating stock options. In October, Atmel admitted to discovering a history of illegal backdating that would result in a big restatement of its financial records and will likely include monetary charges, for which the company has not stated a specific amount yet.