Credence to cut 30% of workforce

In the semiconductor test company's first profitable year in six years, Credence is embarking on a strategy of simplicity and focus, according to CEO Lavi Lev.

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 1/8/2008

As part of its fiscal Q4 financial results, Milpitas, Calif.-based semiconductor test provider Credence Systems Corp. outlined changes that the company said are intended to build on core technology strengths while simplifying operations to meet increasing opportunities in Asia-driven consumer semiconductor markets, highlighted by a 30% workforce reduction.

Credence reported fiscal Q4 ended November 3, 2007 net sales of $97.7 million, down 21% from fiscal Q3 net sales of $123.5 million, and down 23% year-over-year from fiscal Q4 2006 net sales of $127.1 million.

Incoming orders for Q4 2007 were $54.4 million, corresponding to a book-to-bill ratio of 0.55. Net income for Q4 $5.6 million or 5 cents per share, compared to net income of $10.3 million or 10 cents per share in Q3 and a net loss of $1.9 million or 2 cents per share in fiscal Q4 2006.

For the full fiscal year 2007, net sales were $461.1 million, down 6.5% from net sales of $493.4 million in the fiscal year ended October 31, 2006. Net profit for fiscal 2007 was $12.5 million, or 12 cents per share, marking the company's first profitable year in six years, and compared to a net loss of $481.6 million, or $4.82 per share in fiscal 2006.

Credence also noted that it more than doubled its cash and investments on the balance sheet to $242.1 million, compared with $102.8 million at the end of fiscal 2006.

As part of its corporate changes, Credence said it intends to prioritize its R&D activities in its Diamond and ASL platforms to “accelerate their deployment” in mainstream consumer semiconductor markets. The company also said it will focus its Sapphire platform development on configurations that support leading-edge applications for the high end of the consumer semiconductor markets.

And since the highest concentration of consumer semiconductor manufacturers are located in Asia, Credence said it will aim to double its sales and support headcount in the region by the end of the year.

As part of cutbacks, Credence also said it intends to divest or otherwise reduce its commitment to businesses and products that are unrelated to its consumer semiconductor market focus, including its Diagnostics and Characterization business and Sapphire DPI solution, as well as scale down its service infrastructure and align with the self-service model commonly used by its major North American IDM customers.

The company noted that the increase in service resources in Asia will allow it to better serve the unique needs of this base, with outsourced manufacturing activities to continue in accordance with previously announced plans.

Approximately 100 employees will be added to address the company’s increased consumer focus, only partially offsetting restructuring initiatives that will result in a net worldwide headcount reduction of 400 people, or approximately 30% of its workforce by end of November.

In connection with this restructuring, Credence will take charges of approximately $16 million in fiscal Q1.

Lavi Lev, Credence’s president and CEO said in a statement, “The essence of our new strategy is simplicity and focus. This means doing fewer things better in a focused market. For Credence, it’s the high-growth consumer semiconductor markets, where the customer pool is rich, the application space is deep, and our growth engines, Diamond, ASL and Sapphire are already well positioned. Executing on the new strategy regrettably requires extremely difficult decisions that affect valued employees and colleagues. We are nonetheless convinced that these are the right decisions to ensure a successful future for Credence.”

Lev was appointed president and CEO in December 2006.

Looking ahead to fiscal Q1, net sales are expected to be $58 to $62 million, with a per share loss of approximately 37 to 39 cents.

Finally, Credence announced today the appointment of Kevin C. "Casey" Eichler, as senior VP and CFO.


For more insight from Credence's Lev, see this Practical Chip Design blog entry, "Design intent, life-cycle costs, SoCs and BOST: a lurking train-wreck."