MIPS plans 15% layoff on $108.5M loss

MIPS Technologies will cut some 75 employees, mostly from analog business and corporate positions, after reporting a fiscal Q4 loss of $108.5 million and a $103.1 million write-down. More than $101 million of the write-down was associated with MIPS' Chipidea analog business group.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 8/14/2008

MIPS Technologies Inc Wednesday announced coming 15% layoffs after reporting a fiscal Q4 loss of $108.5 million and a $103.1 million write-down, of which $101.4 million was associated with its Chipidea analog business group.

The Mountain View, Calif-based company said in a filing with the SEC (Securities and Exchange Commission) that the job cuts will affect employees at its facilities in the United States, Israel, and Europe. MIPS said it expects to incur costs associated with the layoffs of approximately $4 million to $5.5 million, of which approximately $3 million is expected to be recognized in its fiscal Q1 2009 and the balance in its fiscal Q2 2009. 

The company separately said on its quarterly earnings call that while the cuts will be across the board, they will more prominently impact MIPS on the analog and corporate sides. MIPS currently employs 512 people worldwide, thus a 15% layoff would affect approximately 75 employees.

MIPS further said on the call that it expects to save $5 million per quarter based on the workforce reduction.

The announcement comes after MIPS cut 28 employees from its processor business group earlier this year.

Meanwhile, revenue for the quarter was $28.9 million, an increase of 6% sequentially and an increase of 22% year over year, driven primarily by increased processor license fees. The company's net loss compared with a net loss of $4.3 million in the prior quarter and a net income of $2.3 million in MIPS fiscal Q4 2007.

"Our fourth quarter results reflect both progress and continuing challenges," said John Bourgoin (pictured, right), MIPS' president and CEO, in a statement. "We had a good revenue quarter, reaching the upper end of our guidance and recording the highest quarterly revenues in the history of our company. But we believe the market continues to show signs of softness, and so we have taken decisive restructuring actions to resize the company in both of our business groups to enable the sustainable profitability and cash flows that investors expect from our combined IP businesses.”

As to the large Chipidea write-down, Bourgoin noted that the synergies MIPS had expected to realize from the combined sales forces are talking longer than it had expected as it mergers Chipidea into its portfolio. MIPS announced plans to acquire Chipidea for $147 million in August 2007. “The write-down reflects current market realities, but our belief in the long-term growth and strategic value of the Chipidea analog business remains strong," he said.

Indeed, MIPS revenue for the 2008 fiscal year increased to $104.8 million, an increase of 26% over the prior fiscal year revenue of $83.3 million, primarily on additional revenues associated with the Chipidea acquisition.

Bourgoin estimated revenue at around $28 million for its current quarter and said he expects revenue to gain 10 to 20% for the company’s full fiscal 2009.