PMC-Sierra Cuts 89 Jobs

-June 24, 2005

Despite plans to meet its guidance, PMC-Sierra Inc. today said it will slash a total of 89 jobs in Q2.

The announcement came as the company updated its Q2 restructuring plan, previously announced during PMC-Sierra’s Q1 conference call on April 20, which then called for a 26 employee layoff.

The additional 63-employee cut was announced this morning, even though PMC-Sierra said its Q2 revenues are expected to be at or near the high end of its April sales forecast for $70 million to $72 million. The 6 percent to 9 percent sequential growth is expected to be accompanied by a book-to-bill ratio exceeding 1.1, as current quarter bookings are already greater than the company's July quarter revenue outlook, PMC-Sierra reported.

Eliminating the 26 positions would show a restructuring cost of $1.5 million; to eliminate the further 63 positions, primarily related to research and development, a restructuring cost of $5.9 million is expected to be recorded. The total cost of $7.4 million will reduce the company's on-going annualized operating expenses by approximately $10 million to $12 million per year, PMC-Sierra said.

"Business conditions across all of our product groups are improving, with new communications and storage products contributing to our business momentum," said Bob Bailey, chairman and CEO of PMC-Sierra, in a statement. "Additionally, we are continuing to focus on improving the efficiency of our operations to enhance our on-going business performance."

PMC-Sierra said it will provide more details on the activity and restructuring during the company's Q2 release on July 21.

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