Seeking to reverse several years of poor earnings, Micro Linear Corp. said last week it will cease developing products that meet the IEEE 802.11a wireless LAN protocol as part of a restructuring that also involves laying off 39 of 113 employees.
The fabless manufacturer of chips for Ethernet and broadband wireless applications said the market for 802.11a is becoming increasingly competitive despite slow growth, making it difficult for Micro Linear to justify continued investment.
"The company believed the [802.11a] market was going to be a fast developer if you proved you could do it faster and better," said Tim Richardson, Micro Linear's president and chief executive, during a recent conference call with analysts.
With a fivefold data-rate increase over the predecessor 802.11b standard, 802.11a was expected by many to spark a wave of WLAN applications this year. But cost, yield, and interoperability issues have slowed user acceptance, forcing suppliers like Agere Inc. and Intersil Inc. to delay producing the faster chips.
As of now, only one company, Atheros Communications Inc., is shipping 802.11a chipsets in production volumes, according to Joseph Byrne, an analyst at Gartner Dataquest, San Jose.
Byrne was unaware that Micro Linear had been developing 802.11a parts, but acknowled-ged that the field is increasingly competitive. "There are many companies pursuing 802.11a, and it makes sense for some of them to fold up their tents before pursuing it further."
Micro Linear, San Jose, will try to leverage its intellectual property for core products such as RFICs, as well as parts employing digital baseband technology, Richardson said.
Under the restructuring, some of Micro Linear's engineers no longer working on 802.11a will be redeployed to 5GHz and other RFIC development, he said. The company's R&D spending, currently $16 million annually, is expected to drop to $12 million.
"We need to make profitability a high priority. We need more customers and faster time-to-market," Richardson said.
Profits have been hard to come by at Micro Linear, which last scored a gain in 1998. In 2001 the company lost $16.2 million on sales of $22 million.
Micro Linear said it expects to record profit of $3.2 million on revenue of $9.1 million in its 2002 third quarter, which ended Sept. 30, but that includes a $4 million tax refund. The company will incur a $500,000 restructuring charge in its fourth quarter.