SAN JOSE, Calif. -- Seeking to cut costs, Canada's Zarlink Semiconductor Inc. has sold its analog foundry operations in Swindon, U.K. to MHS Electronics UK Ltd., a subsidiary of MHS Industries Group, for a mere 1 euro or $1.50.
The move more or less represents Zarlink's exit from the foundry business. Under the terms, Zarlink has transferred all assets related to its Swindon foundry business, including the analog foundry and equipment, employees, third-party inventory and other assets. Approximately 120 Zarlink employees will be transferred to MHS Electronics as part of the sale, representing all of the foundry employees.
With this acquisition, MHS Electronics will now offer foundry services. Zarlink's former analog foundry unit provides bipolar technology processes and design services for fabless semiconductor companies and original equipment manufacturers.
Zarlink experienced some bad luck in this sector. As a result of record rainfall and the breach of the nearby River Ray last year, Zarlink's analog foundry fab in Swindon, U.K. was flooded on July 20, 2007.
Zarlink will unload the fab for $1.50. Under the terms, Zarlink has also paid MHS Electronics 2 million euros ($3 million) to support restructuring initiatives. The two companies have signed a three-year agreement to ensure continuity of wafer supply for Zarlink, under which Zarlink will deposit $3.9 million, representing about nine months of product orders.
As a result of this sale, Zarlink expects to record a book loss of approximately $13 million, or $0.10 per share. Zarlink's guidance for the quarter has been revised from a loss of $0.06 to $0.08 per share to a loss of $0.16 to $0.18 per share.
Zarlink is maintaining its revenue guidance of $53 million to $56 million for the quarter.
"This transaction will benefit Zarlink and its shareholders, while the analog foundry employees will prosper as part of a pure-play semiconductor foundry," said Kirk K. Mandy, president and CEO of Zarlink, in a statement.
"Zarlink can now focus our resources solely on growth initiatives in the wired communications, optoelectronics and medical markets,'' he said. ''Management and the board of directors will continue to review all aspects of our business, and where appropriate take the strategic steps necessary to position ourselves for success in these markets."
Recently, Zarlink posted its results. Third quarter revenue was $48.6 million, compared with $49.6 million in the second quarter, and $34.1 million in the third quarter of Fiscal 2007. Zarlink recorded a third quarter net loss of $8.4 million or $0.07 per share. In the second quarter, Zarlink recorded a net loss of $15.9 million or $0.13 per share, and net income of $5.6 million or $0.04 per share in the third quarter of Fiscal 2007.