SAN FRANCISOFreescale Semiconductor said it would trim about 10 percent of its workforce after charges dragged the company to a $3.37 billion loss in the third quarter.
Hurt by non-cash charges associated with the company's decision to divest its cellular products business and weakening market conditions, Freescale reported the loss on net sales of $1.41 billion for the third quarter.
Freescale (Austin, Texas) also said it would reduce its global workforce by about 2,400 jobs as part of a restructuring program that the company expects will save more than $400 million per year.
Freescale recorded non-cash intangible assets and goodwill charges totaling $3.37 billion in the third quarter, an estimate which the company expects plans to finalize in the fourth quarter.
The $3.37 billion write off is "a recognition that the value of our company, much like the value of other companies, has come down," particularly in light of plummeting market valuations of peer companies, said Rich Beyer, Freescale chairman and CEO. Beyer emphasized that the charge was a non-cash charge and said Freescale's third quarter "was a thoroughly decent quarter given the incredible macroeconomic environment."
Freescale reported third quarter net sales of $1.41 billion, down 4 percent sequentially from $1.47 billion in the second quarter and down 3 percent year-to-year from $1.45 billion in the third quarter of 2007.
Freescale recorded earnings before interest, tax, depreciation and amortization (EBITDA) of $387 million in the third quarter.
Beyer expressed concern about the macroeconomic environment, suggesting the current chip industry downturn could be worse than those in recent memory. While all downturns share certain characteristics, Beyer said, the current downturn is different from the tech sector implosion of 2000. As a more broad-based economic problem, this downturn could potentially be worse, he added.
"I believe that the potential exists for it to be a deeper drop in revenues or a longer period in which the revenues stay downor, God forbid, both," Beyer said.
Freescale said it has initiated a series of restructuring actions which will reduce headcount in its supply chain, technology, marketing and general administrative functions. The company said it expects to incur about $175 million in restructuring charges. The moves, which include modest layoffs initiated in the third quarter, are expected to save the company more than $400 million per year.