Texas Instruments Inc. said it will reduce workforce by 12 percent, or approximately 3,400 employees, as it restructures operations following one of the worst sequential and year-over-year quarterly performances in the history of the analog and digital signal processor company.
Dallas, Texas-based TI also warned that it does not expect sales will improve significantly anytime soon due to continuing weakness in the general economy, which helped drive down fourth quarter revenue 30 percent from the immediately preceding quarter and 26 percent from the comparable quarter of 2007.
Net income in the December quarter plunged 86 percent, to $107 million, or 8 cents per share, from $756 million, or 55 cents per share, in the year-ago quarter. The company said the results included 13 cents per share in restructuring charges.
Excluding the special charges, adjusted earnings per share would have been 21 cents, TI said. Analysts were expecting TI to report adjusted earnings per share of 12 cents.
TI's woeful performance follows equally dismal results posted in recent weeks by many other semiconductor industry heavyweights and high-tech equipment OEMs, including Intel Corp., Advanced Micro Devices Inc., Ericsson and Nokia, all of which also announced fourth quarter revenue fell sharply due to the weakening economy. By promptly cutting workforce, TI expects to bring its expenses more in line with reduced demand, the company said.
"We are realigning our expenses with a global economy that continues to weaken," said Rich Templeton, chairman, president and CEO at TI, in a statement. "By reducing expenses now, we keep TI financially strong and able to invest for future growth."
The extent of the cost-reduction actions being implemented by TI demonstrates how deeply the economic recession is beginning to hurt companies in the electronics industry.
With consumer and corporate demand stalling, most electronic component suppliers are largely working to blind forecasts and have been forced to severely cut production to reduce costs.
In TI's case, the company appears to be aiming most of its costs at non-core businesses and the selling, general and administrative structure.
The company will be cutting jobs largely in "our internal support functions and non-core product lines so that a greater percentage of the dollars we spend will go directly toward developing and supporting analog and embedded processing products," according to Templeton. "We believe these are the areas that will drive TI's future growth and allow us to achieve our financial objectives."
Details of the job cuts confirm earlier speculations TI had started offering buyouts to older workers. The company said it will actually eliminate 1,800 positions through direct layoffs and offer voluntary retirements to 1,600 other workers.
The cuts will cost TI approximately $300 million and combined with the expected benefits from earlier reorganization plans announced in October add up to $700 million in annual savings.
The outlook for the first quarter appears even bleaker than the fourth quarter performance. TI forecasts first quarter revenue will be in the range of $1.62 billion to $2.12 billion.
The company said it may post a net loss for the first quarter. For 2009, TI expects R&D expenses will be $1.5 billion while capital expenditure will be approximately $300 million.