Analog Devices is scheduling a series of plant shutdowns in the current quarter because the utilization rate of its analog wafer fabs is "well below our original plans," said company president and CEO Jerald G. Fishman Wednesday.
"While this is painful in the short term, it could provide upside gross margin leverage when the market recovers," said Fishman, who announced the moves as part of Analog Devices' release of its third quarter results. In that quarter, ended Aug. 1, Norwood, Mass.-based Analog Devices (company
profile) reported net sales fell 7 percent to $294.9 million compared with $318.1 million in the same period last year.
Analog Devices ADI said its net income for the third quarter plunged 81 percent to $8.8 million vs. $46 million in the period last year. The company took a $17 million restructuring charge and a $3.6 million equity loss in the silicon foundry joint venture WaferTech, in Camas, Wash. Analog Devices partnered with Taiwan Semiconductor Manufacturing, Altera, and Integrated Silicon Solutions in the 8-inch wafer-foundry company.
"Because of lower-than-planned third quarter revenue and reduced near-term revenue expectations, we implemented a 5 percent worldwide workforce reduction," Fishman said.
Fishman said the outlook for the semiconductor industry is a 10 percent drop in total revenue in 1998 compared with 1997.
"Against this backdrop, we believe Analog Devices will grow its revenue 5 percent in continuing businesses this year -- very good performance in the current environment, but far below the 20 percent-plus growth we anticipated at the beginning of the year, and had prepared our factories to produce," he added.
"DSP IC digital signal processor integrated circuit revenue was up both sequentially, and year over year, despite tough market conditions in many of the DSP-intensive vertical markets," Fishman said. "We currently believe exclusive of the declines we've seen in DSPs for GSM Global System for Mobile Communications handsets, our DSP IC business will increase by more than 30 percent year over year, assuming modest growth in the fourth quarter. This growth is being driven both by our general-purpose 16- and 32-bit DSPs and by market- and customer-specific products that integrate a DSP with an analog front end."