Celeritek Inc (Santa Clara, Calif.) is pulling out of the increasingly competitive handset power amplifier business to focus on standard GaAs semiconductors for the communications and defence markets and GaAs subsystems targeting military applications.
The company blames excess capacity and increasing competition which have "created a challenging business environment and uncertain outlook for handset manufacturers and suppliers."
The company will lay off about a fifth of its employees, consolidate activities at its Santa Clara headquarters and close sales and technical support offices in South Korea.
It hopes these changes will reduce cash burn by approximately $14 million to $16 million annually and significantly reduce its breakeven revenue level from approximately $18 million, currently, to approximately $10 million per quarter going forward. The company expects to incur other non-cash charges of $4 million to $5 million related to asset and lease impairments and cash charges of approximately $700,000 related to facilities consolidation over the next several quarters.
"Despite our industry leading technology, we believe the severe pricing pressure and other adverse market conditions in the wireless handset industry will prevent our handset related business from achieving acceptable gross margins," said Tamer Husseini, president and chief executive officer of Celeritek.
The company said that to drive additional design wins and sales in the communications marketplace, it will focus its semiconductor R&D efforts on low cost standard products for the wireless and satellite sectors. It also intends to market its high performance GaAs chips to commercial communications customers, but there will be a clear shift to serving the defence business.