Conexant Systems Inc. (Newport Beach, Calif ) and PMC Sierra Inc. (Burnaby, British Columbia) each announced Monday (March 26) plans to reduce their respective workforces and take cost-cutting measures in light of market conditions that have led to cancelled orders and lower than expected chip sales.

And last week, 3Com Corp. reported weak sales for its recent quarter and said it would discontinued its two Internet appliance products, the Audrey and the Kerbango Internet radio.

Both Conexant and PMC Sierra sell chips for broadband communication markets, and each bet a portion of its future on the nascent but growing wireline and wireless home networking markets.

The current slowdown is not expected to impact directly the companies' home networking chip businesses, since neither sells the chips in large volumes yet, but analyst Sabharwal said the downturn could delay home networking's rate of adoption this year, pushing it into 2002.

"Nothing is ever immune to a slowdown," Sabharwal told EE Times.

But technologies now in the early stages of adoption could suffer if customers alter plans for buying or delivering products, Sabharwal said.

Home networking technologies with a head start, such as the IEEE 802.11b wireless networking protocol, for which millions of chip sets have already shipped, may have an advantage in the sluggish market because their prices have already declined somewhat due to volume shipments, Sabharwal said. Competing technologies like phone-line-based HomePNA, power-line-based HomePlug Alliance and HomeRF are still relatively expensive and don't have much market penetration, so they risk slower than expected rates of adoption, he said.

The home networking segment received further bad news when 3Com scrapped plans for its Audrey appliance, which had a built-in home networking feature that was expected to help drive home networking chip sales.

3Com's decision is "obviously a negative" for the home networking camp, Sabharwal said.

Nevertheless, Conexant reiterated its focus on broadband access and mobile communications, and detailed plans to restructure and cut costs in the face of the upcoming spin-off of its Internet infrastructure-related business later this year.

The company said that revenues for its March-ending second fiscal quarter would be 35 to 40 percent below first-quarter revenues of $410.4 million. It also said that sales were off in both the personal networking and Internet infrastructure segments. As a result, Conexant expects to report a pro forma quarterly loss of between 35 and 40 cents per share.

To control costs, Conexant will trim 20 percent of its workforce, including 1,500 full-time and 125 temporary workers, over the next six months. The cuts will reduce the company's workforce from 9,000 to 6,900 employees worldwide.

Further measures include the temporary shut down of wafer manufacturing facilities in Newport Beach and Newbury Park, Calif., the idling of a test and assembly plant in Mexicali, Mexico for two-week periods during the third and fourth quarters, and a 10 percent cut in senior management salaries. The company also plans to explore alternatives for its digital imaging and board-level subassembly businesses as part of a plan to separate its Internet infrastructure business into a separate company.

Meanwhile, PMC Sierra reduced its first-quarter forecast and said it would fire 230 workers, or 13 percent of its 1,740 employees, as a result of order cancellations from major customers.

The company trimmed its revenue forecast to between $118 million and $120 million, down from a previous estimate of $160 million to $170 million. First-quarter earnings will come in at approximately 2 to 3 cents per share, down from earlier projections of 12 cents per share.

To trim expenses, PMC Sierra said it plans to centralize operations and halt the development of certain product lines.

In the face of such bad news, ABI's Sabharwal said he believes communication chip companies may postpone plans to integrate standalone home networking chips for phone-line and power-line-based technologies into DSL and other broadband chip sets.

Integration is a key to consumer adoption of home networking technology, since consumers are more like to purchase systems with built-in home networking features rather than standalone home networking adapters or nodes, Sabharwal said. "People will find more value if the home networking is integrated into the device itself rather than in a standalone solution," he said.

While Sabharwal said he doesn't doubt that home networking will come to fruition, he said it may happen later than expected.