MagnaChip ends imaging work in effort to save $50M
In making the exit, the company said it incurred impairment charges of $26.3 million in its Q3 and expects to record approximately $15.2 million in restructuring charges in Q4.
By Suzanne Deffree, Managing Editor, News -- Electronic News, 10/24/2008
In an effort to cut costs, MagnaChip Semiconductor has announced the closing of its imaging solutions business unit in the midst of growing losses.
The company said its action is subject to continuing support for existing customers of the CMOS image sensor business.
In making the exit, the company said it incurred impairment charges of $26.3 million in its Q3 and expects to record approximately $15.2 million in restructuring charges in Q4. Of the total approximate $41.5 million in restructuring and impairment charges, $27.6 million relates to non-cash charges and approximately $13.9 million relates to cash expenditures, which are expected to be paid over the next 18 months, MagnaChip said.
The company made the announcement while reporting on its September quarter, which saw net loss grow to $139.8 million from a net loss of $38.8 million in Q3 2007.
"Due to the current economic environment and tightened credit supply, Q3 demand from customers was much weaker than expected," Sang Park, chairman and CEO of the company, said in a statement Thursday. "Q3 revenue came in at $176 million, a decrease of 9.6% as compared to the second quarter of 2008 and a decrease of 12% as compared to the third quarter of 2007. Looking ahead, we expect current market conditions and weak customer demand to continue in the short term."
MagnaChip's gross margin was $40.5 million or 23% of revenue for Q3, compared to $31.3 million or 15.6% of revenue for Q3 2007.
"In spite of the tough environment, we recorded a gross margin of over 23%," Robert Krakauer, president and CFO of MagnaChip, said in the statement. "As a result of the closing of our imaging solutions business segment, the company expects cost savings, including reductions in research and development and capital expenditures, of approximately $50 million in the company's fiscal year 2009 as compared to 2008. To further improve on our margin and cash flow, we have started cost management initiatives to improve our cost structure a further $20 million over the coming year."
Krakauer did not detail the "cost management initiatives" and did not state if those actions would include layoffs in the company's statement.
