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Layoffs at National Semi
April 22, 1998: 1:57 p.m. ET

Chipmaker to slash 1,400 jobs; analysts say cuts reflect changing focus
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NEW YORK (CNNfn) - National Semiconductor Corp. Wednesday announced plans to slash 1,400 jobs, or 10 percent of its worldwide work force, due to softness in the semiconductor market.
     Of the 1,400 layoffs, 560 will come from a previously announced closing of National Semiconductor's older manufacturing facilities in Santa Clara, Calif.
     The company said in a statement other worldwide sites would be affected to a lesser degree.
     National Semiconductor said it would take a one-time charge between $60 million to $70 million before taxes, or 27 cents to 32 cents per share after taxes, in its fourth fiscal quarter ending May 31 for the job cuts and other costs.
     The charge includes approximately $25 million for severance and lease terminations.
     National Semiconductor had been struggling due to dwindling demand from Southeast Asia, particularly South Korea. In March, the company said it expected to take a fourth-quarter loss.
     But the chipmaker caused a stir earlier this month when it announced plans to combine most of the chips used in personal computers onto a single chip, which could drive prices of new computers below $500. National Semiconductor expects the chip to be available by mid-1999.
     Analysts said the layoffs weren't surprising, given the company's conservative financial approach and the shift in its technology focus.
     "They announced a loss for May and a slowdown for August," said Joe Moore, semiconductor analyst at Goldman Sachs. "And they're re-ramping the Cyrix business - that's they're focus right now."
     National Semiconductor acquired chipmaker Cyrix Corp., which is providing the technology behind the integrated low-cost chip, in November.
     Although National Semiconductor said the layoffs were necessary to cut costs in the face of soft demand, Drew Peck, an analyst at Cowen & Co, said he believed the company had been planning to downsize all along in order to focus its efforts on developing the low-cost chip.
     "I think [National Semiconductor President and Chief Executive Officer Brian] Halla is using the poor financial results as an expedient to downsize the company," he said. "This is a company that's gung-ho on the idea of PCs on a single chip. They're less interested in the more commoditized parts of the business, such as low-end networking. The poor results are a good excuse to cut back on these parts of the business."
     Shares of National Semiconductor (NSM), which were up earlier before the announcement, fell 9/16 to 23 in midday trading. Back to top


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National Semiconductor

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