Intersil Corp. (
) plans to eliminate 18% of its workforce in order to reduce
operational costs. This layoff is an attempt to optimize the cost
structure, concentrate on the company's sales and development
efforts, improve cash flow and thereby improve the company's
overall financial performance.
The headcount reduction is scheduled to be completed during
the first quarter of 2013 and the layoffs are expected to reduce
annual operating expenses by approximately $30 million.
Currently, the company expects a restructuring charge of
approximately $15 million for severance-related benefits during
the first quarter of 2013.
Management is looking to save costs by reducing its workforce
and revamping its product portfolio. Intersil has been suffering
from the slowdown in the Flat Panel Display (FPD) and global PC
markets. We believe that the weak computer market, strong
competition and the company's failure to deliver strong results
have forced it to refine its cost structure.
According to the latest NPD Display Search report, spending on
manufacturing equipment for Flat Panel Displays (FPDs) is
expected to rise 121% from $3.8 billion in 2012 to $8.3 billion
in 2013. The growth is expected to be driven primarily by the
widespread use of FPD displays in various electronic gadgets such
as TVs, notebook computers, personal computers, mobile phones and
public display systems.
We believe that the company's focus on the development of new
products and design wins will likely improve the demand for its
products. The leaner cost structure will also boost margins and
earnings growth in the near future.
This is not the first time that the company has resorted to
restructuring actions. The company had reduced its workforce by
9% in 2008 and then again by 11% in May 2012.
Intersil Corp makes power management chips used in flat panel
displays and DVD players. The restructuring announcement came a
few days after Intersil reported its fourth-quarter 2012
Though its earnings of 2 cents beat the Zacks Consensus
Estimate, the company reported an overall disappointing fourth
quarter. Sales of $137.5 million were down sequentially as well
as from the year-ago quarter due to the combined effect of weak
demand across industrial, consumer and computing end markets.
Currently, Intersil has a Zacks Rank #2 (Buy). Other stocks
that have been performing well and are worth looking into include
), all carrying a Zacks Rank #2 (Buy).
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