CEO Alex Lidow said, “This restructuring positions IR to more rapidly realize the full potential of our proprietary products, which grew 40% year-over-year in the first half of fiscal 2003. The steps we are now taking will concentrate the company's resources on proprietary products, reduce our development and manufacturing cycle times, and improve our cost structure. Over the next several quarters, we will upgrade equipment and processes in designated facilities and close down a number of others. We expect the restructuring to accelerate our transition to proprietary products, stepping up their contribution to revenues by 5 percentage points to 65% to 70% of our total sales by the quarter ending June 2004.”
In the December quarter, the company recorded charges related to its restructuring program totaling $179.8 million, of which $4.8 million was for severances, $6 million of raw material and work-in-process inventory, and $169.0 million for asset impairment, plant closure costs, and related charges. An additional $25 million in severance charges will be taken and expensed as incurred over the next eight quarters. Cash charges associated with the restructuring are expected to total less than $40 million. The company generated $20 million of cash from operations in the December quarter, and closed the period with approximately $670 million in cash and cash investments.
In the quarter ended December, IR won significant new business in target markets. Proprietary products, including X-Phase, DirectFET, and iPOWIR, took leading positions in new designs for the top three PC suppliers, the top three server companies, the top two graphics card manufacturers, and two global leaders in telecom and networking.
Both Samsung and LG Electronics chose proprietary analog ICs and advanced-circuit devices from IR to power their new large-screen plasma TV displays.
Just last quarter, IR secured 14 new designs for proprietary products in defense programs, including applications on F22, F16, and F15 fighter jets from Boeing, Northrop Grumman, and British Aerospace.
IR won new designs for proprietary products going into energy-efficient appliances from makers such as Matsushita, Merloni, and Fisher & Paykel.
Delphi, Bosch, and Siemens selected analog ICs and advanced-circuit devices from IR to power new engine controls, diesel fuel injection systems, and advanced braking systems.
Lidow noted, “These and other design-ins secured in the last three months are expected to generate incremental revenues of more than $100 million annualized within the next four to six quarters. We continue to strengthen IR's leadership in power management, but industry conditions remain challenging, and global economic uncertainties are limiting near-term visibility. In the quarter ending March, IR expects revenues to remain sequentially flat, ±3%, with gross margin up about a percentage point. For fiscal 2003 overall, the company is on track to achieve our target revenue growth of 17% to 23%.”
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