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By Maria Armental
Chipmaker Xilinx Inc. plans to cut about 7% of its workforce, blaming a "perfect storm" of a slowdown in fifth-generation technology investments and the impact of trade restrictions blocking business with China's Huawei Technologies Co.
Xilinx, which Tuesday reported the first quarterly revenue decline in four years, said it would take a series of actions this quarter targeting roughly $20 million in cost cuts.
"Clearly, we're not where we expected to be if we go back to the start of this fiscal year," Chief Executive Victor Peng said in a conference call with analysts.
In May, the Trump administration banned U.S. shipments to Huawei as trade tensions with Beijing escalated. That move stopped chipmakers, including Qualcomm Inc. and Intel Corp., from shipping some of their processors, though some deliveries resumed over the summer after companies determined they weren't affected by the ban.
Huawei has now reduced its reliance on U.S. chips, sourcing them from other vendors that don't face such export restrictions.
"The unprecedented change in U.S.-China relations and trade clearly has an impact on the industry, and specifically, our business," Mr. Peng said.
Xilinx hasn't quantified its revenue exposure to Huawei, but several analysts estimated it at about 6% to 8% of total revenue.
The U.S. has long been concerned about Huawei's links to the Chinese government, expressing fears that its gear could be used to spy on Americans -- something the company has said it wouldn't do. The U.S. government has been lobbying countries to exclude Huawei gear as they roll out 5G infrastructure.
Those lobbying efforts have been met with mixed success. The U.K. government, for example, has given the green light for some Huawei equipment to be used in its 5G network.
The slower-than-expected deployment of 5G networks also is weighing on Xilinx. Still, Mr. Peng said, "we have to keep in perspective that we're only in the very first phase and deployments will come back."
Xilinx would return to delivering double-digit revenue growth, but the latest measures, including the job cuts, reflect the reality that the recovery would take longer, he said.
Xilinx, which had already eliminated Huawei from revenue forecasts, now expects to end the year with $3.16 billion to $3.19 billion in revenue, down from its earlier view of $3.21 billion to $3.28 billion. For last year, it reported $3.06 billion in revenue.
For the quarter ended Dec. 28, Xilinx reported a 32% profit drop to $162 million, or 64 cents a share, ahead of analysts' projections.
Meanwhile, revenue fell 10% to $723.5 million, shy of the midpoint of Xilinx's guidance and below analysts' projected $731.3 million.
Shares closed Tuesday at $98.61 and fell 9% to $90 in after-hours trading.
Write to Maria Armental at firstname.lastname@example.org
(END) Dow Jones Newswires
January 28, 2020 20:12 ET (01:12 GMT)
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