Chipmaker Xilinx to Cut About 7% of Its Workforce
January 28 2020 - 8:27PM
Dow Jones News
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 maria.armental@wsj.com
(END) Dow Jones Newswires
January 28, 2020 20:12 ET (01:12 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
QUALCOMM (NASDAQ:QCOM)
Historical Stock Chart
From Mar 2024 to Apr 2024
QUALCOMM (NASDAQ:QCOM)
Historical Stock Chart
From Apr 2023 to Apr 2024