National Semi to Lay Off 2,000, Close 2 Operations
Still struggling to regain momentum lost years ago, National Semiconductor said Tuesday that it will close at least two manufacturing operations and lay off about 2,000 workers, the company’s second layoff of that size in 19 months.
National, one of the nation’s oldest chip manufacturers, said the moves, which will result in $140-million charge in the current quarter, are designed to focus the company on faster-growing segments of the semiconductor market and abandon money-losing operations. About 500 layoffs will be in Santa Clara, where the company is headquartered. The remainder will be made throughout the world. National, which will be left with about 30,000 workers at the end of the latest round of layoffs, has no operations in Southern California.
The situation at National Semiconductor, which has lost more than $48 million in the past two years, underscores the difficulties that several of the nation’s large, established chip-making companies have as they try to fashion product line-ups that produce profits and cutting-edge technology.
The problems are twofold: cutthroat price competition from Asian manufacturers on older, established products and a bevy of new Silicon Valley upstarts--usually with venture capital funding behind them--offering the latest in semiconductor technology.
“Big companies can’t just abandon their existing product lines and turn themselves around on a dime by finding new technologies,” explained Millard Phelps, an analyst at Hambrecht & Quist, a San Francisco brokerage. “They need to find big new market opportunities to replace their old products. National hasn’t found the right formula yet.” Analysts said they expect the company to post a loss of $150 million to $200 million for the quarter ending Sunday.
Erik Jansen, a semiconductor analyst for Robertson, Stephens & Co. in San Francisco, said he expects that the company will be forced to lay off another 2,000 workers before it becomes profitable. Further, Jansen said that although he believed that the company’s latest moves were sound, he doubted whether they would make the company more competitive in the long run.
“Is National fundamentally better off for this?” Jansen asked. “No. They are not pursuing any new markets, only getting out of the old ones.”
Nevertheless, Wall Street was pleased. On a day when losers outnumbered gainers by a wide margin, National’s shares rose 12 1/2 cents to close at $5 on the New York Stock Exchange.
In the latest moves, the company said it will close one manufacturing line at a plant in Washington where advanced memory chips are made and will shutter its entire military-product assembly and testing facility in Tuscon, Ariz. National said it would also reduce its investments in one facet of “application specific” chip manufacturing. A spokeswoman said the company has not ruled out the possibility of selling some of the facilities, although no deals are pending.
“We are taking these actions both to refocus our strategic investments on high-growth, high-potential businesses and to reduce our costs in line with current revenue projections,” Charles E. Sporck, president and chief executive, said in a prepared statement. Sporck cited several factors for the decisions, including “reduced levels of military demand and severe pricing pressure in certain market sectors.”
In Boston, analysts said Tuesday that Data General Corp., which has already cut its work force by about one-third, may slash its payroll by as many as 1,000 jobs to help end a string of losses. The once market-leading business and scientific computer maker has fallen on hard times in recent years as the market for its machines has slowed in the face of competition from personal computers and sophisticated work stations.
“We are committed to taking whatever steps are necessary to become profitable,” said James Dunlap, a spokesman for the Westboro, Mass.-based computer maker.
