Microsemi Stock Takes a Nose Dive : Finances: A cash crunch and problems with a bank loan lower value of shares 54%. The company is now cutting costs.
Microsemi Corp.'s shares took a dive Tuesday after the custom-chip manufacturer announced that it faces a severe cash crunch and may not get a bank loan that it had anticipated.
In trading on the NASDAQ market, the company’s stock fell $1.31 a share, or 54%, to close at $1.125.
As a result of the cash shortage, the company said, it will be forced to cut staff, sell off poorly performing subsidiaries, reduce its inventory and pursue other, unspecified cost cuts.
“This is a surprise,” said one analyst who asked not to be identified. “Sales and profits are there, and they’ve been performing fairly well.”
Company executives said they are also considering longer-term measures to improve the cash position, such as the sale or refinancing of real estate holdings, equipment refinancing or sale of additional shares of stock.
Microsemi has been restructuring for several years as defense budget cuts have slowed its sales. In 1989, the company said it planned to sell or close 10 subsidiaries not related to its core business of manufacturing computer chips for use in electronics equipment ranging from military weapons to heart pacemakers.
The company sold four subsidiaries, shut down one, combined two and retained three. The company took $20.5 million in write-offs during the past three years in connection with the restructuring.
Costs related to the restructuring continued to drain Microsemi’s resources last year, accounting for $3.9 million in losses. Available cash on Jan. 3, the end of the company’s first fiscal quarter, was $1.8 million.
The company borrowed $14.5 million on a $15-million line of credit, and it owes $4.4 million in a loan for equipment financing. The company had been negotiating to obtain a $900,000 secured loan to be paid over two years.
For its fiscal first quarter, Microsemi’s profit dropped to $248,000, or 3 cents a share, from $295,000, or 4 cents a share, for the same period a year earlier. Revenue rose from $19.5 million to $30.5 million.