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LSI Logic Profit Down 60%; 1,200 Jobs to Go

Technology: No. 1 chip maker for networking also is closing plants to fight effects of global slowdown.

October 15, 1998|From Times Wire Services

LSI Logic Corp. said Wednesday that it will cut 1,200 jobs and close plants to combat the effects of a worldwide economic slowdown, as the chip maker's third-quarter profit fell 60%.

The company earned $19 million, or 14 cents a share, before charges in the quarter resulted in a loss, down from $47 million, or 33 cents, a year earlier. The No. 1 maker of chips used in networking equipment had been expected to earn 13 cents a share, the average estimate of analysts polled by First Call Corp.

Revenue rose 19%, to $390 million from $327 million.

The loss included special charges associated with the purchase of Hyundai Electronics America's Symbios unit in August for $760 million. With the purchase, LSIacquired products that link high-end computer servers to networks.

Shares of LSI fell 25 cents to close at $11.88 on the New York Stock Exchange.

Milpitas-based LSI, like other chip makers, has been struggling with a worldwide slowdown in demand. Overcapacity, economic turmoil and plunging prices have prompted many firms to close plants, fire workers and put expansion plans on hold.

"They have way too much capacity as it is and to have to blend in Symbios in an environment where you have layoffs makes the timing bad," said Hans Mosesmann, a Prudential Securities analyst.

In addition to cutting about 17% of its work force, LSI said it will close an 11-year-old chip plant in Tsukuba, Japan; a test facility in Colorado Springs, Colo.; and an assembly plant in Fort Collins, Colo. It also plans to consolidate LSI and Symbios design centers, sales offices and administration.

LSI warned in August that its third-quarter profit would miss estimates because of a "major shortfall" of orders from U.S. customers. At the time, it was expected to earn 23 cents a share, the average estimate of analysts polled by First Call. It was the second time in a month that the company warned investors about its earnings.

LSI gets about a third of its revenue from chips used in telecommunications and networking equipment. Its customers include Cisco Systems Inc., 3Com Corp., Bay Networks Inc. and Cabletron Systems Inc. The company also makes specialty chips for Sony Corp.'s Play-Station game system and digital videodisc player.

At a Glance:

* Genentech Inc. said third-quarter profit almost doubled, far exceeding expectations, on strong sales of its anti-cancer drug Rituxan. Genentech, which is majority-owned by Switzerland's Roche Holding, said profit rose to $63.4 million, or 49 cents a share, from $32.1 million, or 25 cents, in the year-ago period. The South San Francisco-based company was expected to earn 37 cents a share. Revenue rose 26% to $313.9 million from $248.9 million.

* E-Trade Group Inc., the second-largest online broker in the U.S., said it lost 13 cents a diluted share in its fiscal fourth quarter before nonrecurring charges, contrasted with profit of 15 cents a share a year earlier.

Including nonrecurring charges totaling $9.5 million, or 20 cents a share, E-Trade said it lost $15.7 million, or 33 cents. The charges account for expenses associated with the company's acquisition of ShareData Inc., the launch of a new Web site and new marketing alliances with America Online Inc. and Yahoo Inc. The company had earnings of $5.9 million in the year-ago quarter.

Palo Alto-based E-Trade was expected to show a loss of 14 cents a share in the quarter. It said revenue rose 32%, to $68.7 million in the quarter, from $52 million a year earlier, as accounts grew by 85,000 during the three months to 544,000. The company kicked off a $100-million advertising blitz Sept. 7.

* Scotts Valley-based Seagate Technology Inc., the world's largest maker of computer disk drives, said its fiscal first-quarter earnings more than doubled on cost cuts, even as sales fell. The company earned $46 million, or 19 cents a share, before charges resulted in a loss. That's up from $20.3 million, or 8 cents, in the year-earlier period, and higher than expectations of 17 cents. Revenue in the quarter ended Oct. 2 fell 18%, to $1.55 billion from $1.90 billion.

Many analysts didn't expect Seagate's revenue to decline as much. Analysts expected sales to be at least $1.65 billion.

* Xylan Corp. of Calabasas said third-quarter profit more than doubled as the computer networking company sold more of its powerful switches directly to corporations, offsetting slower sales to large distributors. Net income rose to $10.4 million, or 22 cents a share, from $4.61 million, or 10 cents, a year ago. Earnings matched estimates. Revenue surged 70%, to $91.1 million from $53.5 million a year ago.

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