It didn't take MACOM’s new CEO Steve Daly long to rein in former CEO John Croteau’s lofty ambitions. After the market closed yesterday, MACOM announced it is terminating 250 staff — 20 percent of the workforce — and closing seven product development facilities.
MACOM also narrowed its market strategy, stopping the development of optical modules and subsystems for data centers. A press release announcing the restructuring said MACOM will be a merchant supplier of semiconductor ICs and photonic devices, supporting optical module manufacturers with semiconductor components.
When complete, the restructuring is expected to save MACOM $50 million per year.
The staff cuts spanned all areas: research and development, production, marketing, sales and administration. The seven facilities being closed are in Florida, Massachusetts, New Jersey, Rhode Island, France, Japan and the Netherlands.
“We do not make these decisions lightly; however, these actions are necessary in order to strengthen our strategic plan.” — Stephen Daly, president and CEO
Reduced Revenue and Earnings Guidance
MACOM also updated guidance for the quarter, dropping the revenue forecast to $107 million to $109 million, compared to the prior guidance of $120 million to $124 million — an 11 percent decline. MACOM said the change reflects the Huawei export ban and reduced shipments to certain distributors.
Based on the revised revenue, MACOM expects non-GAAP adjusted EPS to be ($0.41) to ($0.45), not including restructuring or impairment charges. The prior guidance was ($0.08) to ($0.04).
The restructuring plan will incur approximately $14 million in charges, including $7 million for employee severance. The majority of the costs will be during this fiscal quarter, which ends in June.
MACOM also said it is performing a “recoverability assessment” of long-lived assets, specifically the intangible assets that are impacted by the restructuring. So far, MACOM has identified approximately $15 million in non-cash impairment charges beyond the $14 million in restructuring charges. On March 29, MACOM’s intangible assets were valued at $472 million.
In the great game of business, a company succeeds when it has a clear vision, the guts to bet on that vision and the execution to make it happen. I admired John Croteau for articulating a vision for a born-again MACOM after the Tyco years, with the guts to pursue it. It now looks like his vision was overly ambitious, without the execution to validate it. MACOM was too far out over its skis. Unfortunately, 250 hard-working employees are suffering the consequences, with ripples extending throughout the industry.