Rockwell has confirmed plans to restructure its business and will spin off its chip unit to shareholders it said yesterday.
The company will take a $625 million charge for restructuring and cut nine per cent of its workforce, amounting to 3,800 jobs worldwide. At the same time, Rockwell posted its third quarter earnings, with senior executives outlining how it intends to approach sales for the rest of this year and next.
The company said the spin-off of its Rockwell Semiconductor Systems business will be subject to a decision by the US Internal Revenue Service that it can qualify as a tax free distribution. Shareholders in Rockwell will get shares on a pro-rata basis, with the new company to list on Nasdaq. The current president of the unit, Dwight Decker, is to become the president and CEO of the concern.
According to Don Davis, CEO of Rockwell: "The dynamics of Semiconductor Systems are very different from Rockwell's other businesses, including its markets, products and investment requirements."
The restructure will cost Rockwell dearly, with the $625 million charge being taken in its third quarter to account for the 3,800 job losses and to cover closing of sites and disposal of lines it considers non-strategic. Cash costs, including write-off of assets and goodwill, will cost it a further $200 million.
Davis said that the restructuring, to be finished by the end of next year, will yield $100 million of pre-tax savings, leading to further savings of $200 million by the year 2001. The US giant will now concentrate on its automotive and avionic business. The third quarter's profits, he warned, would be 20 per cent below the equivalent quarter last year.
He confirmed that the semiconductor business would post operating losses both for the third quarter and for the full year. That, he said, was caused by weakness in the PC modem market as well as what he described as a work stoppage at a Californian plant. Chip set business was still strong, he said.
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