The company said it is continuing in its efforts to control costs and to respond to depressed market conditions. This round of cuts is in addition to a workforce reduction that was announced in November 2008. KLA is looking to eliminate quarterly non-GAAP operating expenses of $140-145 million by the end of calendar year 2009, adjusted from the company’s previously announced target of $165-170 million.
Despite prior cuts in operating costs, KLA said it must further cut operating expenses “in order to respond to the current demand environment.” The translation there is simple: semiconductor companies are not spending on more cap-ex. Other cost-cutting actions facilities consolidation (i.e. factory closings or lease terminations), additional forced time off (unpaid vacation) and a reduction in employee stock purchase plan benefits (lower benefits).
KLA-Tencor estimates charges of approximately $20 million to $30 million, including $18 to $22 million related to estimated severance costs.
Here is the sad thing… Analysts were already looking for a loss in this year (June-end). They are now looking for losses next year. It is possible that these job cuts will help to increase the bottom-line a year out after the charges have been absorbed. But over the last 90-day period we have seen a drastic reduction in earnings expectations from analysts. You can bet that the analysts take note this week with a recognition that companies never really announce another round of layoffs if they are expecting a rapid return of strong orders in a quarter or two. If KLA-Tencor was expecting a sharp recovery it might furlough workers for a month or two, but that is not what KLA-Tencor signaled last night.
Shares closed down 6.5% Monday and have yet to offer any solid indications. Its 52-week range is $14.81 to $47.07.
Jon C. Ogg
March 31, 2009
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