Entropic Communications, a maker of set-top chips and silicon for products that use Multimedia over Coax Alliance (MoCA) technologies, on Monday set in motion a major restructuring that will result in the closing of several facilities and the laying off of 23% of its global workforce.
The chipmaker also lowered second quarter guidance amid weaker-than-expected June orders.
Entropic said the plan, while painful, will enable it to streamline and focus its R&D efforts, boost operational efficiencies, and accelerate its return to profitability.
Entropic will close several sites and consolidate others in order to maximize engineering and operational efficiencies, while also streamlining product development processes. Speaking on a call Monday night, Entropic CEO Patrick Henry said the company will close engineering sites in Austin, Texas; Israel; Taiwan; and India, and concentrate R&D at facilities in San Diego, Irvine and San Jose, Calif. Entropic will maintain specialized, local efforts in Shanghai and Shenzhen, China; and Belfast, Northern Ireland.
Entropic said it will substantially complete its reorg by the fourth quarter of 2014, the same time it expects to realize about $6 million quarterly savings. Entropic said it anticipates a pre-tax restructuring charge of about $5 million.
Entropic ended the first quarter with about 650 employees, and expects to reduce it to fewer than 500 in the fourth quarter.
Entropic announced a smaller restructuring last summer that included a 10% layoff.
Henry said a restructuring of this magnitude is “painful,” but “absolutely necessary” as the company looks to speed up its time to probability and achieve its business objectives. The company said 30% of employees based in sites set for closure are being offered opportunities to relocate to one of the California locations.
The company also lowered Q2 guidance, now expecting revenues of $50 million to $51 million, and a non-GAAP loss per share of 13 cents, down from a range of $53 million to $55 million, and a loss of 10 cents to 12 cents, respectively.
Entropic CFO David Lyle blamed the decline in part to slower than expected orders in June, particularly around MoCA-based adapters as DirecTV continues to ship new Genie Mini devices in higher volumes. In April, DirecTV announced the launch of the Wireless Genie Mini, a video client that connects to DirecTV's central Genie HD-DVR over a secure WiFi connection and is capable of supporting the operator’s full live TV lineup and access to DVR-stored content.
“MoCA is one of the biggest impacts we’re seeing,” Lyle said.
Henry, meanwhile, said Entropic will deemphasize set-top chips with HEVC support targeted to 4K/Ultra HD boxes in the near-term, and will instead focus on HEVC-optimized chips for traditional HD boxes. Entropic has developed a 4K/HEVC decoder, but won’t drive that product in the short term. Entropic expects the market for 4k/HEVC decoders to ramp up in the second half of 2015, Henry said.
While the 4K market is accelerating quickly for TV sets, Entropic is not seeing a “broad-based push” for Ultra HD client products among its service provider partners, except for Comcast, which is working with partners on new boxes for its X1 platform that support HEVC decoding and 4K/Ultra HD.
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