Atmel Announces Strategic Restructuring Initiatives

December 19, 2006 by Jeff Shepard

Atmel® Corp. announced strategic restructuring initiatives designed to enhance profitability, accelerate the company's growth and reduce costs. These initiatives include a redeployment of resources to accelerate the design and development of leading-edge products that target expanding markets, as well as the halting of development on lesser, unprofitable, non-core products.

The company also plans to better optimize its manufacturing operations by seeking to sell its wafer fabrication facilities in North Tyneside, United Kingdom and Heilbronn, Germany. These actions are expected to increase manufacturing efficiencies by better utilizing remaining wafer fabrication facilities while reducing future capital expenditure requirements.

Furthermore, the company plans on adopting a fab-lite strategy by a better utilization of its remaining wafer fabs and the expansion of its foundry relationships. Witht his strategy, the company intends to significantly reduce manufacturing costs and continue to design and develop new products utilizing its manufacturing facilities.

The company anticipates cost savings in the range of $70 million to $80 million in 2007 reaching an annual rate of $80 million to $95 million by 2008. Included in the cost savings is approximately $55 million per year resulting from the expected sale of the wafer fabrication facilities. Through a combination of voluntary resignations, attrition and other actions, Atmel expects a reduction in its non-manufacturing workforce of approximately 300 employees, or 10%. The company anticipates headcount to be reduced by approximately 1,000 additional employees upon completion of the sales of the North Tyneside and Heilbronn wafer fabrication facilities.

The company expects to meet the production needs of its worldwide customer base during this transition through the use of internal capacity and existing foundry partners. In addition, the company anticipates entering into a transition sourcing agreement with the eventual buyers of the wafer fabrication facilities.

As a result of the initiatives, the company estimates it will record one-time restructuring and impairment charges in excess of $200 million in the fourth quarter of 2006 for fixed asset write-downs, severance and other expenses associated with the restructuring. A significant portion of these non-recurring charges relate to the non-cash write-down of the North Tyneside manufacturing facility.