Mindspeed Technologies Inc.’s restructuring moves and its integration of U.K.-based chipmaker Picochip Ltd. have given the chipmaker some momentum as it closes its fiscal year.
The Newport Beach-based company last week projected revenue of $35 million to $36 million for the current quarter. Analysts on average had forecast revenue of $34.4 million for three months through September, the end of Mindspeed’s fiscal year.
Rising demand in the company’s landline business—particularly for high-performance analog and products using Voice Over Internet Protocol—are driving a rebound in sales, Chief Executive Raouf Halim said.
“Furthermore, we believe that the Picochip acquisition and integration, as well as our global restructuring efforts to accelerate operating profitability have already begun to show marked benefits,” Halim said
Mindspeed makes chips for routers, switches and other networking gear. Its fiscal 2011 revenue totaled $162 million.
Job Cuts
The company plans to cut more than 80 jobs in research and development, sales and administrative operations. That will save $13 million per year and shave the companywide work force to about 500.
Mindspeed cut about 25 employees after January’s acquisition of Picochip for $51.8 million and up to $25 million in additional benchmark payments.
Investors traded up shares to a market value of about $145 million after Mindspeed issued its guidance.
The market gains reversed a trend that saw shares drop and the company’s market value fall below $50 million amid investor doubts over the Picochip acquisition.
St. Petersburg, Fla.-based Raymond James & Associates Inc. issued an “outperform” rating on the stock after initiating coverage last week.
• Headquarters: Newport Beach
• Business: Makes networking chips
• Founded: 2001
• Ticker symbol: MSPD (Nasdaq)
• Fiscal 2011 revenue: $145.5 million
• Recent earnings: $6.9 million for June quarter
• Market value: About $143 million
• Notable: Cost-cutting campaign includes smaller work force, less corporate space
Mindspeed says the Picochip acquisition will positively affect profit for July through December. Acquiring Picochip will increase Mindspeed’s overall potential market to $3 billion by 2016, executives estimate.
Picochip makes systems-on-a-chip for small cell base stations, a growth market fueled by a race to 4G supremacy among the nation’s largest wireless carriers. Campbell-based research firm Mobile Experts LLC predicts small cell base station shipments will grow to 24 million units by 2016.
Picochip has 70% market share in the 3G packet access small-cell market. High-speed packet access helps improve speed while supporting more users on a network.
Shift in Strategy
Mindspeed has been undergoing a strategic shift to exploit its information technology and research and development legacies by developing systems for manufacturers and infrastructure. The company built its name making networking chips used in communications equipment and devices.
Its May partnership with Hong Kong-based China Mobile Ltd., the world’s largest wireless carrier, underscored the transition. Mindspeed will support the company’s installation of thousands of small base stations to improve China’s taxed communications infrastructure.
China Mobile will use Mindspeed technology gained from the Picochip acquisition. China Mobile, which has more than 618 million subscribers and 70% market share, plans to extend its trial 4G LTE, or long-term evolution network, to 10 Chinese cities and build 20,000 base stations this year and another 20,000 in 2013.
Mindspeed plans to raise $32 million through the sale of convertible senior notes. The company also has downsized its corporate headquarters as part of the restructuring.
In April, Mindspeed signed a new lease with New York-based landlord Emmes Group of Cos. for 88,160 square feet through 2019, down from 97,000 square feet at the complex.
