Chartered forecasts record loss, will cut 600 jobs

January 30, 2009
Singapore Democrats

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Andrea Tan
Bloomberg

Chartered Semiconductor Manufacturing Ltd., the world’s third-largest maker of customized chips, forecst a record quarterly loss and will cut more jobs to weather the deepening global recession.

The net loss in the first quarter will probably be $142 million to $152 million, Singapore-based Chartered said today after reporting its largest deficit since the first three months of 2002. Sales may slump as much as 40 percent to as low as $232 million, it said.

Chief Financial Officer George Thomas said customers are reducing “even more aggressively” as inventory levels pile up amid the broadening slump in demand. The collapse in chip sales led Toshiba Corp., Japan’s largest maker of semiconductors, to predict a record annual loss yesterday.

“We’re in unprecedented times. This is a demand-driven downturn and everything from handsets to PCs to consumer electronics is going to decline by 5 to 10 percent this year,” said Steven Pelayo, a Hong Kong-based analyst at HSBC Holdings Plc. “Combine that with clients and chipmakers having excess inventories and you have these ugly times.”

Chartered, which makes chips used to power Microsoft Corp.’s Xbox 360 game console, was unchanged at 23.5 Singapore cents as of the 12:30 p.m. lunch break in local trading. Its American depositary receipts dropped 4.3 percent to $1.56 before the earnings announcement.

Unpredictable

“In this environment, it is difficult to predict with accuracy how the quarter will turn out,” Chartered’s Thomas said.

The fourth-quarter loss of $114 million, or 46 cents per ADR, included a reversal on a $34 million tax credit. The $81 million median loss estimate in a Bloomberg survey of five analysts didn’t factor in the tax-credit reversal. Sales slipped 0.3 percent to $351.7 million. Chartered will give a mid-quarter update on March 13.

Chartered said it will cut 600 employees, or 8 percent of its workforce, to save $16 million a year. It will book an $8 million one-time charge in the first quarter. The latest reduction brings the total eliminations to 1,300 positions, or 18 percent of its workers, the chipmaker said.

Chartered expects to save about $8 million in wages this year because of Singapore’s S$4.5 billion ($3 billion) plan to help retain jobs, Chief Executive Officer Chia Song Hwee said on a conference call with analysts.

The chipmaker would “seriously consider” a merger or a strategic investor if approached and had nothing to report on that, Chia said in an interview.

The company, which counted Broadcom Corp. and Qualcomm Inc. as its largest clients in 2008, said it plans to slash capital spending this year by 35 percent to $375 million and temporarily shut down two production lines.

Collapse in demand

Qualcomm, the world’s largest maker of mobile-phone chips, on Jan. 28 cut its annual sales outlook and said it won’t give an outlook for profit because of the unpredictability of demand.

A collapse in demand for electronics ranging from mobile phones to computers has forced Intel Corp. to say its 87-quarter streak of profitability may end. Samsung Electronics Co., the second-largest chipmaker after Intel, this month reported its first quarterly loss.

Taiwan Semiconductor Manufacturing Co., the top producer in the so-called foundry industry that Chartered competes in, last week forecast its first quarterly loss since 1990.

“Demand’s not coming back,” said Stuart O’Gorman, who helps manage $800 million in technology shares at Henderson Global Investors Ltd. in Edinburgh. “Most of the chipmakers are going to go out of business, and it’s a very long road.”

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