Entropic Cuts Staff Again

Suffering more "growing pains" as it seeks to refocus its chip-making business on pay-TV set-top boxes, Entropic plans to lay off another 70 employees, or about 10 percent of its total workforce worldwide.

The San Diego-based chip maker, which announced the fresh round of staff layoffs just before the Independence Day holiday last week, also released a gloomy warning about its second-quarter earnings. Entropic said it now expects its second-quarter revenues to come in at about US$70 million, right at the low end of its original financial guidance. In addition, the company, which will report its spring quarterly earnings on July 31, reaffirmed its earlier guidance that it will roughly break even in the quarter on a non-GAAP basis.

Entropic, which anticipates that the layoffs will generate about $9 million in annual cost savings, said the cuts are part of "a restructuring plan designed to refine business operations with the goal of driving long-term profitable growth." In a press release, the company said it is "making strategic organizational changes across its marketing and business operations to focus on key vertical markets, streamline global manufacturing resources and consolidate several engineering activities."

Entropic President and CEO Patrick Henry added that the restructuring "also gives us an opportunity to increase investment in strategic areas with more long-term growth potential, including analog mixed signal and software." Entropic signaled a move in that direction last month when it bought Mobius Semiconductor, which produces low-power analog mixed signal semiconductors, for $13 million.

Entropic said it expects to wrap up the restructuring and layoffs largely within the next month. It will incur $1.7 million in pre-tax GGAP charges in connection with the moves.

The latest layoffs and restructuring follow Entropic's layoffs of 40 employees, or 6 percent of its global workforce, in December. They also follow Entropic's acquisitions of set-top box chip maker Trident Microsystems and the intellectual property of satellite TV chip maker PLX Technology last year as the company shifts away from its heavy reliance on MoCA-based chips for cable home gateways. (See Entropic Cuts 6 Percent Amid Growing Pains.)

— Alan Breznick, Cable/Video Practice Leader, Light Reading

brookseven 7/9/2013 | 2:39:51 PM
re: Entropic Cuts Staff Again So, this is pretty typical.

The whole issue is that Entropic is basically a 1 product company and thus the company lives and dies by the life cycle of the product. This is very typical in semiconductor startups (but system startups as well).

The challenge is that the best time to sell the company is before the major revenue cycle when the technology has promise and the opportunities are not run through yet.

The only question is now does Entropic sell itself before it becomes worthless (see Transwitch) or does it sell itself before things get quite that bad (see Broadlight). But the time to sell this company was probably 2006 - 7.

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