Zarlink aims to break even in 2004

Zarlink Semiconductor has released third quarter results for the fiscal 2003 period ended 27th December 2002.

Zarlink Semiconductor has released third quarter results for the fiscal 2003 period ended 27th December 2002.

As expected, third quarter revenue was US $46.8 million, up from US $46.2 million for the previous quarter and down from US $51.7 million for the same period last year.

Although sales in the quarter continued to be affected by the general state of the semiconductor industry, the company did see encouraging improvements in new orders.

As expected, Zarlink recorded a third quarter net loss of US $13.7 million, or US $0.11 per share.

In comparison, the company recorded a net loss of US $18.3 million or US $0.15 per share for the same period in fiscal 2002.

"We continue to drive our business forward through intelligent cost control while at the same time building a superior product portfolio", said Patrick J Brockett, President and Chief Executive Officer, Zarlink Semiconductor.

"There are some signs that the worst of the downturn may be behind Zarlink".

Gross margin for the third quarter remained steady at 45% of revenue for the second consecutive quarter, and is up substantially from the 40% gross margin recorded in the same period last year.

This gain reflects substantial improvements the company has made in its operations, and these are expected to continue to positively affect product margins in the fourth fiscal quarter.

At the end of the third quarter, 90-day order backlog was US $36.0 million, up from US $31.5 million in the previous quarter.

Cash and short-term investments at the end of the third quarter remained steady at US $133.1 million, in line with US $132.7 million in the previous quarter.

R and D investments in the third quarter were US $23.8 million or 51% of revenue.

This was in line with the US $23.2 million invested in the previous quarter and up from US $19.9 million for the same period last year.

However, R and D spending in the third quarter included severance costs of US $2.5 million associated with previously announced restructuring activities.

Selling and administrative expenses remained flat at US $11.5 million, including severance costs of US $0.8 million, as compared with US $11.3 million for the previous quarter, and down from US $11.8 million for the same period last year.

The company remains committed to cost control efforts to keep its spending in line with industry and sales forecasts.

In the fourth quarter, the company expects revenue to rise 9% to approximately US $51 million with increases across all business segments.

The company also expects to record a net loss of approximately US $0.10 per share, US $0.01 lower than Q3.

The fourth quarter loss will include a nonrecurring expense of approximately US $0.05 per share attributable to the wind-up of the UK-defined benefit pension plan.

The pension plan wind-up item was disclosed in Zarlink's 10-Q report for Q2.

For fiscal 2003, Zarlink expects to record revenue of approximately US $192 million and a net loss of approximately US $0.38 per share.

In fiscal 2002, Zarlink recorded revenue of US $222.1 million and a net loss of US $0.98 per share.

The cash balances of US $133.1 million at the end of the third quarter are projected to decrease to approximately US $120 million at the end of the fourth quarter.

The decrease will result chiefly from cash payments of approximately US $8 million for the wind-up of the company's UK pension plan and approximately US $8 million for the settlement of certain foreign currency contracts for the pound Sterling as against the US dollar.

The company expects to be operating at cash breakeven in the first quarter of fiscal 2004.

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