Zarlink comes back into the black

Zarlink Semiconductor has reported results for the fiscal 2005 second quarter ended 24th September 2004.

Zarlink Semiconductor has reported results for the fiscal 2005 second quarter ended 24th September 2004, prepared in accordance with US generally accepted accounting principles (GAAP).

Second quarter revenue was US $58.8 million, a gain of 5% from US $55.8 million in the first quarter, and up 26% from US $46.6 million in the second quarter of fiscal 2004.

Zarlink recorded revenue increases in all three of its business units, and geographically, in Europe and the Americas regions.

The company reported a second quarter net profit of US $3.2 million, or US $0.02 per share.

Included in this number is a US $2.9 million gain, relating to the receipt on 1st July 2004, of a note receivable payment from X-Fab Semiconductor Foundries of Erfurt, Germany.

In comparison, Zarlink recorded a net loss of US $18.9 million, or US $0.15 per share for the second quarter in fiscal 2004.

For the first six months of fiscal 2005, revenues reached US $114.6 million, up from US $100.3 million in the first half a year ago.

Net profit for the first half was US $10.7 million.

Included in this number is a US $9.9 million gain relating to the receipt of payments from X-Fab on the above-mentioned note receivable.

This compares with a net loss of US$25.1 million in the first half of fiscal 2004.

"I am very pleased with our second quarter results, particularly in view of current conditions in the global semiconductor industry", said Patrick J Brockett, President and Chief Executive Officer, Zarlink Semiconductor.

"While we anticipate lower revenues in the third quarter because of a clearly softer global market, we will maintain our long-term strategy of investing in higher-margin growth opportunities, while continuing to aggressively manage costs".

Gross margin improved to 46% of revenue in the second quarter, compared with 45% in the first quarter.

R and D expenses in the second quarter were US $15.6 million or 27% of revenue, compared with US $14.9 million or 27% of revenue in the first quarter.

In the second quarter of fiscal 2004, R and D expenses were US $19.2 million, or 41% of revenue.

Selling and administrative (S and A) expenses were US $11.0 million or 19% of revenue in the second quarter, up marginally from US $10.7 million or 19% of revenue in the first quarter.

In the second quarter of fiscal 2004, S and A expenses were US $14.2 million or 30% of revenue.

Thanks to the broad-based slowdown in the world's semiconductor industry, Zarlink is forecasting that revenues will decline to between US $49 million and US $52 million in the fiscal 2005 third quarter.

90-day opening order backlog at the beginning of the third quarter was US $37 million, seasonally down from US $44 million at the start of the second quarter, but up US $9 million from the same period in fiscal 2004.

Based on this guidance, Zarlink expects to record a third quarter net loss of US $0.01 to US $0.03 per share.

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