Two chipmakers cut jobs as demand falls

Bloomberg News Service

SAN FRANCISCO — Conexant Systems Inc. and PMC-Sierra Inc. plan to fire hundreds of workers and said sales this quarter will lag already-reduced forecasts because demand for communications chips is falling.

Conexant said it is eliminating 1,500 jobs and firing 125 contract workers, about 20 percent of the company's work force. PMC-Sierra is firing 230 employees, or 13 percent of its staff. The sales shortfall will cause a wider-than-expected loss at Conexant and lower profit at PMC-Sierra.

The firings are among the first announced this year by specialized chipmakers who supply Cisco Systems Inc. and other Internet equipment vendors. Companies such as Conexant and PMC-Sierra are trimming expenses because Internet and telecommunications equipment makers are buying fewer chips.

"I don't think we've seen the worst yet," Conexant chief executive Dwight Decker said in an interview.

Newport Beach, Calif.-based Conexant plans to trim senior managers' pay by 10 percent as part of its effort to cut costs. The company also canceled plans for an initial public stock offering of its Mindspeed Technologies unit, which makes chips that speed Internet traffic, because of waning demand for new offerings.

Many of the chipmakers' large customers already have announced their own work force reductions this year. Cisco is cutting as many as 8,000 jobs, Nortel Networks Corp. is eliminating 10,000 and Lucent Technologies Inc. is trimming its work force by 16,000 people. Intel Corp., the world's largest chipmaker, said March 8 that it would cut 5,000 jobs.