UTStarcom has announced plans to close its Korean handset factory over the next six months to enable the company to meet current customer commitments in North America and the process will be complete by July 2009. The company's handset segment will continue to supply handsets to the China market.
The actions announced today represent a continuation of the plan UTStarcom outlined in September of 2007. Since the beginning of this year the company has divested a number of non-core business units and increased its net cash position by $150 million.
"Over the past twelve months, we have achieved a year-over-year OPEX reduction of 20% and streamlined our business to improve our competitive and financial position," said Peter Blackmore, UTStarcom's CEO and president. "These additional measures will reduce our annualized expense base by another 25% or $100 million. Importantly, these actions will advance our strategic goals by increasing our focus on our IP-based portfolio targeting the developing regions of the world."
Additionally, the company has initiated actions to disband its Custom Solutions Business Unit by the end of the first quarter 2009.
In the fourth quarter 2008 and first quarter 2009 the company will reduce its global employee base by approximately 10%. This reduction is in addition to the employees impacted by the identified non-core business rationalizations discussed above.
Over the past twelve months the company has implemented a number of IT systems and operational enhancements. With the improved operational capability, the company is now able to eliminate functional duplication and consolidate a number of back office functions into our China operations. This process will start in the first quarter of 2009 and be executed over the first three quarters of 2009.
Restructuring Charge
In connection with the wind down of the Korea-based handset manufacturing business the company expects to incur a restructuring charge of approximately $10 million, consisting of write-downs of assets and one-time severance benefits. This charge is expected to be taken in the fourth quarter of 2008.
The company also expects to incur a restructuring charge in connection with the worldwide reduction in workforce not related to the wind down of the Korea-based handset manufacturing of approximately $8 million comprised of one-time severance benefits. This charge is also expected to be taken in the fourth quarter of 2008.
Posted to the site on 19th December 2008
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