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Freescale 1000-worker cull to cost $65m

Savings to be spent caressing customer companies, apparently

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PowerPC maker Freescale yesterday told 1000 staffers they would lose their jobs in order to allow the chip maker to "accelerate new product development and.... drive greater customer intimacy", whatever that is.

The announcement came as the company published figures for its most recently completed quarter, Q3, which ended 2 October 2004. The quarter yielded revenues totalling $1.43bn, down two percentage points on Q2's $1.46bn but up 16.3 per cent on the year-ago quarter.

Freescale boosted its earnings from a year-ago loss of $106m to a profit of $57m (15 cents a share). That represents a sequential gain of 32.6 per cent on Q2's $43m net income. Gross margins reached 39 per cent in Q3, up from 30.3 per cent in Q3 2003 and 38.4 per cent in Q2 2004.

Q3's income comes after Freescale spent $19m on "separation expenses" resulting from the company's split from Motorola. Q4's earnings will likewise be impeded by one-off expenses, to the tune of $65m to cover the cost of the 1000 redundancies. It will also spend a further $25-30m on said separation expenses.

Freescale expects Q4 revenue to come between $1.4bn and $1.45bn, with gross margins falling to between 38 per cent and 39 per cent - at best the same as Q3. Given Q4's potential for margin and revenue decline, the anticipated expenses don't leave much room for profits from Q3's operating income of $81m. ®

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