The clock is ticking for Spansion

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The clock is ticking for Spansion

Posted: 13 Jan 2009


Is time running out on Spansion Inc.?
Amid a string of losses, declining funds and a major economic downturn, NOR-flash leader Spansion has implemented another round of cost-cutting measures. Rumors are also running rampant that Spansion is mulling a plan to file Chapter 11 protection of the U.S. Bankruptcy Code.

Regarding the possiblity of filing Chapter 11, a spokeswoman for Spansion said: ''We do not comment or speculate on rumours.''

At one time, there were other rumours about Spansion, including a report that Japan's Toshiba Corp. would acquire the company. Sources believe that Spansion and Toshiba were close to signing a deal, but the acquisition was reportedly put on the back burner.

Indeed, it's been a rough time for Spansion, the world's leading supplier of NOR flash memory. Recently, Spansion reported a loss for the third quarter of Rs.593.93 crore ($118.7 million) on revenue of Rs.3,157.30 crore ($631 million). During the third quarter, the company imposed salary reductions, cut capital spending, frooze headcount and cut research and development projects.

In November, the company became the latest semiconductor supplier to issue a warning about revenue in the current quarter, saying it expected fourth quarter net sales to be down about 20 per cent sequentially. Last month, Spansion closed its fab in Austin, Texas, for two weeks during the fourth quarter in anticipation of a weak holiday season and deteriorating macroeconomics,

Faced with an uncertain future, Spansion confirmed that it is also implementing another round of cost-cutting moves. Pay was cut 20 per cent across the board in December; hours were cut 20 per cent as well, sources said.

''Varying degrees of salary reductions were implemented as early as October 2008. Schedule changes were implemented beginning the first pay period of 2009. These actions have been implemented as part of a larger global cost cutting strategy to help better position Spansion to weather the storm during the economic downturn,'' the spokeswoman said.

Still, employees were called to tell them they were furlowed for this week without pay. Today, the furlow was extended for another 2 weeks—mandatory—without pay.

''We realise this comes at a difficult time, but Spansion has decided to extend its furlough through January across parts of the company. This decision is part of a part of a broader initiative to reduce operating expenses and help align manufacturing output with customer demand,'' the spokeswoman said.

Spansion is also telling employees it has enough product for customers to last for three weeks. As a result, manufacturing runs have halted at the firm.

''As a result of the continuing deterioration of the macroeconomic environment, which has resulted in decreased customer demand for flash memory, Spansion has decided to temporarily shutdown its manufacturing facilities for periods in January. This decision is part of a larger strategy to help align manufacturing output with customer demand,'' the spokeswoman said.