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MACOM Lays Off 250 Employees as Part of Restructuring Plan

Zacks Equity Research

MACOM Technology Solutions Holdings, Inc. MTSI announced the approval of a restructuring plan. This plan constitutes the elimination of around 20% of its total workforce and closing of several development facilities.

The company plans to terminate around 250 employees from several departments. The layoffs cover broad areas of operations, including research and development, production, sales and marketing, as well as general and administrative.

As part of restructuring endeavors, the company also plans to close seven product development facilities, including locations in France, Japan, the Netherlands, Florida, Massachusetts, New Jersey and Rhode Island. In addition, it will no longer invest in the design and development of optical modules, along with subsystems for Data Center applications.

Once this restructuring measure is implemented, the company will save about $50 million annually. However, it expects to incur approximately $14 million in restructuring charges, including $7 million for employee severance obligations.

 

MACOM Technology Solutions Holdings, Inc. Price and Consensus

 

MACOM Technology Solutions Holdings, Inc. Price and Consensus

MACOM Technology Solutions Holdings, Inc. price-consensus-chart | MACOM Technology Solutions Holdings, Inc. Quote

Fiscal Q3 Guidance Updated

MACOM now expects sales within $107-$109 million, down from the previous guided range of $120-$124 million. The Zacks Consensus Estimate for revenues is pegged at $122.5 million

On a non-GAAP basis, the company downwardly revised its gross margin guidance to the range of 39-41% from 53-55%. This guidance includes approximately $14 million in inventory reserves.

MACOM now estimates non-GAAP adjusted loss in the range of 41-45 cents per share versus 8-4 cents expected earlier. The corresponding Zacks Consensus Estimate is pegged at a loss of 6 cents per share.

Bottom Line

Weakness in the company’s datacenter business led to weaker-than-expected fiscal second-quarter results. Dim prospects across the customers of MACOM’s white box solutions, owing to cloud operators’ lack of initiatives toward improvement of new module suppliers, remain an overhang.

Ongoing macro-economic headwinds in China might continue to impact the company’s growth. Moreover, weak performance in the telecom market is a drag.

Therefore, MACOM’s efforts to implement a restructuring plan and improve financial position encourage us. Moreover, the company’s focus on expanding product offerings for customers bodes well for the long term.

Zacks Rank & Stocks to Consider

Currently, MACOM has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the broader technology sector include Itron, Inc. ITRI, Teradyne, Inc. TER and AXT, Inc. AXTI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Itron, Teradyne and AXT is currently projected at 25%, 9.8% and 15%, respectively.

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