Knobias Clip Report (12-16-2008) INFS
Submitted By Knobias ClipReport
INFS: CEO Discusses Workforce Reduction, Restructuring & Strategic Alternatives
By Fain Hughes, fhughes@knobias.com
InFocus Corporation (INFS) announced plans today to restructure the Company and reduce its global workforce by approximately 30% and restructure the operations of the Company. The Company also commented today on a recent decision to retain the services of investment banking firm Thomas Weisel Partners LLC to provide advisory services to the Company, including advice concerning unsolicited offers from outside sources expressing interest in purchasing the Company.
Bob O’Malley, President and CEO of InFocus, explained in a conference call today, “In regard to the board’s decision to retain Thomas Weisel Partners, we believe that outside interest in InFocus comes from our brand being the most widely recognized in the projector industry. Our Company has a projector roadmap that is differentiated from our competitors. We also have a longstanding and well-established relationship as the supplier in channel levels. This includes our position as the number one North American supplier of digital projectors and the number one market share in IT channels for North America.”
He continued, “As the structure and nature of any offers may vary, the process to review these strategic alternatives will take an undetermined amount of time. We will provide updates on this initiative when we have reached a definitive agreement, ot the board has terminated the process. In addition, this action has a direct impact on our recent announcement of a stock buyback which we have now suspended.”
Mr. O’Malley further discussed the workforce reduction and restructuring efforts. He noted, “These plans are in direct response to the worldwide softening of demand for projectors and other general IT equipment. Our recent strategy was to grow profitability with top line growth. We need to do more faster, especially with the near term outlook for decline in projector industry revenues. The economic slowdown has also presented greater challenges in managing our working capital, as our revenues softened at a quicker pace than anticipated. Inventory levels are tracking higher than expected. This will impact cash balances in the short term. We expect this pressure to alleviate in the first half of 2009, as current inventory levels are absorbed by our channels.”
The Company currently expects to incur restructuring charges in the fourth quarter of 2008 ranging from $5.3 million to $6.1 million. Approximately $1.3 million to $1.6 million of the charge is related to the planned headcount reduction, and consists primarily of severance payments, to occur during the fourth quarter of 2008 and over the course of 2009.
The Company’s 2009 business model will be built off a breakeven point of $50-55 million revenue per quarter, down 30% from previous assumptions. The Company believes it will achieve profitable operations with an 18% gross margin target and operating expenses in the range of $10-11 million per quarter.
Mr. O’Malley added, “As we refocus our plans, we will preserve cash, reduce operating expenses, evaluate our investments, freeze much of our travel and a year-end shutdown of facilities to reduce expenses. In this reshaping, our prevailing methodology is rooted in simplifying our business. The philosophy of simplification will drive execution in each of our four functional areas.”
He concluded, “We fully expect a difficult first half of 2009, as we assess the effects and duration of the economic downturn. We expect to see the full effects of our restructuring by the end of 2009 when infrastructure costs come down and our new differentiated projectors with higher margins begin to ship.”
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