Tuesday, November 16, 2004

Shareholder value

AMCC announced last night that it will let go of about 20% of its workforce, which is about 150 people. This move will save the company about $6-$8M/quarter by March 2005. Sounds nice at surface, where the management is taking the right steps to bring company to profitability. But this is the company that in last few years had decided to buy into storage and embedded processor markets. Wasn't any one thinking about profitability then? AMCC and many other Comm IC companies have seen their core transport market decline and have been "buying growth" and usually buying growth ends with "restructuring". Usually what gets restructured is part of old business that has not picked up and some of the new "growth". So why doesn't management just avoid all the banking fees, severance pays and the hoopla with "buying growth" by gracefully exiting or pairing-down exposure to the old markets? I am still trying to figure this one out, but most of you get my drift. Returning shareholder equity to the shareholders is not always the most advantageous for management which only owns 1% of the equity.


Post a Comment

<< Home