Rockwell spells out restructuring plan

Networking Chip unit to be spun off and 3,800 jobs to be axed.

Networking vendor Rockwell has confirmed costly plans to restructure its business and said it will spin off its chip unit to shareholders, taking an exceptional hit in the third quarter.

The company revealed last week that it will take a $625 million charge for restructuring in the third quarter ending 30 June and will cut nine per cent of its workforce, amounting to 3,800 jobs worldwide. The charge will also cover the closing of sites and disposal of lines which the vendor considers non-strategic.

Cash costs, including write-off of assets and goodwill, will cost Rockwell a further $200 million.

Senior executives continued to outline how the vendor will approach sales for the rest of this year and next.

The company said the spin-off of its Rockwell Semiconductor Systems business will be subject to a decision by the US Internal Revenue Service that it can qualify as a tax free distribution.

Shareholders in Rockwell will receive shares on a pro-rata basis, and the spin-off company will be listed on Nasdaq.

The current president of the unit, Dwight Decker, will become the president and chief executive of the operation.

Rockwell chief executive Don Davis said: 'The dynamics of Semiconductor Systems are different from Rockwell's other businesses, including its markets, products and investment requirements.'

Davis said the restructuring, to be finished by the end of next year, will yield $100 million of pre-tax savings, leading to further savings of $200 million by the year 2001.

The US giant will now concentrate on its automotive and avionic business.

Davis warned the third quarter's profits would be 20 per cent below the equivalent quarter last year.

Davis confirmed that the semiconductor business would post operating losses both for the third quarter and for the full year.

That, he said, was caused by weakness in the PC modem market as well as what he described as a work stoppage at a Californian plant. Chipset business was still strong, Davis maintained.