Marvell to refocus on IoT as mobile profits drop

Chip maker Marvell Technology has announced a ‘significant restructuring’ programme as mobile revenues disappoint and the Internet of Things offers better growth prospects.

The change in plan comes as it shifts focus from consumer mobile to concentrate more on corporate mobile, while addressing new markets such as the automotive industry and the Internet of Things.

The company’s financial aims are to concentrate on more profitable corporate targets and reigns in expenses, it said.

The new mobile product lines will still target Wi-Fi and other standards of wireless connectivity as these support its strategies in existing markets.

The company’s board of directors approved the new business plan after a meeting in which it was presented preliminary estimates for the first half of fiscal 2016.

The board was told that the Marvell Technology Group’s mobile platform generated roughly $122 million in revenues in the latest financial year and around $13 million in gross profit.

However, a successful restructuring of the mobile business is expected to result savings of between  $170 million and $220 million a year. This would include operating expense savings of $15 million to $20 million.

The downsizing of the mobile platform organization is currently expected to result in job losses for 17 per cent of the global workforce.

The restructuring will begin immediately and the company expects the major activities to take place through the end of fiscal 2016, which it expects will cost between $100 million to $130 million, mostly in severance and employee-related costs in the third and fourth quarters of fiscal 2016. The price of cutting mass redundancies is expected to be between $45 million and $55 million.

Meanwhile, managing change in facilities and assets could cost up to $40 million and an inventory write down charge will cost from  $25 million to $35 million.

Marvell does not plan to hold a conference call with investors and will discuss the restructuring of the mobile platform business in more detail during its next, as yet unconfirmed, quarterly earnings conference call, it said.

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