Vishay Intertechnology Inc. today disclosed why it is embarking on a cost-cutting and employee reduction program noting in a release that third quarter revenue and profits came in below investors’ and the company’s expectations. Its sales forecast for the December quarter were similarly lackluster indicating demand for its products remain weak.
Malvern, Pa.-based Vishay reported net income rose in the September quarter to $32.7 million, or 22 cents per share, up from $22.3 million in the year-ago quarter, but below the 24 cents per share analysts were expecting. Revenue also failed to match expectation, rising on a year-over-year basis to $603 million from $573 million but were below the consensus analysts’ forecast of $621.5 million.
The company in a statement is guiding “for revenues of $570 to $610 million at margins in line with this level of volume,” according to Gerald Paul, president and CEO. Prior to the announcement of the latest results, analysts on average were predicting Vishay’s fourth quarter sales would be approximately $613 million.
The discrete semiconductor and passive components supplier attributed the revenue shortfall to a sharp decline in orders starting in July and said it was “disappointed” at its performance. In response, the company on Monday announced a battery of cost-reduction measures, including early retirement or “voluntary separation” for some employees as well as a move to outsource the production of semiconductor wafers to foundries. (See: Vishay Unveils Sweeping Cost Cutting Actions.)
“The anticipated seasonal pick up in the computing and consumer end markets during the third quarter did not materialize. Orders from distribution worldwide rapidly fell off after July,” said Paul in the statement. “As we announced yesterday, we are in the process of establishing a comprehensive cost reduction effort consisting of several distinct programs in order to support profitability. When fully implemented by the end of the first quarter of 2016 we expect total annualized savings of $36 million at a total cash cost of $26 million.”