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Electronics Production | March 02, 2008

Zarlink sells UK operation to MHS Electronics

Canada based semiconductor specialist Zarlink Semiconductor Inc. has sold its analog foundry in Swindon, UK to MHS Electronics UK Ltd., a subsidiary of MHS Industries Group.
As part of the agreement, Zarlink has transferred all assets related to its Swindon foundry business, including the analog foundry and equipment, employees, third-party inventory and other assets but excluding cash on hand, accounts receivable and accounts payable, to MHS Electronics for Euro (€) 1. In addition, Zarlink has paid MHS Electronics €2 million to support restructuring initiatives. The two companies have signed a three-year agreement to ensure continuity of wafer supply for Zarlink, under which Zarlink will deposit US$3.9 million, representing about nine months of product orders.

As a result of this sale, Zarlink expects to record a book loss of approximately US$13 million or US$0.10 per share. Zarlink’s guidance for the Fourth Quarter, Fiscal 2008 has been revised from a loss of US$0.06 to US$0.08 per share to a loss of US$0.16 to US$0.18 per share. Due to the timing of closing, Zarlink is maintaining its revenue guidance of US$53 million to US$56 million for the Fourth Quarter, based on the factors provided in the Third Quarter Fiscal 2008 press release issued February 5th, 2008.

Zarlink expects that this transaction will be accretive to Fiscal 2009 earnings by approximately US$0.05 per share, primarily as a result of eliminating losses incurred by the Analog Foundry in Fiscal 2008.

“This transaction will benefit Zarlink and its shareholders, while the Analog Foundry employees will prosper as part of a pure-play semiconductor foundry,” said Kirk K. Mandy, President and CEO, Zarlink Semiconductor. “Zarlink can now focus our resources solely on growth initiatives in the wired communications, optoelectronics and medical markets. Management and the Board of Directors will continue to review all aspects of our business, and where appropriate take the strategic steps necessary to position ourselves for success in these markets.”

Zarlink’s Analog Foundry provides bipolar technology processes and design services for fabless semiconductor companies and original equipment manufacturers. MHS Electronics offers contract manufacturing on specialized mixed-signal CMOS and BiCMOS processes, supported by project management, wafer manufacturing, prototyping and test/assembly services, for the aerospace, defense and medical markets. Approximately 120 Zarlink employees will be transferred to MHS Electronics as part of the sale, representing all of the Foundry employees.

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