Sigma also confirmed its revenue guidance for the third quarter provided in its earnings conference call on September 5, 2012.
The currently estimated impact of the restructuring plan is an aggregate cost savings of approximately $45 million in fiscal year 2014. Key elements of the restructuring plan include:
- Reduction of approximately $26 million in annual labor costs through headcount reduction and other related actions;
- Reduction in other operating expenses by approximately $14 million to be recognized across fiscal year 2014;
- Migration to lower cost manufacturing components and processes with estimated annual savings of approximately $5 million
This plan would result in non-GAAP profitability on a quarterly basis assuming a quarterly revenue rate of $56 million and begin generating cash from operations at a quarterly revenue rate of $52 million. The Company expects to incur an initial restructuring charge of $1 million in the third fiscal quarter, primarily as a result of headcount reduction, and additional charges in the fourth fiscal quarter as it executes on the remainder of the restructuring plan.
"Over the last few months management has worked closely with the board of directors to conduct a thorough analysis of our global business opportunities by product line. Our top priority is establishing sustainable profitable growth. This analysis resulted in difficult decisions which are necessary to regain profitability," said Thinh Tran, Sigma Design's chief executive officer. "Our restructuring efforts, which have already begun and which we anticipate will be completed by the end of the current fiscal year, are designed to align and scale our workforce and our other expenses with our markets, products and financial plans. We have developed a meaningful restructuring plan that is comprehensive and includes adjustments in all functional areas of our company and regions in the world," added Mr. Tran.
Sigma expects to execute the restructuring plan in several phases, all of which it anticipates will be implemented by the end of this fiscal year. The initial phase, which consisted primarily of headcount reduction in the Company's North American operations and the implementation of expense management measures across worldwide operations, has been completed. Sigma is also investigating strategic alternatives for several research and development programs.
Mr. Tran continued, "Although we have taken and will take significant actions to reduce our expense levels, we believe our core strengths remain intact and poised to capitalize on opportunities in the major markets that we target, including IPTV and DTV, home connectivity, and home control and automation."
