Loss-making UTStarcom will cut more than half of its workforce, mostly from R&D and manufacturing, as it aims to slash its operating costs.
The China-US vendor, who has been under new management for the last 18 months, will also withdraw almost completely from the handset market.
The company will eliminate 2,300 jobs by outsourcing manufacturing and cutting back on R&D, reducing costs by more than half to less than $100 million, it announced on Friday.
It will take a restructuring charge of $40-$45 million, mostly in severance costs. The company has approximately 4,300 staff today.
CEO Peter Blackmore told an analysts’ hookup that UTStarcom would continue to focus on selling IP networking gear, primarily for China and India.
It will close down its Korean handset manufacturing and continue only in the high-end CDMA phone market.
“We will optimize our R&D by focusing on products with technology differentiation and which will drive high revenue growth and grow margins,” he said.
He said the outsourcing of manufacturing move “may be cost-neutral” but would improve the cash flow cycle.
UTStarcom, headquartered in California, carries out most of its manufacturing in China. It was one of the biggest manufacturers of PHS phones and equipment for China’s Xiaolingtong service, but has been hit by the planned winding down of those networks.
The company made a net loss of $67.4 million in the first quarter on sales of $119.3 million. A year ago it posted a $25.4 million profit on $586 million.
Blackmore said the company hoped to sell its huge manufacturing plant in Hangzhou, although he did not expect an early sale in the current environment.
He said he expected “double-digit” sales growth in 2009.