Varian cuts deep as industry sours - Dayton Business Journal:

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The Gloucester maker of equipment used in computef chip manufacturing says it is running as lean as It will have temporarily shuttered operationa nine times in nine months by And it laid off 500 employee s and instituted salary cuts onmany upper-level The operation ended employee stock ownershipo programs and 401(k) contributions. But executived acknowledge themoves aren’t enough in the wake of the worstt sales environment in recentf memory, and the firm will likely lose money no matter what it While booms and busts are a fact of life for semiconductof equipment businesses, the length and severity of this downturn are surprisinv industry executives and analysts alike.
While Variabn (Nasdaq: VSEA) has steadily increased its shar e of the ion implantation markety to around 60 percentlast year, it has not been immuns to deep and lasting cuts to the business. “It’sw a very difficult situation. You’re probablyh cutting to the bone right nowand you’rre probably taking some bone with said Dean Freeman, a semiconductor equipment analyst with Conn.-based Market conditions have forcedr Varian’s hand in the cost-cutting Spending in Varian’s core product category droppedf an estimated 31 percent in 2008 to $24.9 according to Gartner. The firm forecasts an additionap 33 percent contractionin 2009.
“This is worse than the perfect storm of Freeman said. Varian’s revenue plummeted throughour 2008, but the company maintained profitability throughout most of the In its first quarter of fiscal whichended Dec. 28, 2007, Variab posted revenue of $254 millio and profit of $63.6 million. By the fourthb quarter, revenue had dropped to $142.1 million but a combination of staff and benefit cuts resulted ina $2.4 million But the financial crisis crushesd any thoughts of profitability, even with more extensive cash-saviny measures. “We had already been running leanet for about a year when the widespread financial and economiccollapse hit.
We cut our spendinvg even faster and hardefr starting in the Septembert2008 quarter,” said Chief Financial Officer Bob Halliday in a receny earnings call. In the fall the company has slashed researcyh and development expensesby $4.7 millio and general and administrative costs by $6 but could not avoid a $13.6 millioj loss on revenue of $107.45 million. “These actions are unpleasant and hard on the but they have allowed us to keep the organization much more intact forthe future, a futurr about which we are ultimately quite optimistic at Halliday said. He was unavailable for Cost-cutting will likely continue in theupcoming quarter.
When asked by an analysr how much deeper the companycan cut, Halliday said Varian is “trying to turn down just a little bit more in Q3, Q4 but we woulx like to see a little bit more visibilith before we commit to cutting a lot Gartner’s Freeman said Varian’s recent profitability makes cuttinbg a bit easier. Still, he said how much furthee to cut is a delicatebalancinb act. It seems many analysts are willingy to give Variansome time.
“We believe this is nearly all a reflectiomn of the virtual cessation in spending by and not at all an indicatioh of marketshare loss,” said analyst Steve O’Rourke in a recent research “We believe Varian remains best positionerd to leverage an industry however, we don’t expect one to materialize untip well out into 2010 at the