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TheStreet Open House

Tessera Technologies Announces Refocused DigitalOptics Business Strategy And Restructuring

“These actions will result in a less capital-intensive approach for our DOC business, which will enable us to continue to innovate and develop the product and manufacturing capabilities that are critical to our success while maximizing the leverage of our partners and imaging ecosystem,” said John S. Thode, who was named president of DOC in February 2013. “Our mems|cam module has demonstrated significantly faster autofocus and lower power consumption than the current voice coil motor autofocus technology. We continue to productize our technology and ship sample quantities of camera modules to mobile phone makers for evaluation and qualification. In addition, we have the capability to deliver unique software driven imaging solutions when combining mems|cam with our Embedded Image Processing solutions now primarily present in digital cameras. The actions we are taking today will help to ensure our long-term competitive viability and a meaningful success in our business in 2014 and beyond.”

The Company’s restructuring will reduce spending in DOC and Corporate Overhead, but not in the Company’s Intellectual Property business. As a result of DOC’s refocused business strategy and previously announced cost reductions, the Company expects its reported Corporate Overhead to be at an annual run rate of approximately $29 million exiting 2013, compared to $47 million in 2012; and DOC operating expenses, excluding cost of revenues and restructuring, impairment and other charges, to be at an annual run rate of approximately $53 million exiting 2013, compared to $88 million in 2012. These reductions will occur throughout the rest of this calendar year. DOC also expects cost of revenues to decline from $40 million in 2012 to approximately $15 million in 2013 as a result of the change in estimated production volumes and previously announced actions.

DOC’s refocused strategy includes initiatives across multiple fronts:

  • DOC will accelerate the use of partner manufacturers for the production of camera modules and will focus its own manufacturing on the lens barrel assembly, which is a higher-margin component for which DOC has unique proprietary technology. This approach will cut DOC’s expected capital spending in 2013 by roughly half – to a range of between $5 million and $7 million, as compared to the Company’s previous estimate of $10 million to $15 million.
  • DOC is consolidating its manufacturing capabilities into its Taiwan facility and expects to cease all operations at its leased facility in Zhuhai, China. DOC will transfer a portion of the manufacturing equipment located there to Taiwan.
  • DOC will terminate its current lens manufacturing program and instead will focus on designing lenses that its partners can produce for use in DOC’s proprietary assembly technology.

The Company expects to take a total charge of between $17 million and $23 million, which includes restructuring, impairment of assets and other related exit costs, with the majority taken in the first quarter of 2013 and the remainder in the second quarter of 2013.

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