ESS Technology

(ESST)

said intense competition has forced the company to rethink its business plan and cut one-quarter of its workforce.

The semiconductor company currently has a standard-definition DVD business, a high-definition DVD operation and a division that focuses on image sensors for camera-enabled cell phones. ESS will now concentrate its standard-definition DVD business activities on serving only a few large customers while continuing to evaluate alternatives for the unit.

Additionally, the company will look for business partners or acquirers for its high-definition business and its camera-phone division.

As part of the reorganization, ESS has reduced its employee count by around 25% since the end of the second quarter. The company will write off about $2 million in standard-definition DVD inventory related to the low end of the market and said additional inventory reserves may be required.

With regard to the third quarter, ESS now believes net revenue will be in the range of $19 million to $23 million. Separately, the company released $14.9 million of its tax reserves in September, which will help earnings in the quarter.