said on Friday that it will take charges of about $29 million total in the second quarter and trim its workforce by about 8% due to a severe decline in IT services infrastructure spending.
The information security solutions provider said its second-quarter revenue would be about 5% lower than its first-quarter results, compared to expectations of sequential growth. According to Rainbow, decreased spending at the company's Spectria segment is responsible for the shortfall.
As a result, Rainbow said it will discontinue its nonsecurity-related IT services and fold Spectria into its security segment. The company will incur about $15 million in charges to close its Spectria facility in California, and it will lay off about 8% of its workforce.
Rainbow said it sees no long-term visibility for a services sector rebound in IT spending.
Additionally, Rainbow will take a charge of $9 million related to the discontinuation of certain products and a write-off of $5 million in capitalized software related to lower-than-expected sales forecasts.
In a press release, Rainbow said, "Going forward, the company anticipates these measures will improve revenues and profitability in the second half of 2002." Less than $1 million of the above charges will be cash related.
Shares of Rainbow closed Friday before the news at $5.33.