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RF Micro to Shed Wireless Chip Unit

The company will take a charge of up to $50 million.


RF Micro Devices


is dumping its cell phone transceiver chip business as it seeks to shore up its sagging profitability.

The company said Tuesday it will reduce investments in wireless systems, including cellular transceivers and GPS products, effective immediately. The move will save RF Micro roughly $75 million in product development costs in its new fiscal year.

Shares of RF Micro were off more than 7% in recent after-hours trading to $3.20.

"These strategic actions will enable RMFD to deliver more predictable financial results and substantially higher profitability," said CEO Bog Bruggerworth in a statement.

RF Micro devices will focus on producing front-end chips for cell phones as well as chips for communications infrastructure equipment.

With the moves, RF Micro expects to achieve an adjusted operating margin of at least 10% and double-digit return on invested capital by the end of the 2008 calendar year.

RF Micro will take a restructuring charge of $40 million to $50 million over the next two quarters.

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The Greensboro, N.C.-based chipmaker announced the restructuring plan after Tuesday's market close, along with results for its fiscal fourth quarter in which RF Micro posted a loss of $16.4 million, or 6 cents a share.

At this time last year, RF Micro had a profit of $30.1 million or 14 cents a share.

Excluding stock compensation expenses and restructuring and amortization charges, RF Micro earned EPS of a penny, in line with Wall Street expectations.

Of course, analysts were expecting a much higher EPS three months ago, when the chipmaker delivered a weak financial outlook due to slowing demand in the cell phone handset business and product launch delays among certain customers.

The fact that



, RF Micro's second-largest customer, is exploring spinning off its handset division has not helped.

Sales for the three months ended March 29 totaled $221.9 million, in line with analysts' expectations.

In the current quarter, RF Micro projected sales between $230 million and $245 million, vs. the average analyst expectation of $238.3 million. The company forecast adjusted EPS of one penny to 2 cents, compared with the 2 cents EPS expected by analysts.