Skyworks Fireworks

Shares soar on the company's plan to exit its baseband business and cut 10% of its staff.
Publish date:

Updated from 7:53 a.m. EDT


(SWKS) - Get Report

shares surged 36% Tuesday on the company's plans to cease its baseband operations.

The stock recently was up $1.84 to $6.90, with more than 26 million shares changing hands. The average daily volume on the stock is about 4 million shares.

The wireless-chip and component maker said late Monday it plans to focus on its core analog and radio-frequency businesses. The move will result in a 10% reduction in its workforce.

Baseband chips, which handle communications functions in cell phones, have been a declining business for the company. Skyworks' fiscal 2006 revenue from the division is projected to fall to $50 million from $123 million a year earlier, while its core business is expected to see revenue grow to $730 million from $655 million.

Skyworks said it will eliminate nearly $70 million in annual costs and cut 425 jobs as a result of the baseband move. The company plans to record $85 million to $95 million in related charges, most of which are expected to be reported in its recently ended fiscal fourth quarter.

Skyworks backed its fourth-quarter targets for earnings of 5 cents a share, before items, and revenue of $197 million to $200 million. Analysts polled by Thomson First Call have an average estimate for earnings of 5 cents a share and revenue of $199 million for the September quarter.

Following the exit of the baseband business, the company anticipates fiscal 2007 revenue of $820 million to $840 million. The company expects earnings for the year to be 55 cents to 60 cents a share, before items, well above First Call's projection of 29 cents.