LONDON — Celeritek Inc. is pulling out of the increasingly competitive handset power amplifier business to focus on standard GaAs semiconductors for the communications and military markets and GaAs subsystems also targeting military applications.
The company blamed excess capacity and increasing competition which have "created a challenging business environment and uncertain outlook for handset manufacturers and suppliers."
Celeritek said it would lay off about one-fifth of its employees, consolidate activities at its Santa Clara, Calif., headquarters and close sales and technical support offices in South Korea.
It expects the changes to reduce expenditures by approximately $14 million to $16 million annually while significantly reducing its break-even revenue level from approximately $18 million currently to approximately $10 million per quarter. The company expects to incur other non-cash charges of as much as $5 million related to asset and lease impairments along with cash charges of approximately $700,000 related to facilities consolidation over the next several quarters.
"We believe the severe pricing pressure and other adverse market conditions in the wireless handset industry will prevent our handset related business from achieving acceptable gross margins," said Tamer Husseini, president and chief executive of Celeritek.
The company said it would focus its semiconductor R&D efforts on low-cost standard products for the wireless and satellite sectors. It also intends to market its high-performance GaAs chips to commercial communications customers, but it would also make a clear shift to military business.
