The semiconductor company MACOM Technology Solutions Holdings MTSI is warning that its third-quarter revenue is expected to fall due to the Huawei ban.
What Happened
Macom said Tuesday that its third-quarter revenue is now expected to fall in a range between $107 million and $109 million versus prior guidance of $120 million to $124 million.
The Lowell, Massachusetts company's non-GAAP gross margin is now expected to be between 39% and 41%, which includes approximately $14 million in inventory reserves, or 1,300 basis points of gross margin impact.These inventory reserves are associated with certain data center products and products that would otherwise be shipped to Huawei. This compares to prior non-GAAP gross margin guidance of 53% to 55%.
In addition to the downward guidance revision, Macom announced a restructuring plan in which it said it will permanently reduce its workforce by 20%, or 250 employees. The plan is expected to create $50 million in annual savings, the company said.
The company is also closing seven product development facilities in locations including France, Japan, the Netherlands, Florida, Massachusetts, New Jersey and Rhode Island.
Why It's Important
The company said it updated guidance to reflect the impact of discontinuing shipments to Huawei Technologies as a result of the Department of Commerce addition of Huawei to its “entity list.”
The company's updated guidance also reflects reduced shipments to certain distribution channel partners, according to Macom.
“We do not make these decisions lightly, however, these actions are necessary in order to strengthen our strategic plan,” CEO Stephen Daly said in a statement.
What's Next
Macom is expected to report third-quarter results sometime around late July, according to the Benzinga Pro earnings calendar.
The stock was trading higher by 0.76% at $14.54 at the time of publication Wednesday.
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