MUNICH, Germany — Against the background of towering losses in its consumer business, chip maker Micronas has announced a major restructuring. R&D spending will be cut drastically; the company's US subsidiary probably will be sold.

The figures speak clearly: On sales of CHF 136.7 million (about $115.9 million or €81.2 million), the Zurich, Switzerland, based company achieved an operational loss of CHF 422 million in its consumer business during the third quarter 2007; excluding impairment the loss amounted to CHF 32 millions. The management sees urgent need for action and has announced a restructuring program which aims at saving CHF 80 million throughout 2009.

In the first place, the company plans to refocus and tighten its broad consumer portfolio, especially in the area of TV products. As a result of a "rigorous review of all strategic options", Micronas Chairman of the Board of Directors Thomas Lustenberger announces a "radical restructuring of the consumer division", with a leaner organization and * hopefully - a better profitability for its products.

The R&D budget will be cut by 45 percent which will lead to 300 job cuts * about 14 percent of the company's total head count of 2200. At the same time, the research capacity in Shanghai will be expanded. The fate of the company's US subsidiary is in the balance: In May 2004, Micronas had bought Chicago-based Linx Electronics and in December 2005 WISchip International, based in Santa Clara, Calif. Both companies appealed the Swiss semiconductor maker for their expertise in HDTV technology, with WISchip focusing on streaming technologies and System-on-Chips for multimedia applications. Despite HDTV continuing to be one of the major trends in consumer electronics, the acquisition apparently has lost its luster. "The market serviced by this subsidiary has proved more fragmented and volatile than was at first assumed", the company informs in a press release. Thus, Micronas has decided to sell the subsidiary. This would make it possible to further grow the US company's IP basis and retain jobs, Micronas said.

In addition, the company's analysis showed that the sales activities also need restructuring with the target to bring it nearer to customers.

The situation in the company's Automotive business which contributes about one third to the sales appears much better. On sales of CHF 49.8 million, the division generated an operating profit of CHF 13.4 million in the third quarter * and it has always been profitable, despite persistently difficult market conditions, as Micronas points out.

The new strategy will yield a turn-around in 2008 and a return to profitability in 2009, the management announced. Before the company gets back into the sunshine, it first has to digest the expenses of the restructuring measures which add up to CHF 50 to 70 million. For the quarter ahead, Micronas expects sales in the range between CHF 160 and 175 million, down from CHF 186.5 million in the third quarter. For the entire year, the company now expects sales between CHF 700 and 715 million (2006: CHF 813 million) and a loss between CHF 560 and 585 million.