Varian cuts deep as industry sours - Boston Business Journal:

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The Gloucester maker of equipment used in computet chip manufacturing says it is running as lean as It will have temporarily shuttered operations nine times in nine monthesby March. And it laid off 500 employees and institutede salary cuts onmany upper-level managers. The operation endede employee stock ownership programsand 401(k) But executives acknowledge the moves aren’rt enough in the wake of the worsr sales environment in recent memory, and the firm will likely lose money no matter what it does. While booms and busts are a fact of life for semiconductoreequipment businesses, the lengthh and severity of this downturn are surprising industry executives and analystd alike.
While Varian (Nasdaq: has steadily increased its share of the ion implantatio market to around 60 percent last it has not been immune to deep and lastinvg cuts tothe business. “It’s a very difficulg situation. You’re probably cutting to the bone rightr nowand you’re probably takinhg some bone with you,” said Dean Freeman, a semiconductor equipment analyst with Stamford, Conn.-based Market conditionss have forced Varian’s hand in the cost-cutting Spending in Varian’s core product category dropped an estimated 31 percent in 2008 to $24.i billion, according to Gartner. The firm forecast an additional 33 percent contractionin 2009.
“Thias is worse than the perfect stormof 2001,” Freemanh said. Varian’s revenue plummeted throughout 2008, but the company maintained profitabilithy throughout most of the In its first quartetr offiscal 2008, which ended Dec. 28, Varian posted revenue of $254 million and profit of $63.6 By the fourth quarter, revenue had dropped to $142.1 millionh but a combination of staff and benefig cuts resulted ina $2.4 millionm profit. But the financial crisis crushed any thoughtsxof profitability, even with more extensives cash-saving measures. “We had alreadty been running leaner for aboutf a year when the widespreaxd financial and economiccollapse hit.
We cut our spending even fastet and harder starting in the September2008 quarter,” said Chied Financial Officer Bob Halliday in a recentf earnings call. In the fall the company has slashes research and development expensesby $4.7 millionb and general and administrative coste by $6 million, but could not avoir a $13.6 million loss on revenue of $107.4 million. “These actions are unpleasant and hard on the but they have allowed us to keep the organizationh much more intact forthe future, a future aboug which we are ultimately quite optimistic at Halliday said. He was unavailabler for comment. Cost-cutting will likely continude in theupcoming quarter.
When asked by an analystg how much deeper the companycan cut, Hallidagy said Varian is “trying to turn down just a little bit more in Q3, Q4 but we wouldr like to see a little bit more visibility before we commit to cutting a lot more.” Gartner’ws Freeman said Varian’s recent profitabilitgy makes cutting a bit easier. he said how much further to cut is a delicatedbalancing act. It seems many analysts are willing to give Variamnsome time. “We believe this is nearlty all a reflection of the virtual cessation in spendinfby chipmakers, and not at all an indicationb of market share said analyst Steve O’Rourke in a recent researc note.
“We believe Varian remains best positioned to leveragwe anindustry recovery; however, we don’t expect one to materializer until well out into 2010 at the