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Microtune Streamlines, Lays Off More Than 1,000

Microtune , who competes with Intel and Broadcom in the broadband communications and transportation electronics chips space, Monday revealed that it has sold off assets and laid off more than 1,000 employees in the last few months in order to cut expenses by about $2 million.

The Plano, Texas firm, embroiled for the past few months in patent and antitrust lawsuits with Broadcom, agreed in March to sell assets of its Philippine manufacturing facility to LCD chipmaker Three-Five, firing roughly 1,000 factory personnel. According to Microtune, many of the laid off employees have been hired by TFS, which has agreed to address and build demand for radio frequency subsystems.

Microtune is keen on retaining its radio frequency product base and so it sold its Netherlands-based Microtune (Holland) B.V., design center, which developed and marketed baseband technology such as demodulators for European digital TV products to the Micronas Group last month. Microtune will continue to have access to the Micronas digital IC technology for the development of its digital video broadcast (DVB) terrestrial subsystem products. Some 25 were shifted to Micronas with this sale.

Lastly, Microtune cut a swath through its Bluetooth division, laying off more than 50 percent. The exact headcount eliminated was not made public and Microtune did not respond to requests seeking comment but the firm said in a statement that it will focus on its new CableFree USB product line.

Microtune will also continue making tuner, amplifier, upconverter, and transportation electronics product lines, as well as invest in research and development in the set-top box, digital television, PC/TV and LCD/TV markets.

The firm said in the statement it believes the cost reductions will reduce quarterly operating expenses of by approximately $2 million in the first full quarter of reductions, which will be in Q3 of 2003. About 230 employees remain with Microtune after the layoffs.

The semiconductor market had a rough go of it in the last year, but the industry has stabilized and is on the verge of a healthy rebound, according to industry analysts making their predictions for next year. Recent forecasts from Silicon Valley-based trade group Semiconductor Industry Association (SIA) predict growth of about 21 percent to $169 billion in 2003, 22 percent to $206 billion in 2004, and then remain flat at $206 billion in 2005.

Rather than address the strategic cost-cutting moves, Douglas J. Bartek, Chairman, CEO, and President of Microtune, boasted about his company's recent legal wins against Broadcom in the press statement.

"Our proprietary silicon tuner technology has been validated by the federal court in our recent patent lawsuit win and preliminary injunction against Broadcom, where we asserted claims under one of our 24 granted patents in tuner technology," Bartek said. "Every one of the 25 patent claims we asserted was deemed to be valid, every claim was infringed by Broadcom, and the jury determined that Broadcom willfully infringed. This powerful validation has reinforced our focus on our core RF broadband technologies."

Microtune plans to file this month its Annual Report on Form 10K for 2002 with the SEC. The 10K will describe adjustments to the first three reported quarters of 2002 and restatement for 2001 as previously reported.