Chipmaker Dumps Employees, Bumps Exec$
It seems as though layoffs and cutbacks are omnipresent these days, as more and more companies make the difficult decision to scale down in order to better compete in the recessed economy. Such decisions are not easy or popular, but are nonetheless necessary — one is left to accept with great sadness that such things should come to pass. That is until the rustling of countless cardboard boxes is muffled by the unmistakable sound of slot machines paying out the jackpot.
Such was the case at chip-maker Spansion, Inc. yesterday, as the company announced a 35% reduction in force while simultaneously rescinding a 10% pay cut imposed on top executives in early October. According to the company's filings with the Securities and Exchange Commission, the layoffs — which will affect some 3,000 workers — is a desperately needed measure to save the company $225 million in cash annually. The filings refer to the restored executive salaries as an "employee retention program" designed to "provide an incentive for executive officers and certain other key employees to remain employed by the Company."
The "employee retention program" fiduciarily excludes the company's CEO from the restoration, possibly because the company's CEO ran screaming from the building earlier this month, carting with him a severance package equal to a full year's salary — a frugal $751,274.94 — plus the cost of having his taxes done, and a four-month consulting contract banking him $62,606.25 per month, half of his previous monthly take. Not to be outdone, the company's new CEO has settled in comfortably with a — practically monastic — contract for $75,000 per month ($900,000 per year) including an advance of $300,000 which, should he decide to follow in his predecessor's footsteps, he won't be required to repay. He is also entitled to "comprehensive benefits and executive perquisites, including medical, dental, life and disability coverage," a 401(k) and executive investment account, and the standard $1.75 million bonus if he can find someone to offload the company onto.
Meanwhile, workers laid off from the company's Austin, Texas manufacturing plant — who, we're guessing, probably brought home paychecks the FDIC would insure — told the Austin American-Statesman that they received no severance at all, though the company would generously be paying a portion of their health insurance costs for the next few months.
Spansion, which describes itself as "the largest company exclusively focused on Flash memory solutions", is the spun-off love child of AMD and Fujitsu, formed between the two in 1993. In 2005, it became a separate company and held what has been described as a "lukewarm" IPO, though it has failed to produce a profit since that time. Both AMD and Fujitsu still own portions of the company — 9% and 12%, respectively — and Fujitsu maintains a seat on the company's board. Spansion produces NOR Flash memory, used in a wide variety of consumer devices, from mobile phones to hi-def TVs, as well as networking equipment and even automobiles. Its partners and customers include, of course, AMD and Fujitsu, which account for anywhere from 13%-56% and 35%-44% of the company's annual sales, respectively, since the IPO, but also Nokia, which accounted for 10% of the company's sales in 2007. Others include Cisco, Nortel, Lenovo, Denali, embedded-Linux outfit MontaVista, QNX, SDC Micro, Casio/Hitachi, Siemens, and even Volkswagen.
On Friday, the company revealed that it had failed to make required interest payments on certain debts, after having delayed those payments in January, causing the full $266 million in principal and interest due immediately. Two weeks prior, the company's Japanese division filed for bankruptcy protection, and analysts have suggested the interest default may trigger certain provisions of Spansion's other credit agreements, forcing it to seek protection under Chapter 11. The company is said to be in talks with various firms to effect a merger or acquisition, and has hired famed investment bank Barclays Capital to assist in the process — along, of course, with promising the newly installed CEO nearly $2 million if he can make it happen.
Somehow one suspects this all wasn't quite what they had in mind when they said "Spansion’s core values of respect for people, integrity, initiative, determination and results are an integral part of the Company’s commitment to good corporate governance."