Conexant announces mass layoffs

Mathis Winkler

NEWPORT BEACH -- Chip maker Conexant Systems Inc. announced Monday

that it will lay off 1,500 employees worldwide, including 450 of 2,700

workers at its Newport Beach site.

Another 650 employees in the city will be temporarily laid off for two

weeks starting April 7 while the Newport Beach-based company shuts down

production to save money, said Lisa Briggs, a company spokeswoman. The

two-week shutdown could be repeated later this year.

The restructuring move also separates Mindspeed Technologies,

Conexant’s Internet infrastructure business, from the rest of the

company. While that proposal still requires share owner and IRS approval,

it should be complete by September, company officials said.

The changes are expected to save the company more than $200 million in

operating costs each year. Saving money has become a major concern for

the financially ailing company, which expects to see a 35% to 40% drop in

revenues compared to its first fiscal quarter earnings of $410.4 million.

Dwight W. Decker, Conexant’s chairman and chief executive, said a

slowdown in the global economy has contributed to a decrease in demand

for the company’s products.

While demands for Conexant’s products should return to normal levels

once customer inventories are depleted, “we see no clear indications of a

recovery at this time,” Decker said.

With the city’s other major employers -- Pacific Life, Hoag Hospital

and the Newport-Mesa Unified School District -- involved in other lines

of business, city officials said they didn’t expect to see the layoffs

repeated elsewhere in the near future.

But “this is still very bad news for Conexant and for the city,” said

Assistant City Manager Sharon Wood, adding that the company had

established itself as a good corporate citizen that contributed to

Newport Beach’s fiscal health. “I’m not at all happy to hear it.”

Since the computer industry is a “pretty volatile business,”

Conexant’s troubles are not a sign that the city’s overall economy will

start to slow down, said Richard Luehrs, the president and chief

operating officer of the Newport Harbor Area Chamber of Commerce.

He added that the city’s latest sales tax figures showed that “we’re

in a comfortable place right now.”

City officials said that sales tax payments for February still showed

an increase of 6.66% compared with the previous year. But compared with

10% to 11% growths in prior months, things are definitely beginning to

slow down.

“It had to happen sooner or later,” Dennis Danner, the city’s

administrative services director, wrote in a memo Friday. “The sales tax

bubble has finally burst.”

Conexant’s changes could also jeopardize company plans to expand its

headquarters by 566,000 square feet. But company officials said the

proposal simply had been put on hold, adding that they would not pick

them up again until Conexant’s financial situation had improved.

Newport Beach’s voters would have to approve the expansion after a new

slow-growth law passed last November.

Greenlight, which is now part of the city charter, requires a citywide

vote on any development that allows an increase of more than 100

peak-hour car trips or dwelling units, or 40,000 square feet more than

the general plan allowance.

Apart from an increase in property taxes, the expansion could also

earn the city about $3 million in sales taxes over a 10-year period,

according to a drafted development agreement. Under the agreement,

Newport Beach would become the point of sales for any supplies purchased

by Conexant from out of town vendors, Wood said.

With roughly $2.6 million in property taxes during the 1999-00 fiscal

year, Conexant ranks among the city’s top five taxpayers in that

category, said Glen Everroad, the city’s revenue manager. Overall, the

city took in $22.5 million in property taxes that year, he added.

Conexant ranks in the top 10% of sales tax-payers and pays taxes on

four different business licenses, Everroad said, adding that the tax

amounts are confidential.