Xilinx expects to reduce its global workforce by 7%—about 350 workers of its 5,000—as it sees a slowdown in 5G and wired deployments and “ongoing global trade headwinds.”
“These are difficult actions, but we believe the decisive steps we are taking to reset our operating expenses will allow us to drive our growth strategy and technology roadmap…,” CEO Victor Peng said in a statement released as the company announced earnings results Tuesday for its third fiscal quarter that ended in December.
The company’s targeted reduction in workforce and steps to slower hiring to replace attrition will come with other measures to reduce operating expenses and save $17 million to $20 million in the current quarter. Xilinx also expects to incur a charge of $25 million to $30 million primarily related to severance pay expenses.
The December quarter yielded revenues of $723 million, down 10% from the same quarter a year earlier. Net income for the quarter was $162 million, down 32% compared to a year earlier. The Xilinx stock price sunk 10% to $88.71 just after Wednesday’s market opening.
Peng said in a statement that he expects “headwinds in our wired and wireless business to be persistent.” In a conference call, he told analysts that the U.S.-China trade dispute had hurt revenues just as the industry was deploying 5G. “The unprecedented change in U.S.-China relations in trade, clearly, has an impact on the industry and specifically our business and at a time that’s really unfortunate right at the beginning of deployment of 5G,” he said, according to a Seeking Alpha transcript.
However, he was optimistic for future prospects with global 5G rollouts and said Xilinx “has a good opportunity there.” Xilinx makes various technologies supporting 5G and data center rollouts and is well known as the company that invented the Field Programmable Gate Array (FPGA) in 1985. In 2019, the company introduced the Versal chip made on a 7nm process as part of its Adaptive Compute Acceleration Platform.
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At one point Peng told analysts when referring to carriers and equipment makers: “We do see the broad softness [in 5G] and the feedback we’re getting is because they’re also not seeing some demand materialize across the regions and that includes the U.S. ...After they’ve done some deployment, it just appears from both [carriers and OEMs] that there seems to be a pause now.”
Peng also remarked on the value of 5G as a clear technology improvement over 4G. “I know there’s been a lot of marketing hype around 5G, but I really must say it is a radically more disruptive set of standards and technologies… It is significantly different [from 4G] which is why we and many other companies have invested so much… Once it’s fully deployed… it will change things for your automobiles, homes, the IoT. So I really do think it is meaningfully different even when you cut through some of the marketing buzz.”