NeoPhotonics announced preliminary results for the third quarter 2020 that incorporate cost cutting measures. As previously announced, NeoPhotonics has adopted a conservative approach to exclude future contributions from Huawei in its financial outlook, following the August 17th tightening of Department of Commerce BIS restrictions.
Revenue for Q3 is now expected to be in the range of $101 to $103 million compared to prior guidance of $95 to $105 million.
NeoPhotonics said it has taken steps to tighten production operations, account for Huawei-specific assets and inventory, consolidate Indium Phosphide production and implement an approximately 4% reduction in force. The costs to implement these changes are expected to be approximately $12.1 million, with $1.1 million in severance costs and $11.0 million in inventory and idle asset charges. The company expects to incur approximately $10.7 million of these costs in the third quarter, $0.7 million in the fourth quarter and the remainder as accelerated depreciation charges through 2021.
“Our actions better align our capacity and production infrastructure with expected demand levels, and accelerate our goal of returning to profitability,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “We are maintaining our focus on developing products for next generation coherent systems and modules, wherein our silicon photonics, lasers and advanced hybrid photonic integration technologies provide the highest value, fully supporting our expansion into the data center market with coherent products. We are increasingly optimistic about our ability to drive growth both in the near-term with our 64 Gbaud solutions and in the mid-term with 96 Gbaud solutions and as our 400ZR products ramp in mid-2021. With these changes, we continue to pursue growth opportunities and deploy our best-in-class products and solutions for the highest speed over distance applications, and with a more diverse customer set,” concluded Mr. Jenks.
