Ontario semiconductor manufacturer switches gears

Mosaid Technologies Inc. is selling its systems segment to focus on its “highly profitable” intellectual property and patents business, as revenues from its IP division continued to boost net earnings and sales in the third quarter.

The Ottawa-based company announced the sale of its automatic test equipment (ATE) business for $20 million to Massachussetts-based Teradyne Inc. shortly before posting its third-quarter results.

“The asset sale and patent acquisition are important steps in Mosaid’s strategic alternatives initiative, resulting in a company that is sharply focused on developing and licensing intellectual property,” said Mosaid chief executive George Cwynar.

Mosaid saw third-quarter net earnings rise 18.5 per cent to $4.3 million or 38 cents per diluted share, while revenues were boosted 13.3 per cent to $18.7 million.

Profits from its IP division totalled $6.5 million, while its systems division saw a tiny improvement with its segment earnings of $50,000, compared to a segment loss in the previous third quarter.

Mosaid announced that it would be cutting its workforce in half to 57 from 116 in line with its focus on the intellectual property market. The cuts would also involve Mosaid’s power-management chip business Mobilize.

“Our Mobilize product family has not met with market acceptance, so we are stopping further development and reducing our cost structure accordingly, which will require a restructuring charge of $6 million to $6.5 million,” said Mosaid’s chief financial officer, Richard Boadway.

The company narrowed its guidance for fiscal 2007 to between $64.7 million and $65.2 million in revenues, from an earlier forecast of $80 million to $85 million, as a reflection of the sale of its systems division. Net earnings are expected to be between $21 million and $22 million, compared to its previous estimate of between $18 million and $20 million.

Mosaid expects to see fourth-quarter revenues of $13.5 million to $14 million, and net earnings of between $5.9 million to $6.9 million. The company had on Tuesday announced an earnings forecast of $5.5 million to $6.5 million, but adjusted its predictions after taking into account the expected expense reductions from its restructuring plan.

In a separate announcement, the company said it had won a competitive bid for a portfolio of 20 WiFi and WiMAX patents from Pennsylvania company Agere Systems. Mosaid was one of 70 companies competing for the portfolio.

The company had 720 patents issued or pending at the end of its third quarter, up from 687 patents in the second quarter.

Under the agreement, Mosaid will pay Agere a total of US$70 million over the next 10 years, including a $25-million payment in the fourth quarter of 2007.

“The acquisition of these wireless patents is a major step for Mosaid that firmly establishes our patent licensing program in another of the world’s largest technology markets,” said Mr. Cwynar.

The portfolio consists of 20 issued patents in the United States, Japan, Germany, France, Great Britain and Canada, and three pending patents in the United States and Europe, with an average remaining life of 11 years for the key patents, the company noted.

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