OTTAWA, CANADA (NYSE: ZL) today reaffirmed its guidance for the
first quarter of Fiscal 2009 and provided its first comments on the
proxy circular issued yesterday.
As provided in earlier guidance, first quarter Fiscal 2009
revenue will be approximately US$59-61 million, an increase of 8-11
percent versus fourth quarter Fiscal 2008 revenue, with growth
coming from Wired, Medical and Optical Communications products. The
Company also reiterated that gross margins will be 46-48 percent in
the first quarter of Fiscal 2009, excluding integration costs of
US$1.0-1.5 million. In addition, total research and development and
selling and administrative expenses are expected to be US$25-26
million, or between 42-43 percent of revenue. In addition, the
Company is reaffirming its expectation for breakeven earnings per
share.
The financial guidance outlined above demonstrates that the
Management Team and Board of Directors are executing on a clearly
set strategy. As a first response to the proxy circular filed
yesterday, Kirk Mandy, President and CEO, Zarlink Semiconductor,
said the following:
"As evidenced by the trading pattern disclosed in the circular
issued by hedge fund manager Mr. Scott Leckie, Mr. David Banks and
Mr. Daniel Owen, these individuals are traders rather than
long-term holders of the shares. At the same time, the circular
misstates Zarlink's financial results, product direction and
strategy. As one example, we have made progress in our
cost-reduction efforts and are now significantly better than the
operating expense metrics of comparable companies in our sector,
which Mr. Leckie highlighted in the circular as a key objective of
their plan. We expect to continue these efficiency improvements in
order to drive further operating margin improvements and
profitability."
Dr. Henry Simon, Chairman of Zarlink's Board of Directors,
continued, "Zarlink's Management Team and Board of Directors have
consistently outlined its strategy to create shareholder value. We
are pleased to see that the traders' purported plan for the Company
imitates and endorses the strategy already adopted and being
executed by Zarlink's Management Team and current Board."
Key elements of the Company's strategy include:
- Targeting the Right Markets Through Solutions: The Management
Team and Board of Directors are successfully positioning Zarlink as
a higher-value solutions provider delivering products that solve
key problems for our customers. This includes new products
targeting the fast-growing network timing, voice-over-packet,
optical interconnect and medical wireless markets.
- Focusing the Business: Zarlink's Board of Directors and
Management Team are extremely active in evaluating our lines of
business, product portfolio and the demands of an ever-changing
market to ensure the Company is positioned for success. We have
exited the money-losing set-top box, packet switching and foundry
businesses, while adding key products and expertise to strengthen
our portfolio. The acquisition of Legerity provides us with
market-leader technology required to deliver voice service over
cable and broadband networks.
- Establishing Clear Leadership in Target Markets: Zarlink's
Board of Directors and Management Team boasts key market-leading
customers in each sector that depend on Zarlink products. For
example, in the medical market, Zarlink is the only supplier with
standards-based ultra low power radios for implantable medical
devices. Zarlink also introduced a whole new class of optical
interconnect products for high performance computing markets.
Through the Legerity acquisition, we gained a market-leading
portfolio of voice interface products required by telephone and
cable operators to deliver integrated voice, television and
Internet services.
- Lowering Costs: Zarlink's Board of Directors and Management
Team are continuing to work diligently to lower costs. The
acquisition of Legerity has in large part allowed Zarlink to reduce
its cost structure by exiting the analog foundry business, supply
chain consolidation, and outsourcing internal test and assembly
activities. This allows the Company to focus solely on its chosen
markets, while improving margins in the coming year.
The hedge fund's call for the removal of Zarlink's CEO and
Chairman of the Board and five directors would have immediate and
lasting negative consequences for the Company's growth prospects
for the future. Furthermore, Zarlink believes that Mr. Leckie's
decision to take such action at this time is highly disruptive and
forces the Company to incur unnecessary costs.
Shareholders are urged to continue to support the strong and
well-qualified Board, along with Zarlink's experienced and capable
CEO and Chairman, against the hedge fund's self-serving,
short-sighted proposal. Zarlink intends to provide additional
updates to shareholders in the coming days.
Important shareholder voting instructions
The Zarlink proxy to vote is YELLOW. Your vote is important,
regardless of how many shares you own. Voting is a very quick and
easy process. To be effective completed YELLOW proxies must be
received by 10:30 a.m. on July 21, 2008. Due to the limited time
available we recommend voting by Internet, telephone or facsimile
today or at least 24 hours in advance of the proxy cut-off. If you
have already voted using the dissident proxy you have every right
to change your vote as it is the later dated proxy that will be
counted.
We urge you to carefully consider the ramifications of your vote
and to submit your YELLOW proxy today FOR the election of the slate
of director nominees set out in the Zarlink Management Proxy
Circular. Please discard any proxy or related materials you may
receive from the Dissidents and vote using only the YELLOW form of
proxy. For ease of voting, Zarlink shareholders are encouraged to
vote using the Internet and entering their YELLOW control number.
Please visit www.zarlink.com for additional information.
Shareholders with questions or needing assistance in voting
their YELLOW proxy are encouraged to call Zarlink's proxy
solicitation agent, Georgeson (North American toll-free,
1-866-717-8088).
About Zarlink Semiconductor
For over 30 years, Zarlink Semiconductor has delivered
semiconductor solutions that drive the capabilities of voice,
enterprise, broadband and wireless communications. The Company's
success is built on its technology strengths including voice and
data networks, optoelectronics and ultra low-power communications.
For more information, visit www.zarlink.com.
Shareholders and other individuals wishing to receive, free of
charge, copies of the reports filed with the U.S. Securities and
Exchange Commission and Regulatory Authorities, should visit the
Company's web site at www.zarlink.com or contact Investor
Relations.
Certain statements in this press release constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied
by such forward-looking statements. Such risks, uncertainties and
assumptions include, among others, the following: our dependence on
the successful development and market introduction of new products;
our dependence on revenue generation from our legacy products in
order to fund development of our new products; our ability to
successfully integrate Legerity and any businesses acquired in the
future; any potential undisclosed liabilities associated with the
Legerity acquisition; our ability to operate profitably and
generate positive cash flows in the future; our dependence on our
foundry suppliers and third-party subcontractors; order
cancellations and deferrals by our customers; and other factors
referenced in our Annual Report on Form 20-F. Investors are
encouraged to consider the risks detailed in this filing.
Contacts: Zarlink Semiconductor Inc. Ed Goffin 613-270-7112
edward.goffin@zarlink.com
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