UPDATE 2-NXP restructures: affects 4,500 jobs, costs $800 mln

Fri Sep 12, 2008 9:11am BST

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(Adds CEO comments, union reaction, details)

AMSTERDAM, Sept 12 (Reuters) - NXP [NXP.UL] said it plans major cuts in manufacturing, its back office and research and development, affecting 4,500 employees -- 15 percent of its workforce -- and the restructuring will cost $800 million.

NXP said on Friday it needed to adapt to slowing economies, a weak U.S. dollar and the smaller size of the company after selling its wireless business.

The reorganisation will result in annual savings of $550 million by the end of 2010, NXP said, adding it expected to close three factories and put a French factory up for sale.

"We expect to be in positive cashflow operations already by the second half of 2009 thanks to these measures," CEO Frans van Houten told Reuters in an interview.

Dutch trade union FNV Bondgenoten said it was shocked by the large job losses. "We knew that the reorganisation would be on a significant scale, but 4,500 is huge," the union said.

Van Houten said the company was comfortable with its debt level even though the company has become smaller due to the sale of its wireless chip activities.

"The equity ratio in excess of 35 percent is quite solid -- in fact many public companies would be happy to have that. We are comfortable, also in view of the cash-generation capability that we will have, to support this kind of debt," he said.

NXP said it will focus on businesses where it has innovative products and market leadership positions such as automotive and identification chips.

After the restructuring NXP will invest 16 to 17 percent of sales in R&D, in line with leading semiconductors companies, it said. In the second quarter, it spent about 23 percent of sales on R&D.

Franco-Italian chipmaker STMicroelectronics (STM.PA) will buy NXP's stake in a joint venture to combine the business with Ericsson's (ERICb.ST) wireless chip and software unit.

NXP was spun off from Philips Electronics (PHG.AS) in 2006 and is majority owned by a private equity consortium including KKR [KKR.UL]. Philips still holds about 20 percent. (Reporting by Niclas Mika and Gilbert Kreijger; Editing by Louise Ireland)