New Focus to Sell Passive Optical Line and Close China Facility

March 18, 2002
San Jose, CA, March 18 -- New Focus, Inc., a supplier of products serving the telecommunications, test and measurement, and photonics tools markets, announced that the company will divest operations related to the manufacture and sale of passive optical components. As a part of this action, the company will cease operations at its 243,000 square foot manufacturing facility in Shenzhen, China after fulfillment of end-of-life orders from customers

San Jose, CA, March 18 -- New Focus, Inc., a supplier of products serving the telecommunications, test and measurement, and photonics tools markets, announced that the company will divest operations related to the manufacture and sale of passive optical components. As a part of this action, the company will cease operations at its 243,000 square foot manufacturing facility in Shenzhen, China after fulfillment of end-of-life orders from customers.

The company is in contact with several parties in regard to the possible sale or licensing of the technology associated with the company's passive optical component product line.

This product line divestiture and plant closure will reduce the company's worldwide work force by approximately 350 people. The company expects to record a restructuring charge of $25-40 million associated with the passives product line divestiture, the China plant closure, and the related work force reductions. The restructuring charge will be recorded in either the first or second quarter of 2002, or possibly spread over both quarters, in compliance with current accounting rules. The company will continue to develop and market active components, such as tunable lasers, data drivers and clock amplifiers, as well as test and measurement products and photonics tools.

"Given our drive to reduce the company's quarterly net loss and our desire to focus our investment spending, we can no longer afford the development and fixed manufacturing costs associated with this product line. Therefore, we will discontinue development work on all passive products early in the second quarter and cease operations at our large, offshore manufacturing facility no later than the end of the second quarter. We are in contact with several parties regarding the possible sale or licensing of the technology associated with our passives product line. Potential acquirers of this product line have also expressed interest in retaining key members of the company's passive development team as part of the transaction. With the announcement of the closure of our China operations, we will now begin to actively market the building and equipment at our Shenzhen site," said Clark Harris, chairman, president and chief executive officer of New Focus, Inc.

The company previously announced the planned closure of its Camarillo, CA manufacturing facility by the early part of the third quarter of 2002. The work force reduction associated with this action involves approximately 160 people. Combined with the additional work force reduction announced today, the company's headcount will drop to 390 people in the fourth quarter of 2002, down from 900 employees at the end of the fourth quarter of 2001 and down from the peak employment level of 2,100 people in February 2001. After closure of the Camarillo and China plants, the company will occupy 213,000 square feet of facilities, down from 573,000 square feet at the start of 2001.

The company expects to lower its expense structure, defined as operating expenses and manufacturing overhead, by an estimated $6 million per quarter as a result of the closure of the China facility and the elimination of development costs for passive products. The closure of the Camarillo facility and reductions in certain support activities should produce approximately $3 million in additional quarterly cost savings. When combined with savings realized in the second half of 2001, these actions are expected to yield an $18 million reduction in the company's quarterly expense structure between the second quarter of 2001 and the fourth quarter of 2002.

At revenue levels comparable to the fourth quarter of 2001, the company's quarterly net loss will be cut by more than 50% upon realization of the projected savings. Additionally, the quarterly net revenue required to achieve profitability should drop to $20 million from the $25 million level previously announced due to the lower expense structure now forecasted for the fourth quarter of 2002.

"Even after these actions, our job is far from done. While we believe that we can grow revenue from our remaining product lines through internal actions, internal growth alone will not allow us to achieve our breakeven revenue level in a timely manner. Therefore, we plan to pursue mergers and acquisitions that will improve our market share position and increase our revenue in existing product areas. We will seek strategic partners for the continuing development of our tunable laser for network applications. We will also pursue the application of our optics and opto-electronics expertise to markets other than telecommunications. In all cases, we will continue to drive hard toward profitability," said Harris.

Laser Focus World

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