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National Semi ends pact with IBM

National Semi will take a one-time charge of more than $50 million due to an agreement with IBM to end their chip manufacturing partnership.

Chipmaker National Semiconductor today announced it has reached an agreement with IBM to end their semiconductor manufacturing partnership, which will result in National taking a one-time charge of approximately $50 million to $55 million in the second quarter.

Under terms of the agreement, IBM, the world's largest computer maker, will stop the sale of processors designed by National's Cyrix subsidiary before the end of calendar 1998, and Cyrix will be relieved of its wafer purchase obligation to IBM.

In addition, Cyrix will transfer certain assets to IBM. As a result of the termination and transfers, National will take a one-time charge of approximately $50 million to $55 million in its second quarter of fiscal 1999, which ends November 29.

"We have no plans for any layoffs as a result of this agreement," said National spokesman Bill Callahan. "Since National merged with Cyrix last year, we have been wanting to take over the manufacturing of their wafers."

Controlling the manufacturing process will allow National to control costs and make the production cycle more effective, the spokesman said.

Just last month, National announced that it had begun to produce Cyrix M II and MediaGX processors on the advanced 0.25-micron manufacturing process in its plant in South Portland, Maine, and will begin to ship production units based around the 0.25-micron process by the end of the month.

"National will fulfill customer demand for Cyrix-designed IBM processors and ensure uninterrupted seamless support," said Michael Bereziuk, National's senior vice president for worldwide marketing and sales.

Based in Santa Clara, California, National has annual sales of approximately $2.5 billion and 12,000 employees worldwide.