Reeling under the impact of the economic crisis as well as a decline in demand for its products, MKS Instruments, Inc. (MKSI), a provider of technologies to improve advanced manufacturing processes, said Friday that it expects GAAP net loss for the first quarter to be below the low end of its previous guidance. Additionally, the company said it implemented a restructuring and an additional reduction in workforce at the end of the first quarter, leading to a combined reduction of about 600 people, or 23% of worldwide headcount.

The company said it will take special charges of $6.0 million-$7.5 million, net of tax, or $0.12-$0.15 per basic share during the quarter, which is estimated to result in a first quarter GAAP net loss of $0.57-$0.54 per basic share. The company previously expected its GAAP net loss for the quarter to vary between $0.46 and $0.31 per basic share.

The GAAP net loss includes $6.3 million-$7.0 million special charges associated with reductions in workforce, and a charge for excess, obsolete and committed inventory purchases of $11.6 million-$12.3 million due to the reduction in demand for the company's products. These charges were partially offset by a first quarter 2009 tax benefit of nearly $5.4 million as a result of a recently completed federal income tax audit.

The first-quarter non-GAAP net loss is expected to be in a range of $0.41-$0.38 per basic share. The company had said in February that it anticipates adjusted first-quarter net loss to range from $0.40 to $0.25 per share.

On average, five analysts polled by Thomson Reuters expect the company to report a loss of $0.33 per share with estimates in the range of a loss of $0.35-$0.31 per share.

Revenue for the first quarter is now seen in the range of $74 million to $76 million, compared to the previous guidance of $75-$95 million. Wall Street looks for revenues in the range of $80 million-$85 million.

In a regulatory filing in February, MKS said global economic uncertainty is prolonging a steep downturn in semiconductor capital equipment spending and was adversely affecting its business, financial condition and results of operations. Stating that it cannot predict when demand from customers will rebound, the company said it expects further decreases in demand during 2009 and as a result estimates lower sequential revenues for the quarter ended March 31, 2009 compared to December 31, 2008.

In February, the company reported a fourth-quarter net loss, hurt by one-time charges and drop in sales. The company's net loss was $6.3 million, or $0.13 per share, compared to net income of $15.2 million, or $0.27 per share, in the prior year period. Excluding charges, MKS' quarterly earnings would have been $0.10 million compared to $18.6 million in the same period last year. Sales dropped 32% to $125.2 million from $184.1 million in the fourth quarter of 2007.

Following the announcement of its fourth-quarter results, the chip equipment maker reportedly said in a conference call that it reduced 10% of its workforce at the end of January, expected to result in annual cost savings of $19 million.

The company reportedly said at that time that selected employees were asked to take a 5% wage reduction, while officers and directors were asked to take additional wage reductions, which then totaled between 10% and 20%.

Commenting on the most recent job cuts, Leo Berlinghieri, Chief Executive Officer and President, said Friday, As we previously announced, we implemented a reduction in work force early in the quarter. However, due to the uncertain effect of the global financial crisis and its impact on demand from our semiconductor equipment OEM customers and the other markets we serve, it was necessary to take further actions to reduce our costs and our headcount during the quarter.

These reductions were done with consideration to both our ability to grow in diverse markets and to respond to the demand and innovation requirements from the semiconductor equipment industry, when the economy begins to recover. As a result of these actions, we expect annual compensation-related savings of approximately $40 million, Berlinghieri added.

Among others in the industry, Advanced Energy Industries, Inc. (AEIS) in December 2008 said it was reducing its headcount by 22% or 330 people, in addition to lowering the salaries of management and executive officers by an additional 5%, effective April 1, 2009. The company attributed the decision to deteriorating economic conditions and weakening demand from its end markets.

Another peer Brooks Automation, Inc. (BRKS) in January announced a cutback of 350 personnel as a part of its restructuring operations to enhance performance and improve operating results. This was in addition to the 10% reduction the company effected as of the December quarter in response to deteriorating conditions in the semiconductor capital equipment industry.

MKSI is currently trading at $15.84, down $0.64 or 3.88%, on 40,241 shares.

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