An internal memo obtained by Mercury News reveals that the merger of Cypress Semiconductor and Spansion, the 18th and 17th biggest companies in the Silicon Valley sector, will result in layoffs that will cut 20 per cent of the two companies' combined employees.

Cypress founder and CEO TJ Rodgers sent the memo to employees revealing the plan to cut 1,600 workers from across the globe. The affected individuals will have severances over the next three weeks, which will be equally given by the two companies.

Around 50 per cent of the job cuts will be immediate, while the remaining ones will be asked to stay for a little longer, Rodgers said.

Quoting from the memo acquired by Mercury News, Rodgers wrote, "Please hang in there. In just three weeks, we will be through this nerve-wracking decision-making process and ready to move on to the extraordinarily exciting future ahead of us."

When the deal was announced in December, the companies said they expected to have combined revenues approaching $2 billion and save $135 million in annual costs within three years. It became apparent within less than a month of discussions about a potential merger that "we could run the combined companies a lot more efficiently," said Rodgers, speaking in a video on the Cypress Web site.

It's not clear if any product lines will be cut as part of the merger. However, Rodgers also stated on the video that "the current plan does not include cutting any major R&D programmes."

When the deal was announced the companies said they have little overlap in their product lines. In memories, Cypress is a leader in SRAMs and Spansion in NOR flash. Both companies have expanded into microcontrollers, but their product lines have little overlap, said an executive who manages the Cypress product line.

The combined companies could be the fourth or fifth largest supplier of memories and MCUs to the automotive industry, Rodgers said in the video. The companies both have design wins in car infotainment systems, but Cypress often supplies capacitive touch screen controllers while Spansion supplies controllers that run other dashboard functions, Rodgers said in the video.

The news comes little more than a week after NXP and Freescale announced plans for a much larger merger, creating a $10 billion company. If it is approved the two companies could be the world's largest supplier of chips to automakers and the second largest supplier of MCUs overall.

So far, NXP and Freescale execs have remained mum about their plans for layoffs. However, their merger is expected to save $200 million in annual expenses in 2016 and as much as $500 million in the long run. The companies are said to have product overlap in the MCU lines.

Cypress' stock price rose about $5 and Spansion's about $15 after their merger plan was announced in December, putting the value of the deal at $5 billion. Cypress shareholders approved the merger on March 12, agreeing to issue 2.457 shares of Cypress stock to Spansion shareholders for each Spansion share they own.

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved