Feb. 6. 2008 – Test/probe-card firm FormFactor says it will trim its workforce by 14% (mostly manufacturing workers at its HQ in Livermore, CA, according to the local East Bay Business Times), taking a charge of $4-$5M mostly in 1Q08 as it tries to fight through a soft market.

The company also posted a profit of $14.4M (EPS $0.29) in 4Q07, down 18% Y-Y, on sales of $120.5M (up 22% Y-Y). Analysts had been expecting an EPS of $0.36 on sales of $126M.

“Market conditions, particularly in DRAM, began to deteriorate in Q4 and that weakness has continued into Q1,” said CEO Igor Khandros in a statement. “In light of this, we are taking actions to restructure the company to better align with the market environment.”

In the conference call discussing the financials and restructuring, Khandros noted that the market has deteriorated particularly in the last 60 days, most notably due to tough pricing in DRAMs which is causing those customers to reduce costs “by any and all means in order to preserve cash,” including cutbacks in test equipment investments, he said. Also hurting results are recent new product execution challenges — i.e., delays in its Harmony DRAM product. The combination of the two “has significantly reduced the outlook for the first half of this year,” he said. Later in the year, demand for DDR3 devices will open up new opportunities, he added. Also, he sees logic as possibly a fast-growing business in 2008.

In the current quarter (1Q08) FormFactor execs said they continue to see “weak” backlog and continued delays in probe card purchases from DRAM customers. Sales are expected to drop off precipitously to $70-$80M, with a net loss (not including the restructuring costs) of EPS $0.09-$0.19. “Companies are putting unusual amount of emphasis… on squeezing whatever extra percentages of yield in existing 70nm product,” rather than on running new processes, Khandros said. “That will not result an extra probe-card business.” Also, he added that the company is pushing back its expansion into Singapore by six months, with manufacturing expected to start “no sooner than late 2009.”