Cirrus Logic to Reduce Fixed Wafer Fab Capacity by Up to 70 Percent; Move Towards Fabless Model Enables Sustainable and Profitable Business Model.

FREMONT, Calif.--(BUSINESS WIRE)--Sept. 24, 1998--Cirrus Logic Inc. (Nasdaq:CRUS) today announced it has initiated a program to eliminate approximately 70 percent of its total fixed wafer fabrication capacity and related fixed costs.

The program, which allows the company to fully concentrate on its profitable linear and mixed-signal positions in the mass storage, audio and high-precision data conversion markets, includes the phasing out of certain businesses and will have an immediate and positive impact on the company's earnings and margins. As a result of these actions, the company has commenced a workforce reduction of 400 to 500 of its employees and will incur restructuring and other charges of up to $500 million. The company expects to report the timing of these charges in its second quarter earnings report on Oct. 21, 1998.

The company's program aims to eliminate exposure to charges related to under-utilization of its joint manufacturing ventures with IBM (MiCRUS, East Fishkill, N.Y.) and Lucent Technologies (Cirent Semiconductor, Orlando, Fla.). In moving closer to a fabless model, Cirrus Logic will focus on its profitable core businesses without the distraction of having to keep its fixed-capacity fabs filled. Revenues and gross margins for the businesses to be phased out were $33 million and less than 10 percent, respectively, for the first fiscal quarter ended June 27, 1998.

Cirrus Logic reports that it has entered into discussions with IBM to restructure its 48 percent stake in MiCRUS. The company is also in separate discussions with Lucent to sell its 40 percent stake in Cirent to Lucent or other third parties. By phasing out low-margin products, the company anticipates operating under a more profitable and sustainable business model. Moreover, Cirrus Logic expects its served available linear and mixed-signal markets to outpace overall industry growth for the foreseeable future.

According to David D. French, recently appointed president and chief operating officer, the company's cash position remains strong at over $300 million. He added that Cirrus Logic's core businesses of mass storage, audio and high-precision data conversion are operating profitably even in the currently sluggish semiconductor market. "Our advanced linear and DSP design skills are among the best," asserted French. "As we now focus on fundamentals and capitalize on our core skills, we aim to drive a consistently profitable business model that will enable us to return substantial shareholder value."

Anticipated Second Fiscal Quarter Results

Cirrus Logic also reiterated its previously stated comments regarding the results of the second fiscal quarter ending Sept. 26, 1998 and expects revenues to be between $160 and $170 million and diluted earnings per share to be approximately break-even. The results of the second fiscal quarter will be announced on Oct. 21, 1998.

Except for historical information contained herein, the matters set forth in this news release are forward-looking statements that are dependent on certain risks and uncertainties including such factors, among others, as overall conditions in the semiconductor market, customer cancellations of orders, or the failure to place orders consistent with forecasts, unforeseen manufacturing difficulties, or hardware or software deficiencies, or delays in customer qualification of key new products, achieving high utilization of the company's manufacturing resources, final determination of appropriate inventory write-downs based on the outlook at the end of each quarter, actual operational spending, obtaining financing sufficient to meet the company's needs and the risk factors listed in the company's Form 10-K for the year ended March 28, 1998.

Cirrus Logic

Cirrus Logic is a premier supplier of precision linear circuits and advanced mixed-signal system-level chip solutions, the latter of which demand high-performance mixed-signal processing, embedded DSP, algorithms and firmware. The company's products, sold under its own name and the Crystal product brand, enable high-volume applications in mass storage, communications, consumer electronics and industrial markets. Additional information about Cirrus Logic is available at www.cirrus.com.