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July 14, 2005 Fremont, CA -- Avanex today announced that it has established a development center in Shanghai, China, to house key development and marketing activities as part of its overall restructuring and cost reduction plans. According to the company, after two quarters in operation, its Shanghai-based team has already delivered strong technical performance, including its first subsystem design win with a major OEM.
"The transfer of critical marketing and development activities to Shanghai represents continued execution on our global restructuring plan," says Jo Major, president and CEO of Avanex. "We believe that dividing our development resources between North America and Asia in a hybrid development model provides us a number of operational and cost benefits, including access to low-cost development talent, marketing in the same time zone and language as key customers, and the purchasing and supply chain advantages of using lower cost suppliers in China."
According to a press release, in collaboration with the company's U.S. development sites, its Shanghai center has already produced its first circuit packet design win with a major North American OEM, generating approximately $1.5 million in revenues in the fourth fiscal quarter. The company says the center's joint design and development model enabled the product to go directly into production in Asia, avoiding the costs of pilot production in the United States. The company says it expects significant revenue growth from this design win in future quarters.
The transfer of development activities to the company's Shanghai facility follows the March opening of its Operations Center in Thailand. The company says these moves are part of its strategic operating plan, aimed at consolidating the company's operational infrastructure into low-cost facilities, while reducing direct and fixed manufacturing costs in its North American and European locations.
The company says it is currently undertaking a previously announced workforce reduction of more than 200 employees from its North American sites and a 60% reduction in its employment base in France. Once the operating plan is fully implemented in March 2006, the company expects total savings from its combined restructuring activities to reduce its cost structure by approximately $40 million per year. The company says its plan to improve cost structure, coupled with increasing market visibility, positions it to generate positive cash flow from future operations.
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