GigaMedia to fire some 120 workers

GigaMedia Ltd (和信超媒體), one of the leading broadband Internet service providers in Taiwan, said yesterday it is laying off 25 percent of its workers -- approximately 120 employees -- after reporting widening fourth-quarter loss upon slowing sales.

The company also announced its restructuring strategies on tightening expenditures and boosting profits as competition increases.

Raymond Chang (張瑞展), chief executive officer of GigaMedia, said the company is also planning to reduce by 25 percent the salaries of the company's high-level officials. According to Chang, the reduction is across the board and will be completed within this week.

It is "an action of cost rationalization," he said.

While Chief Financial Officer Chang Yi-chun (張逸群) and Vice President Chris Tung (董本洪) resigned, new blood is being added with Nelson Chang (張安平), the former president of Chia Hsin Cement Corp (嘉新水泥) -- who is being appointed to serve as the new chief operations officer -- and Winston Hsia (謝載祥) as new chief financial officer.

Raymond Chang said the appointment of Nelson Chang is a "synergy of old economy and new economy," hinting that he is from the new economy while Nelson hails from traditional industry.

"The new economy sells a dream, but we [the old economy] look after the bottom line," Chang said.

GigaMedia is still seen as financially healthy but it needs to strengthen its broadband products. To expand the company's profit margin, Chang said that the more practical way to a company's long-term value is to ... "draw back on our ADSL and cable modem businesses" and focus more on "broadband construction and boosting subscribers."

"We expect to add 100,000 new subscribers [including users of two-way and one-way cable modem and ADSL services] this year," he said.

However, Chang said that GigaMedia wouldn't completely end its role as content provider.

"In the future, we will only concentrate on online games, e-learning, and entertainment," he said, adding "We still believe that the customer loyalty comes from content, not the ISP service."

Both Changs agreed that a combination of fast network access plus unique content services is GigaMedia's future direction.

GigaMedia's share price on the NASDAQ has fallen from a peak of US$91 to around US$2.31 last Wednesday.

GigaMedia's revenue in the last quarter of 2000 dropped 25 percent from the third quarter to US$2.8 million.

The company expects US$2.65 million in net sales for the first quarter of this year.