Freescale Semi loss narrows; to restructure operations

Oct 25 (Reuters) - Freescale Semiconductor Ltd, which makes chips for cars and machinery, reported a narrower quarterly loss and said it would restructure its businesses as part of its new chief executive's drive to cut costs and turn around the business.

The chipmaker said it would combine its manufacturing operations under a single management group to cut down on costs, and focus research and development on select product groups.

Freescale has been struggling with falling prices, shrinking margins and factories operating at reduced capacity.

Chief Executive Gregg Lowe, who joined Freescale in June this year, had promised to rein in costs with an eye on shoring up margins. One of his first moves in that direction was the elimination Freescale's corporate jet program.

Lowe, a Texas Instruments Inc veteran has set a long-term target of 53-55 percent gross margins. Third-quarter gross margins came in at 42 percent.

The company expects cash charges of about $35 million to $40 million in the current quarter related to severance, though it did not give details on the number of jobs it plans to cut.

"Given the business has not been performing well, I think investors will welcome the speed at which management changes have been made and the focus the company is likely to gain from the actions announced," RBC Capital Markets analyst Doug Freedman said.

Freescale reported a third-quarter loss of $24 million, or 10 cents share, compared with $88 million, or 36 cents a share last year.

Excluding items, it posted a surprise profit of 4 cents a share, profit compared with a loss of 6 cents expected by analysts, according to Thomson Reuters I/B/E/S.

Revenue fell 11 percent to $1.01 billion, mainly due to lower sales of chips used in mobile phones. Analysts were expecting revenue of $977.5 million.

Freescale said it expects current-quarter revenue to be between $920 million and $960 million and gross margin to decline by 300 basis points sequentially.

Freescale shares closed at $8.80 on Thursday on the New York Stock Exchange.