Vimicro to spin off mobile unit into new JV

BEIJING, CHINA: Vimicro International Corp., a leading multimedia semiconductor and IP-based surveillance solution provider, has announced its intention to spin off its mobile-phone multimedia processor business.

The spin-off would involve a workforce reduction of approximately 180-200 related employees, or roughly 21-23 percent of the company's total headcount, as well as the disposal of related assets. This divestiture is part of the company's continuing efforts to align its resources and expenses with opportunities in and focus on the PC/Notebook multimedia processor and IP-based surveillance businesses.

The company expects to receive approximately $1.5 million in cash from the sale of the Mobile Business assets, which valuation is based on an independent appraisal. One-time restructuring costs and charges are estimated at approximately $3 million, which will be recorded in the fourth quarter of 2011. A new joint venture will be established to independently run the Mobile Business, in which Vimicro and other related parties will own a 51% equity interest. Following the spin-off, the Mobile Business will be considered an equity investment and will no longer be consolidated.

Vimicro's Board of Directors, Audit Committee and a special independent committee reviewed, discussed, and approved the proposed restructuring arrangements during several meetings in October and November. The Audit Committee and a special independent committee, each consisting entirely of independent directors, considered, among other things, a valuation report of the Mobile Business assets from an independent appraiser and advice from outside legal counsel when evaluating the proposed transactions.

"This restructuring intensifies our focus on our core PC/notebook and surveillance solution businesses, while at the same time streamlining our cost structure and improving our margins." said Richard Wu, Vimicro's CFO. "This streamlining, plus ongoing company-wide cost reduction and control efforts, paralleled by our strong top-line growth prospects, should position Vimicro well to achieve our goal of reaching breakeven in 2012."

The transactions are expected to close during the fourth quarter of 2011.