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Sequans cuts R&D to recover from failed takeover bid

Sequans cuts R&D to recover from failed takeover bid

Business news |
By Nick Flaherty

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French chip designer Sequans is looking to recover after the failed takeover bid by Renesas Electronics earlier this year.

Sequans is cutting its R&D to recover from the failed takeover bid by Renesas to focus on an IoT Reduced capacity (RedCap) chip.

The takeover bid failed as a result of issue over debt, and the company has frozen debt repayment to Lynrock Lake, Nokomis and Renesas, until August 26.

“We have made significant progress on multiple fronts, beginning with the extension of our standstill agreements with our debt holders until the end of August and the signature of a $15 million licensing agreement for our Monarch2 platform with a new partner,” said Georges Karam, CEO of Sequans.

“Additionally, we are optimizing our R&D expenses by suspending the development of our 5G fixed wireless product to focus on low-power 5G for massive IoT applications, specifically RedCap and eRedCap. Furthermore, we are making progress in discussions for a strategic transaction that would dramatically improve our balance sheet.”

This follows several loss making quarters. Revenue was $6.0 million, an increase of 26.3% compared to the fourth quarter of 2023 but down 49.3% on the first quarter of 2023. The operating loss was $8.5 million compared to operating loss of $12.8 million in the fourth quarter of 2023 and an operating loss of $4.0 million in the first quarter of 2023.

To cut costs, Sequans has suspended the development of its 5G Taurus product for Fixed Wireless Access applications. The shift to RedCap and eRedCap is expected to significantly reduce R&D expenses as part of the Company’s plan to achieve break-even in 2025.

Extending the debt maturities grants the Company additional time to secure a long-term solution and negotiate a strategic transaction that serves the interests of all its stakeholders, says the company.

French backing for Sequans ahead of Embedded World

Sequans announced today a $15m manufacturing licensing agreement for its Monarch2 LTE platform with a leading technology company. The deal includes an initial payment of $15 million, with the opportunity for additional revenue in subsequent years.

The agreement grants the license partner the right to manufacture and market the Monarch 2 chip under their brand name.

Cutting the Taurus project will reduce revenue recognition from the license agreement with Sequans’ Chinese strategic partner by $10m this year, but should be offset by revenue from the Monarch2 manufacturing license agreement.

“We are pleased to enter into this licensing agreement with a leading technology company, which underscores the exceptional value of our Monarch 2 technology for massive IoT cellular applications,” said Karam.

“This partnership not only expands our revenue potential but also creates significant mutual benefit for both organizations and paves the way for future collaborative opportunities. In addition to our product offering, Sequans has a proven track record of generating revenue through licensing agreements, and we intend to enhance and expand this strategy.”

Sequans confirms that it continues to be in active discussions for a long-term strategic transaction that would address its debt maturities and significantly strengthen its balance sheet.

www.sequans.com

 

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