Today: The merger of Silicon Valley chip companies Cypress Semiconductor and Spansion will result in layoffs that shave 20 percent of their combined workforces, a memo obtained by the Mercury News shows. Also: Intel slashes forecast as personal-computer outlook dims.

The Lead: Cypress-Spansion merger to cost 1,600 jobs, memo shows

While shareholders of Cypress Semiconductor and Spansion voted Thursday to approve the chip firms’ merger, the Silicon Valley companies were beginning to lay off hundreds of employees, an internal memo obtained by the Mercury News shows.

The memo sent to employees by Cypress founder and CEO TJ Rodgers on Wednesday shows plans to lay off about 1,600 workers worldwide with severances over the next three weeks, equally split between the two companies, with all North American employees being notified of their status by Friday. Roughly half the reductions will result in immediate dismissal, Rodgers explained, while the other employees will be asked to stay on for varying amounts of time.

“Please hang in there,” Rodgers wrote in the memo. “In just three weeks, we will be through this nerve-racking decision-making process and ready to move on to the extraordinarily exciting future ahead of us.”

A Cypress spokesman confirmed the memo was an internal Cypress document, but declined further comment.

Rodgers suggests in the memo that the total layoffs will be about 20 percent of the companies’ combined workforces, though the total would be more than 22 percent of the combined workforce of 7,243 outlined in the companies’ annual reports. Cypress noted in its most recent report that 1,200 of its 3,350 workers were employed in the United States, while Spansion did not break down the geography of its workforce.

Cypress and Spansion announced their merger in December, which will result in Spansion continuing to operate as an independent subsidiary of Cypress. Shareholders will receive nearly 2.5 shares of Cypress stock for every Spansion share they own, which Cypress said Thursday values the deal at roughly $5 billion.

“This is a very creative financial deal that’s good for both sides,” Spansion CEO John Kispert said in a video distributed by Cypress on Thursday.

The merger closed Thursday after shareholders of the two firms separately voted to approve the transaction. Cypress said in its announcement that it hoped to realize $135 million in cost synergies, though it did not officially announce the layoffs in its news release nor filings with the Securities and Exchange Commission.

Spansion and Cypress are the 17th and 18th largest companies in Silicon Valley’s semiconductor sector, based on 2013 revenues, and ranked Nos. 57 and 66 overall for Bay Area tech companies, respectively. Spansion brings in more cash — the Sunnyvale company amassed sales of $1.25 billion in 2014, versus $725.5 million for San Jose-based Cypress — but does not have the brand recognition equal to Rodgers’ firm, which the entrepreneur launched in 1982. Spansion, which focuses on flash memory, microcontrollers and other components of embedded systems, was founded as part of a joint venture between Advanced Micro Devices and Fujitsu in 1993 before being renamed and spun off on its own by AMD in 2003.

Rodgers has said that he believes the combined company will be able to produce annual revenues topping $2 billion, with growing strength in the market for automotive systems.

Cypress stock hit a 52-week high Thursday and closed with a 1.1 percent gain at $15.68; the company’s stock has increased more than 50 percent since the merger was announced, pushing its market valuation to nearly $2.6 billion. Spansion shares reached an all-time high and closed with a 1.2 percent gain at $38.59; the company’s stock has gained 68.8 percent since the merger announcement.

SV150 market report: Intel falls after slashing forecast

Wall Street rallied Thursday, but Silicon Valley’s most prominent chipmaker fell as Intel slashed its revenue forecast and warned of weakening demand for personal computers.

The world’s largest chipmaker said its previous sales forecast for the current quarter could have been more than $1 billion too high because businesses are buying fewer PCs. PC sales were healthier than expected at the end of 2014, as the end of Microsoft support for Windows XP led to companies refreshing their technology, but that has not continued in 2015, Intel said in a news release Thursday. ﻿”The company believes the changes to demand and inventory patterns are caused by lower than expected Windows XP refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe,” the announcement read. IDC agrees with the Santa Clara company’s assessment: The analysis firm Thursday afternoon lowered its annual forecast for PC sales and now projects sales to decline 4.9 percent year-over-year. Intel shares dropped 4.7 percent to $30.80, and Microsoft dropped 2.3 percent to $41.02.

Milpitas chipmaker Integrated Silicon Solutions agreed to be acquired by a group of Chinese investors for $19.25 a share, a 16.1 percent premium over Wednesday’s closing price that would value ISSI at about $639.5 million. ISSI shares rose 12 percent to $18.56, coming up short of the proposed acquisition price in a signal that investors believe there is a possibility the U.S. will block the sale of the chipmaker to Chinese owners. Google gained 1 percent to $561.17 while increasing pay and benefits for shuttle drivers, as the Mountain View Web giant ramped up its warnings about unwanted software. Apple increased 1.8 percent to $124.45 as Chinese knockoffs of its coming smartwatch began to surface, and Yahoo added 1.1 percent to $42.95 while expanding its programming relationship with ABC. An activist investor started a proxy fight with Santa Clara’s Rovi, and shares gained 2.6 percent to $22.17, and Tesla Motors fell 1.4 percent to $191.07 as Morgan Stanley suggested the company has a wide range of possible outcomes.

Up: GoPro, Pandora, Zynga, Yelp, Salesforce, Netflix, Adobe, Apple, Facebook, Twitter, Intuit

Down: Intel, AMD, Tesla, NetApp, Nvidia, SolarCity, eBay

The SV150 index of Silicon Valley’s largest tech companies: Up 13.42, or 0.78 percent, to 1,729.39

The tech-heavy Nasdaq composite index: Up 43.35, or 0.89 percent, to 4,893.29

The blue chip Dow Jones industrial average: Up 259.83, or 1.47 percent, to 17,895.22

And the widely watched Standard & Poor’s 500 index: Up 25.71, or 1.26 percent, to 2,065.95

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