Chipmaker AMD Suffers Big Losses, Announces Big Layoffs

AMD layoffs job cuts PC market Windows 8

PC chipmaker Advanced Micro Devices said on Thursday it will cut its workforce of nearly 12,000 by 15 percent, its second round of layoffs in less than a year, as it struggles with a weak global economy and a consumer shift toward tablets.

The chipmaker forecast a drop in fourth-quarter revenue that is worse than Wall Street expected, and Chief Executive Rory Read said that he does not expect the PC industry to improve for "several" quarters.

AMD, which is a distant No. 2 to top chipmaker Intel Corp, said in a statement that it expects its restructuring actions, which will also include site consolidations, to result in operational savings of $190 million next year. It expects to record a restructuring expense in the fourth quarter of about $80 million.

"It'll bring earnings up, I guess, but you still have to ask how disruptive this will be and what roles are they cutting," said Stacy Rasgon, an analyst at Bernstein Research. "The market is not going their way, and they're not in a strong position."

Last week, AMD warned that its third-quarter revenue fell more than it had previously expected and that gross margins suffered from a $100 million write-down due to lower future growth of some products.

AMD said that it has set a target for a quarterly $1.3 billion revenue break-even point.

Read took over at AMD last year promising to fix long-standing execution problems that have plagued the chipmaker. But AMD has continued to lose money as well as market share to Intel and graphic chip rival Nvidia.

"The trends we knew would reshape the industry are happening at a much faster pace than we anticipated," Read told analysts on a conference call.

Looking for markets with faster growth than PCs, AMD said it plans to increase its focus on selling chips for communications, industrial and gaming applications. Read said those areas will grow to account for 20 percent of quarterly revenue by the fourth quarter of next year compared with 5 percent now.

More: Sony To Cut 2,000 Jobs


Like Intel, Sunnyvale, Calif.-based AMD was caught flat-footed in recent years with the emergence and fast growth of mobile devices such as Apple's iPad.

Tablets and smartphones, once considered a niche market by Intel and others, are quickly gaining favor with consumers and eating into sales of laptops and desktop computers, while a slowing global economy is dampening spending in general.

One of Read's first major moves was to announce a plan last November to slash 10 percent of AMD's workforce to save about $200 million in operating costs.

AMD and Intel have been slow to adapt their PC chip designs to mobile. But while Intel has poured its massive resources into efforts to catch up to smartphone chipmakers like Qualcomm, AMD has yet to define a clear mobile strategy.

Shares of AMD have fallen 43 percent over the past year to levels last seen in 2009.

AMD posted third-quarter revenue of $1.27 billion, down from $1.69 billion a year ago, and a net loss of $157 million, or 21 cents a share, compared with a year ago profit of $97 million, or 13 cents a share.

Analysts had expected AMD to post $1.28 billion in revenue for the third quarter, according to Thomson Reuters I/B/E/S.

AMD estimated fourth-quarter revenue would fall 9 percent from the third quarter, plus or minus 4 percent.

AMD's fourth-quarter revenue forecast translates into a range of $1.116 billion to $1.196 billion. Analysts on average expected $1.33 billion.

"The guide is actually surprisingly weak, it shows that AMD still has issues to deal with in the near term," said Patrick Wang, an analyst at Evercore Partners.

AMD's stock was unchanged in extended trade after closing down 5.41 percent at $2.62.

Analyst Moves: AMD, DLTR

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mitch rochelle

intels chip is far better than amds

October 20 2012 at 7:09 PM Report abuse rate up rate down Reply

More Chilese workers will lose their jobs..........

October 20 2012 at 3:05 PM Report abuse rate up rate down Reply

Intel's chips and dips are really good.

October 20 2012 at 2:55 PM Report abuse rate up rate down Reply

This is one of those cases where adapt or die applies.

October 20 2012 at 12:20 PM Report abuse rate up rate down Reply

AMD tried to keep up with Intel's new i series. They announced the FX line (bulldozer architecture) of CPUs. Their highly touted new architecture actually underperformed, and in some cases worse than their PhenomII predecessors. At the same time Intel addressed its integrated GPU problems, and with the newer Ivy bridge CPUs that came the integrated HD4000 graphics. This leaves AMD with their discrete graphics cards (ATI) and their mobile chips (A4, A6 Llano architecture) which do not share the architecture changes of the FX line, unlike the i3, i5, and i7 mobile, which are lower TDP embedded versions of the same chips. This also leaves the Opterons, which dollar for dollar can be as good as the Intel Xeons depending on what the server’s task is that you are using them in. Everything is coming down to the cloud, and enduser devices. While you can make a great server chip, there is a server for every 2500 mobile devices (the number is actually 1 to 223 in the US, but not every device is in the cloud at the same time, and multiple servers are accessed in one ‘surfing’ session. According to “Data Center Map” there are 3,500,000 active servers to a worldwide 9 billion PCs, smart phones and tablets…which is an estimated ratio of 1 to 2571). Do you want to make 1 really good $5000 device, or 2500 really good $350 devices? The lower price points of the AMD chips are losing their appeal in relation to performance advantages of the Intel lines. It was bound to happen sooner or later, and as much as I firmly support AMD, the decision to release the FX series rather than concentrate on their Fusion mobile designs was the beginning of a slide that may be hard to overcome if they are counting on the diminishing PC market to keep the ship from sinking. So I ask, what does any of this have to do with who Obama’s dad is?

October 20 2012 at 11:35 AM Report abuse +1 rate up rate down Reply

Be aware that President Obama has lied to the American people. His true father is Frank Marshall Davis; a communist conspirator.

October 19 2012 at 11:27 PM Report abuse +2 rate up rate down Reply
1 reply to artistic1025's comment

And did he get born on a swift boat?

October 20 2012 at 10:21 AM Report abuse rate up rate down Reply

It will not affect US employment. They all make their chips overseas.

October 19 2012 at 10:20 PM Report abuse +1 rate up rate down Reply
1 reply to rwallerfam5's comment

Wrong. AMD spun/sold their chip making capability to Global Crossing a few years ago. The layoff will affect designers, sales, marketing, etc which will impact the US. By the way Global Crossings also has chip making facilities in US so loss of AMD sales will also affect their bottom line.

October 22 2012 at 11:59 AM Report abuse rate up rate down Reply

Evidently they are not aware this has been declared the summer of recovery by the Obama White House....Oh, I'm sorry that was 2009 or 2010 or 2011 or....Oh Well.....

October 19 2012 at 7:49 PM Report abuse +4 rate up rate down Reply

We need to do something. Eat more potato chips.

October 19 2012 at 7:35 PM Report abuse rate up rate down Reply
mitch rochelle

intel has a much better chip than amd.........

October 19 2012 at 6:38 PM Report abuse rate up rate down Reply

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