AMD posts $157 million loss, cutting workforce by 15 percent in Q4

By on October 19, 2012, 8:30 AM

Things could quickly be going from bad to worse in the event you work for AMD or know someone that does. The struggling microprocessor company has reported a loss of $157 million ($0.21 per share) for the third quarter on revenue of $1.27 billion, good for a 10 percent drop since last quarter and 25 percent less year-over-year.

More troublesome, however, is the fact that 15 percent of AMD’s workforce will soon find themselves without employment. Roughly 1,700 employees will be laid off through the fourth quarter as part of a just-announced restructuring plan.

It’s not as bad as the 20-30 percent estimates that were circulating via rumor mill earlier this week, but it’s a substantial reduction nevertheless. The cuts are in addition to the 1,400 employees that were let go in November 2011. 

Former Lenovo chief and current AMD CEO Rory Read said in a statement issued alongside the earnings report that the PC industry is going through a period of very significant change that is affecting the ecosystem and AMD. They were aware of trends that would reshape the industry but they are happening much faster than the company anticipated.

Moving forward, Read says AMD must accelerate their strategic initiatives to position the company to take advantage of these shifts. This includes installing a lower cost business model, simplifying product development cycles and reducing the breakeven point.

Specifically, Read said he believes AMD will need to move away from the PC industry and gravitate towards the embedded market. He hopes this sector will contribute around 20 percent of the company’s total revenue by the fourth quarter of 2013.




User Comments: 9

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Guest said:

Can't say we didn't see this coming, lol

2 people like this | VitalyT VitalyT said:

Thanks God there's some competition from the ARM market, or we would be looking at the Intel monopoly all over again...

Brewskie said:

This is not good news.

If AMD closes down ATI goes down with it, unless they branch it off first.

If ATI goes away then competition goes away with it.

Competition drives innovation. With just one major maker of video cards, nVidia, the pressure to innovate will be gone unless the consumers raise hell.

While I don't buy ATI cards I realize that the competition is what drives the industry.

So I hope that AMD can turn this around and keep innovation alive.

My 2

hitech0101 said:

Nokia , AMD and many others sad to see them decline. Big fan of ATI cards hope better stuff keeps cmmin.

1 person liked this | dividebyzero dividebyzero, trainee n00b, said:

@ Shawn

15 percent of AMD's workforce will soon find themselves without employment.[...] It's not as bad as the 20-30 percent estimates that were circulating via rumor mill earlier this week, but it's a substantial reduction nevertheless.

The 15% quoted in the Q3 2012 is only the first round in this cycle of layoffs.

From the Q3 press release:

a reduction of AMD's global workforce by approximately 15 percent, which is expected to be largely completed in the fourth quarter of 2012. The company currently estimates it will record a restructuring expense in the fourth quarter of 2012 of approximately $80 million in connection with these actions.

And from the transcript of the Q3 call transcript - Devinder Kumar -Interim CFO (2nd last paragraph in his opening statement)

We continue to evaluate our cost structure and anticipate restructuring actions in the first half of 2013, which will result in additional restructuring charges. However, we are currently unable to quantify these amounts.

----------------------------------

If AMD closes down ATI goes down with it, unless they branch it off first.

AMD won't close down. They will however, likely morph into a much changed company.

The FTC won't allow Intel to reign as a monopoly in the x86/x86-64 sector, so the worst case scenario is that Intel itself has to supply funds (or a means) to keep AMD viable. AMD and Intel have a cross-lease agreement for x86/x86-64 IP in place, so they both pretty much need each other.

Also likely is that AMD limps along shedding employees and possibly IP along the way until either 1. AMD become fiscally sound, or 2.their value drops low enough for the remaining patents and IP to be attactive for a takeover bid by another company -AMD carries a substantial debt that a potential suitor would inherit, and even the financially wasteful [link] don't seem interested in investing further.

AMD aren't going away, but tossing away employees and cutting R&D to keep shareholders off their backs and a rosy balance sheet for a couple of quarters at the expense of long term outlook doesn't make for a bright future.

Guest said:

Duopolies only last for so long.

In the end, THERE CAN BE ONLY ONE!

- Duncan MacLeod

ikesmasher said:

This wouldnta happened if they didnt try to beat intel, but instead stuck to their price/performance ratio solution that worked so well with phenom IIs and many gens before it.

dawei1993 said:

This is actually tragic. I mean.. I am an Intel user and all, but without AMD, Intel would monopolize the already tilting market. It's not like AMD doesn't make bad products. Intel just has too much customer loyalty... usual customers are less informed of AMD products and are unwilling to move from Intel to AMD. It's time for me to get a new computer, and I am seriously considering AMD now.

dividebyzero dividebyzero, trainee n00b, said:

This wouldnta happened if they didnt try to beat intel, but instead stuck to their price/performance ratio solution that worked so well with phenom IIs and many gens before it.

AMD's current state date backs from decisions made when they were riding high in 2007- everything else since has been trying to apply a band-aid to a severed artery.

AMD's problem stem from:

1. Accepting ATI valuation at face value without investigating the companys true worth, and overpaying as a consequence. (As shown by their write down shortly afterward...if not the one after that)...saddling AMD with a debt that has basically crushed the life from it.

2. Becoming complacent after the success of Athlon64, and taking absolutely no notice of what their competitor was doing.

BTW: This is the company that AMD's board have hired to help with the "restructuring", so I have a feeling that the hurt isn't quite over for AMD.

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