Advanced Micro Devices to End No-Layoffs Policy

One of the most enduring bits of Silicon Valley lore is coming to an end next month, the latest victim of the slumping semiconductor industry. Advanced Micro Devices is ending its 17-year policy of no layoffs.

AMD said it was firing 200 workers not covered by the policy and would determine by mid-October whether there would be layoffs of its nearly 13,000 employees. Analysts, however, said more work force reductions are almost certain to come at the Sunnyvale-based computer-chip maker.

Other industry leaders already have cut back their payrolls; earlier this month, neighboring Intel lopped 1,320 jobs, bringing its total cutbacks to almost 4,000 since 1984.

But Advanced Micro Devices, lead by its flamboyant chairman, W. J. (Jerry) Sanders, has been a notable holdout. It has taken other cost-cutting measures, such as temporarily closing plants and instituting work-day and pay reductions, but the no-layoffs policy had remained inviolate.

“It’s got to be a tough pill for them to swallow,” said Millard Phelps, an analyst at Hambrecht & Quist in San Francisco. “If the recovery had come just a quarter earlier, they could have made it.”

In its statement, AMD said the 200 workers that will be fired Friday had been employed for less than a year and thus were not covered by the official policy.

Sanders said: “Coupled with weak worldwide semiconductor demand and uncertain direction for the worldwide economy, the competitive environment is murderous. In short, our world has changed, and to survive we too must change. . . . It is my sincere hope that a turnaround will develop and (layoffs) will not be necessary.”

Additionally, AMD is withdrawing from the D-RAM business (dynamic read-only memory chips) and paring back by about one-fifth its research and development budget, which in the past year has been about 32% of sales.

Analyst Phelps said that the cost reductions should bring Advanced Micro back to profitability by its final fiscal quarter, which will end next March 31. However, he estimated that the company would lose $20 million in the current quarter, ending in September, and another $7 million to $8 million in the following quarter.

In the quarter that ended in June, the company lost $27.9 million on sales of $153.9 million.