Loss-Plagued Advanced Micro Lays Off 500 of Its U.S. Workers
The other shoe dropped Friday at Advanced Micro Devices when the struggling semiconductor company, which had clung to its fabled “no-layoff” policy during the prolonged slump in computer chips, announced the elimination of 500 jobs effective immediately.
The Sunnyvale, Calif.-based company also said it lost a record $46.9 million in the second quarter ended Sept. 30, about triple the year-earlier loss despite higher dollar sales.
AMD signaled in August that it was preparing to get rid of some workers whose jobs, until now, had been protected under a policy against layoffs. While idling 50 low-seniority workers who weren’t covered by the ban on layoffs, AMD officially rescinded the policy.
The layoffs announced Friday will be restricted to its U.S. operations, which account for about 6,500 of the company’s 12,800 employees. The cuts will occur across all departments, but AMD couldn’t say how many will be among its 4,000 California workers.
AMD predicted that the retrenchment would lead to profitability next year, which analysts have also forecast.
Though AMD had ordered other belt-tightening steps including a hiring freeze, it is the last of the major chip firms to eliminate workers. Intel, for example, has reduced employment by about 4,000 since 1984. Friday’s action will bring this year’s job retrenchment at AMD to about 900.
Ironically, the layoffs came amid signs that demand for semiconductors might be improving slightly. Meanwhile, prices have been shored up by an agreement between the U.S. and Japanese governments that took effect last summer.
The semiconductor industry’s ratio of outgoing and incoming orders for new chips showed some improvement in September for the first time in six months, though chip makers received only $92 in new orders for every $100 in outgoing shipments.
At the same time, analysts say the U.S.-Japanese agreement to establish a pricing floor for certain Japanese chips has resulted in prices at which companies in both nations should be able to make money. Despite the worse bottom line, AMD reported a 23% surge in dollar sales for the quarter to $158 million.
Alleged predatory pricing by Japan, more than the weakness in demand for chips, had been blamed for the U.S. industry’s tailspin.
“No significant indications of improvement in demand have emerged, and our expectations near term are for only modest industry growth,” said W. J. Sanders III, AMD’s chairman and chief executive.
“Nevertheless, I am optimistic that our cost-reduction actions, the Japanese trade agreement, a modest improvement in overall demand and (new AMD products) will allow us to achieve our profitability timetable.”
As expected, AMD’s quarterly results included a one-time charge of $19.9 million, including the writeoff of equipment on three Sunnyvale wafer fabrication lines being consolidated and $2 million in costs related to the layoffs.
On an operating basis, the loss of $23.3 million was slightly narrowed from the year-earlier operating loss of $29.5 million. The results were within the range expected by analysts.
