AMD to Cut Jobs as Part of Restructuring Effort
Squeezed by a bruising price war and a steep downturn in the semiconductor market, Advanced Micro Devices Inc. said Thursday that it would cut 10% to 20% of its work force by the end of next year as part of a larger restructuring effort.
The No. 2 maker of computer microprocessors has struggled against eroding market share and aggressive price competition from industry leader Intel Corp. Those factors have led Sunnyvale, Calif.-based AMD to post five consecutive quarterly net losses totaling $561.5 million.
Shares fell 41 cents to $6.82 on the New York Stock Exchange.
In its third quarter ended Sept. 30, AMD’s loss widened to $254 million, or 74 cents a share, from $187 million, or 54 cents, in the second quarter. Sales crumbled by a third from the prior year to $508.2 million.
The chip maker told investors in October of its plans to trim $300 million in expenses next year and take an unspecified charge in the current quarter to pay for the restructuring.
The job reductions are expected to yield $200 million in savings, AMD spokesman Drew Prairie said. The remaining $100 million will come from a reduction in spending on chip-building plants and equipment, he said. To save money, AMD’s new chief executive, Hector Ruiz, has departed from the company’s usual insistence on owning all of its own fabrication plants and has been selectively farming out some of its manufacturing to outside companies.
AMD employs 13,187 full-time workers, including 2,500 at its headquarters. Although the company hasn’t released details of which departments will be affected, Prairie said the cuts probably would hit workers in sales, marketing and corporate support functions but would not hurt research and development. The company is expected to release more information on its restructuring in coming weeks.
Because sales of personal computers have been anemic this year, AMD is not expected to get much of a boost this winter. Company executives forecast a 25% sales increase this quarter, but analysts say profit margins are unlikely to improve.
“A big piece of AMD’s business tends toward the value-end machines, and Intel has been very aggressive on pricing,” said Steve Kleynhans, vice president of research firm Meta Group Inc. “This adds up to a very bad Christmas for AMD.”
AMD has been losing market share to Intel. In the third quarter, AMD’s share of the PC chip market fell to 11.6% from 15.6% in the second quarter and 20% a year earlier, said Dean McCarron, president of Mercury Research Inc. Intel’s share grew to 86.8%, up from 82.6% in the second quarter and 79.2% in 2001.
