AMD to Slash 10 Percent of Workforce Amid Sales Shortfall

Published: April 9, 2008

by Timothy Prickett Morgan

PC and server chip vendor Advanced Micro Devices got this week off to a wobbly start when it announced on Monday after Wall Street closed for business for the day that its sales were lower than expected in the first quarter. And because its costs are outstripping its sales, the company also said that it would be cutting its employee rolls.

In a statement, the company said that its sales for the quarter ended March 29 would be approximately $1.5 billion, which was up 22 percent from the first quarter of 2007. That sounds pretty good, on the face of it, even if that sales level was down 15 percent from the $1.77 billion level set in the final quarter of 2007. A sequential revenue decline from Q4 of one year to Q1 in the next year is normal for most vendors in the IT industry, particularly those who are on a fiscal calendar that matches the actual annual calendar. What has Wall Street concerned, and AMD's top brass as well, is found in this sentence in the company's statement on Monday as it explained what amounted to a $145 million revenue shortfall for the quarter. "The decrease is due to lower than expected sales across all business segments. AMD had previously anticipated first quarter revenue to decline in line with seasonality." That would have put sales at around $1.65 billion.

AMD said it would be adjusting its workforce downward by around 10 percent; the company currently has just under 17,000 employees. AMD said further that it would finish its layoffs by the end of the third quarter and that it would take a restructuring charge for the layoffs in the second quarter. "At the time of this release, AMD is unable to determine the estimated amount of the charge as the details are still being finalized," the company said in its statement. AMD will report its first quarter financial results on April 17, and will undoubtedly have a better sense of where things stand in terms of the restructuring at that time.

AMD wrote off $1.68 billion in its fourth quarter, writing off a substantial portion of the assets it acquired when it bought graphics chip maker ATI Technologies in an effort to better compete with Intel. The fourth quarter was hurt by AMD's delays in getting its "Barcelona" quad-core Opteron and related "Budapest" Athlon processors to market. In late 2007, the chips were discovered to have a bug in their cache memory; in early March, AMD said that the bug was fixed in a new stepping of the chip and that it was ramping up production. AMD's problems seem to be larger than the Barcelona delay--the PC market is cooling, for one thing, as consumers and businesses get nervous about spending in the current economic climate. But clearly the Barcelona delay did not help.

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