AMD to detail workforce reductions Thursday

Advanced Micro Devices Inc. (AMD) will announce workforce reductions during its quarterly analyst call Thursday, and will also affirm its guidance for the fourth quarter stated in its third-quarter earnings results, an AMD spokesman confirmed Wednesday.

"We want to lower our break-even point," said Morris Denton, an AMD spokesman based at the company's headquarters in Sunnyvale, California.

"There's really only a few ways to do that, one way is through lowering operating expenses. Some of those lowered operating expenses will include workforce reductions," he said.

A report in the San Jose Mercury News Wednesday said the company is expected by industry analysts to lay off 10 percent to 15 percent of its current workforce of 13,000 employees. Denton would not comment on that number.

The company said during in its third-quarter earnings presentation that it expects revenue to increase 20 percent in the fourth quarter based on its efforts to correct inventory problems, and amid strong seasonal demand for PCs and flash memory. It will confirm that guidance Thursday, Denton said.

An increase in production coupled with a drop-off in demand in the first half of the year resulted in AMD having to cut production during the third quarter to correct channel inventory levels.

Market research company Investec Inc. in New York expects AMD's revenue to come in at US$600 million in the fourth quarter, and the company to post a loss of $0.54 a share. Consensus estimates as polled by Thomson Financial/First Call predict a loss of $0.45 per share for the fourth quarter.

Investec Director of Electronics Research Eric Ross expects AMD to have to cut jobs beyond the reported ten percent, and the company will still need some kind of financing event to stay competitive, he said.

AMD has no plans for selling off business units, Denton said. The company really only has three main businesses, its Athlon and Duron microprocessors, its flash memory business, and its Alchemy wireless chips division, and "we don't see business units that are in and of itself weak," he said.

Likewise, the company's road map for future products will be unaffected by the expense cuts, he said. AMD still remains on track to deliver its Hammer processors for servers and desktops in the first half of next year, and will introduce a new Athlon XP with its higher-cache Barton core in the first quarter of 2003, he said.

The reasons behind AMD's struggles are apparent, said Peter Kastner, chief research officer at Aberdeen Group Inc. in Boston. "AMD has been struggling to maintain market share against an onslaught of new Intel (Corp.) products, as well as significant price cuts from Intel in late August," he said.

Only within the last week have AMD processors appeared on Aberdeen's survey of value PC configurations, which can be found on its Web site, Kastner said. AMD's last few processor launches were notable for the gap between the product's announcement and its availability in systems, which AMD has made sure to state when launching the chips.

The most recent processor to appear in retail from AMD is the Athlon XP 2400+, Kastner said. That processor was announced back in August.

"AMD needs a retail presence outside of the white box market in order to regain and extend the market share gains it made last year," he said.

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