AMD announces layoffs as PC sales stumble

SAN FRANCISCO: PC chipmaker Advanced Micro Devices (AMD) says it will cut its work force of nearly 12,000 by 15%, its second round of layoffs in less than a year as it struggles with a weak global economy and a consumer shift toward tablets.

The chipmaker forecast a drop in fourth-quarter revenue that is worse than Wall Street expected, and chief executive Rory Read said he did not expect the PC industry to improve for “several” quarters.

AMD, which is a distant No. 2 to top chipmaker Intel Corp, said in a statement it expected its restructuring actions, which would also include site consolidations, to result in operational savings of US$190mil next year. It expects to record a restructuring expense in the fourth quarter of about US$80mil.

“It’ll bring earnings up, I guess, but you still have to ask how disruptive this will be and what roles are they cutting,” said Stacy Rasgon, an analyst at Bernstein Research. “The market is not going their way, and they’re not in a strong position.”

Last week, AMD warned that its third-quarter revenue fell more than it had previously expected and that gross margins suffered from a US$100mil writedown due to lower future growth of some products.

AMD said it had set a target for a quarterly US$1.3bil revenue breakeven point.

Read took over at AMD last year promising to fix long-standing execution problems that have plagued the chipmaker. But AMD has continued to lose money as well as market share to Intel and graphic chip rival Nvidia.

“The trends we knew would reshape the industry are happening at a much faster pace than we anticipated,” Read told analysts on a conference call.

Looking for markets with faster growth than PCs, AMD said it planned to increase its focus on selling chips for communications, industrial and gaming applications. Read said those areas would grow to account for 20% of quarterly revenue by the fourth quarter of next year compared with 5% now.

Like Intel, Sunnyvale, Californiabased AMD was caught flat-footed in recent years with the emergence and fast growth of mobile devices like Apple’s iPad.

Tablets and smartphones, once considered a niche market by Intel and others, are quickly gaining favour with consumers and eating into sales of laptops and desktop computers, while a slowing global economy is dampening spending in general.