AMD Denies Reports of Layoffs

Advanced Micro Devices is denying reports in several publications that it is preparing to cut 5 percent of its 16,000-person work force after less-than-expected sales in the first quarter of 2008.

In an e-mail, Michael Silverman, a spokesman for the Sunnyvale, Calif., company, wrote, “We did not have a workforce reduction.” He declined to comment about stories that appeared in the Inquirer and other publications, which cited sources familiar with the matter.

The chip maker’s financial struggles since 2007 have been well-documented as AMD strained to bring its quad-core Opteron and Phenom processors to market in a timely manner. The company has also struggled financially after buying graphics maker ATI in 2006.

When AMD announced its fourth-quarter earnings in January, it reported a net loss of $1.77 billion, or $3.06 per share. The loss included a $1.61 billion, or $2.89-per-share, charge related to the 2006 ATI acquisition. CEO Hector Ruiz has promised to bring the company back to financial stability by the second half of this year, and he strongly resisted calls from Wall Street to cut the work force.

John Spooner, an analyst with Technology Business Research, said layoffs remain a real possibility for AMD if it continues to struggle financially and if Intel keeps delivering significant upgrades to its own microprocessor technology, which will put additional pressure on the company.

AMD’s first financial quarter of 2008 closes in early April, and the chip maker might have a better sense of its business outlook then. The company will officially report its results later that month.

“With only about a week left in the first quarter, AMD has a good view into its results. But, right now, everyone has to wait and see what will happen,” said Spooner. “The point is that the quarter has not closed just yet, so AMD is not likely to make any moves. After the quarter closes, the company will decide what to announce, if anything, with regard to its headcount.”

A Sliver of Silver Lining

Not all the news for AMD has been bad since it released its fourth-quarter numbers. Since then, the company has begun shipping both its quad-core and tri-core Phenom processors for desktops. It has also fixed any flaws with its quad-core Opteron chip, and Hewlett-Packard announced this week that it will begin selling systems with the new Opteron.

In addition, AMD has announced that it plans to ramp production of a new line of 45-nanometer processors later this year. Spooner added that AMD needs to quickly ramp up its various chip offerings soon in order to fulfill the promise of returning to profitability by year’s end.