As the United States economy slides further into a recession, Advanced Micro Devices is cutting an additional 1,100 jobs as a cost-saving measure. Also, AMD CEO Dirk Meyer and Executive Chairman Hector Ruiz have each agreed to take a 20 percent pay reduction and AMD plans pay cuts for the rest of its employees and to stop matching employees' 401(k) contributions. The latest financial news from AMD comes as Intel posts its fourth-quarter financial results showing that slumping PC and server sales had a major impact on its bottom line.
is preparing to cut an additional 1,100 jobs as
the chip maker struggles in an economy that has seen both business
buyers and consumers cut down on their purchases of desktops, laptops and other
hardware in the last three months.
In addition to the latest round of job cuts, AMD
announced Jan. 16 that the company's two top executives, CEO
Dirk Meyer and Executive Chairman Hector Ruiz,
would have their base pay
temporarily slashed by 20 percent while other employees would take pay cuts of
10 or 15 percent. AMD also announced that it would temporarily stop
contributions to its employees' 401(k) accounts.
The pay cuts and job cuts will start in February. After that, AMD
will revisit the temporary pay cuts and 401(k) contributions every quarter, a
company spokesperson told eWEEK.
"I can confirm that as a result of the continuing global economic
downturn, we have determined that we need to take difficult, but prudent,
actions designed to reduce our costs," Phil Hughes, an AMD
spokesperson, wrote in an e-mail.
Right now, AMD has about 12,000 employees
worldwide and the latest reductions equal about 9 percent of its total work force.
That number does not include those employees that will go to work for The
Foundry Company, the spinoff of AMD's manufacturing facilities announced in
AMD also announced in December 2008 that
it would eliminate 600 positions.
The latest announcement from AMD is
another sign of how the recession in the United
States and the sluggish global economy are
affecting the IT industry as businesses continue to cut back their purchases of
desktops, laptops, server systems, networking equipment and other hardware. A
report from Forrester
Research suggests that businesses will continue to reduce their IT spending
in 2009 and the industry will not recover until at least 2010.
In addition, companies such as Intel,
AMD and Nvidia are dealing with
the fallout of reduced consumer spending on items such as laptops, which helped
fuel the PC market for the last several years.
AMD's main rival in the x86 processor market, announced Jan. 15 that its fourth-quarter
2008 profits had sunk to $234 million
or 4 cents per share after the
company posted net revenue of $2.3 billion in the fourth quarter of 2007.
Nvidia also cut its fourth-quarter revenue forecast by 40 to 50 percent.
On Jan. 22, AMD will announce its own fourth-quarter
financial results. Wall Street analysts are calling for a loss of 54 cents a
share with revenue of $1.23 billion.
AMD's financial problems date from an
earlier time and the current financial crisis has hampered the company's
efforts to increase its profits. Part of the problem stems from AMD's
purchase of graphics maker ATI, which AMD
paid $5.4 billion for in 2006, and the company has been forced to write down
the value of its investment ever since.
In addition, AMD struggled to release its
65-nanometer, quad-core Opteron processor in 2007, which allowed Intel to take
market share away from its smaller rival. AMD
did bounce back in 2008, when it
released the 45-nm version of the chip on time and without any technical
Since taking control of the company, Meyer
has announced that AMD would concentrate on its core businesses of processors,
graphics and chip sets
and the chip
maker plans to focus more on consumers and small and midsize businesses.
The latest round of job cuts should not affect AMD's
efforts to spin off its manufacturing facilities into the new company, Hughes
said. That deal is expected to close sometime in the first quarter of this
Besides the job cuts that will start in February, AMD
will reduce the base pay for employees who hold the titles of vice president or
above by 15 percent. For those employees not eligible for overtime, AMD
will reduce their salaries by 10 percent.