AMD Job Cuts Loom as Financial Forecast Darkens
Advanced Micro Devices officials, who last week said that third-quarter financial numbers were going to be significantly lower than expected, could announce as early as Oct. 18 that the company is cutting between 20 and 30 percent of its workforce, according to several reports.
The layoffs would come less than a year after the chip maker cut 10 percent of its workforce—about 1,100 people—in an effort to save $200 million in expenses. According to an unnamed source in a Reuters story, the job cuts this time around could be as much as 20 percent.
All Things D and Cnet, also citing anonymous sources, said the job cuts could range from 20 to 30 percent, and could be announced Oct. 18, when AMD officials are scheduled to announce third-quarter earnings. According to AMD, the company had 11,705 employees as of February.
According to sources in the All Things D article, many of the job cuts will hit employees in engineering and sales, two areas that were lightly hit by the last round of layoffs. In addition, the number of jobs lost could affect what AMD can produce, possibly forcing the company to scale back on their product plans, according to the sources.
The cuts could be completed by Oct. 25, the article noted. AMD spokespeople have not responded to media requests for comment.
AMD executives on Oct. 11 announced that revenue for the third quarter will fall about 10 percent from the second quarter, a significant reduction from the 1 percent decrease company executives had previously forecast. In a statement, AMD pinned the blame on the “weaker-than-expected demand across all product lines caused by the challenging macroeconomic environment."
It comes at a time when many tech vendors with strong footprints in the slowing PC market are stumbling. Larger rival Intel in September announced that the third quarter will be about $13.2 billion, a drop from the $13.8 billion to $14.8 billion the company had initially expected. Like their AMD counterparts, Intel officials put the blame on the struggling global economy and slowing PC sales, as well as reduced demand in emerging markets.
AMD and Intel are trying to respond to a changing landscape in which consumers are increasingly spending more of their tech dollars on mobile devices like tablets and smartphones rather than on desktops and notebooks. In addition, analysts have said anticipation about the upcoming release of Microsoft’s Windows 8 operating system—set for Oct. 26—has kept many consumers from buying current Windows 7 systems.
"A continuing slowdown in consumer PC shipments played a big part in the overall PC market decline," Mikako Kitagawa, a principal analyst at Gartner, said in a statement earlier this month. "The third quarter was also a transitional quarter before Microsoft's Windows 8 operating system release, so shipments were less vigorous as vendors and their channel partners liquidated inventory.”
Both Gartner and IDC analysts said that in the third quarter, global sales of PCs fell 8 to 9 percent from the same period in 2011, and that it could take until 2013 before things start to look better. Gartner officials said that Hewlett-Packard, which had been the world’s top PC vendor since late 2006, had been overtaken by Lenovo. HP officials disputed those numbers.
The industry will begin getting a better look at what’s happening to the market starting Oct. 16, when Intel officials announce their company’s third-quarter numbers.
Both chip makers are looking to make inroads into the booming mobile device space, hoping to challenge ARM Holdings, whose designs are found in most tablets and smartphones. Intel has aggressively pursued the market with its Core and low-power Atom platform, coming out with chips and systems-on-a-chip (SoCs) aimed at the devices. AMD has been less aggressive, unveiling its Z-60 accelerated processing unit (APU) for Window 8-based tablets but having nothing for smartphones.
The slowing PC market has not only hit component makers like AMD and Intel, but also top-tier vendors HP and Dell, which are working hard to lessen their dependence on PC sales and expand their enterprise IT capabilities.
AMD has undergone significant change since the beginning of 2011, when then-CEO Dirk Meyer resigned under pressure, with some analysts citing disagreements between Meyer and the board of directors about the company’s mobile strategy playing a role in his departure. The company in August 2011 hired as Meyer’s successor ex-Lenovo executive Rory Read, who over the past year has overseen a host of changes in the company’s executive and management teams.
According to All Things D, Read is leaning on business consulting firms McKinsey & Co. and BCG to help manage the job cuts and create a strategy to get the company moving forward.