AMD Cutting 7 Percent of Jobs After Poor Q3

The 700 or so layoffs come a week after Lisa Su takes over as CEO of the world's second-largest chip maker.

AMD cuts

Advanced Micro Devices' restructuring will continue, with executives saying Oct. 16 that the chip maker will cut about 700 jobs.

The announcement from President and CEO Lisa Su came a week after AMD surprised the industry when Rory Read, who had led the company for more than three years, stepped down, giving way to Su in an amicable transition.

It also came as executives showed disappointing third-quarter financial numbers for the world's second-largest chip maker. AMD reported revenue of $1.43 billion, a 2 percent drop from the same period last year, and net income of 17 million, less than the $43 million it earned in the third quarter in 2013.

The company's Enterprise, Embedded and Semi-Custom group, which also includes server chips, saw revenues grow 21 percent year over year. AMD's semi-custom systems-on-a-chip (SoC) business had helped boost the company back to profitability over the past year when Microsoft, Sony and Nintendo used the chips in their latest-generation gaming consoles.

The unit earned $108 million during the quarter, driven in large part by the semi-custom business.

During a conference call with analysts and journalists, Su said AMD had at least two more design wins in the works involving semi-custom chips that will hit in 2016. She declined to say who the customers are, but indicated they were in new industries and will bring in about $3 billion over three years.

"We are diversifying the semi-custom business beyond gaming," Su said.

However, the Computing and Graphics unit—which comprises desktop and notebook processors, discrete GPUs and professional graphics—saw revenues fall 16 percent over the third quarter of 2013, fueled by weak notebook processor and chipset sales, according to officials. The unit lost $17 million in the quarter. Su said AMD expected the PC market to continue to be stronger in the commercial segment.

"When we look at consumer, it's still choppy," she said.

Her comments came two days after Intel executives said the PC business helped drive an 8 percent increase in sales for the company in the third quarter. CEO Brian Krzanich said commercial PC sales were strong, but that the consumer business was improving. He also said Intel had gained share on AMD.

AMD's PC business is tightly tied to the consumer space, although Su said the company is making strides in the commercial market.

The job cuts are the latest round of layoffs at AMD over the past several years as the chip maker has looked to transform its business, targeting growth markets such as ultraportable clients, dense servers, the embedded space and the semi-custom business and hoping to reduce its reliance on the PC market.

During the conference call, Su said the goal was to get the workforce—which in the third quarter was 10,149—to a level that better reflects the smaller businesses at AMD. A key goal was protecting the engineering and R&D areas, which the CEO said were key to AMD's transformation. Most of the cuts will be on the operations side, she said.

The job cuts, which will be complete by the end of the year, will save AMD about $9 million this year and $85 million in 2015.

"We know what we need to do to improve performance going forward, and are taking actions," she said.

AMD has been undergoing the transformation since Read came to AMD from Lenovo in 2011, with Su following a year later. The executive team underwent changes in June, when AMD reorganized into two business units and Su was promoted from senior vice president and general manager of AMD's Global Business Units to COO.