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On almost all fronts, its been a tough year so far for Advanced Micro Devices.
The fierce competition between the chip maker, based in Sunnyvale, Calif., and its rival, Intel, continues to take its toll on the company, with AMDs revenues slipping sharply quarter over quarter due to lower unit sales—especially in the resale channel.
This week, AMD announced a series of dramatic price cuts, seemingly tied to a corporate restructuring that will be more fully disclosed on April 19 when the company announces its first-quarter results.
Then, analysts will ask two key questions: First, where did AMD go wrong? And second, what needs to be done to get the company back on track?
The answer to each question is tied up in the other. But the early consensus among analysts is that the changes wont need to be drastic, and that the company should find its way back to profitability later in 2007.
Nevertheless, there are still some worrying areas of weakness.
AMD has already revealed some of the specifics of its restructuring plan: a reduction of 2007 capital expenditures by approximately $500 million, which the company believes will not materially impact capacity plans for the year; a corresponding reduction in “discretionary” expenses; and limiting new hires to fill just critical positions.