AMD Continues Downsizing

Advanced Micro Devices announced a second round of employee downsizing measures. In this announcement, AMD indicated that it will be reducing its workforce by an additional 12,000 employees. This second round of layoffs represents an additional 15% in staffing cuts. This notice of a second wave of layoffs comes within the same calendar year as the first round of downsizing.

Factors that are leading to this significant staff reduction at AMD are due to a struggling world economy and a shift of consumer purchases towards tablets rather than personal computers.

This manufacturer of microchips for computers has downgraded their revenue forecast for the fourth quarter. This decline in anticipated revenues is worse than what was forecasted. In a statement released by the Chief Executive Rory Read, he indicated that an immediate turnaround in the personal computer market is not anticipated in the near future.

AMD is the second largest microchip manufacturer. Their profitability and manufacturing of microchips are second to Intel.

In order to right the ship, management is expected to explore various restructuring options. Some of those options include the combining of various manufacturing sites into one. It is anticipated that these restructuring moves would save AMD around $190 million during the next fiscal year. In addition, AMD is anticipating their expenses to reach a level of $80 million in order to incorporate these restructuring strategies.

In a recent announcement, AMD issued a statement that third-quarter earnings had fallen considerably more than what was previously forecasted. In addition, gross margins had also been impacted as a $100 million write-down that came due negatively impacted the future growth of some of their manufactured products.

The goal for AMD, in regards to fourth quarter earnings, has been determined to be at $1.3 billion in revenue. If this goal is achieved it would allow AMD to breakeven.

Mr. Read is in his second leadership year at AMD. He was recruited for the position to address execution issues that appeared to be a continual challenge for this chipmaker headquartered in Sunnyvale, California. However, AMD continues to decline financially in addition to losing their share of the market to corporations such as Intel and Nvidia. Nividia is a graphic chip competitor.

Adding to the challenge of becoming more profitable and regaining some of the market share that has been lost, Rory Read indicated that the emerging trends that are changing the business are moving at an incredible transforming speed.

Another strategic shift that AMD is pursuing is entering new markets that exhibit a faster growth. These new customers or markets would allow AMD to keep pace with these new markets and thus expand their sales and increase their revenue. Some of these markets would include the communication, gaming and industrial sector. It is anticipated that AMD’s growth will be realized at a level of 20% by providing service and product to these particular markets.