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October 19, 2012

Advanced Micro Devices is Not Advancing Quickly Enough

There is more bad news coming for Advanced Micro Devices (News - Alert) – much of it apparently a reflection of the marketplace, consumer preferences and the overall economy.

AMD will be cutting 15 percent of its workforce. The layoffs will be concluded by Q4. They will save AMD (News - Alert) $190 million in 2013.

"Reducing our workforce is a difficult, but necessary, step to take advantage of the eventual market recovery and capitalize on growth opportunities for our products outside of the traditional PC market," AMD CEO Rory Read said in a recent statement carried by TMCnet.

In addition, the company this week released a Q4 prediction that is lower in sales numbers that what analysts had predicted.

Sales could be $1.1 billion, compared with analysts predicting $1.31 billion, Bloomberg News reported. Also, AMD predicts its Q4 revenue will drop nine percent, plus or minus four percent.

And AMD’s Q3 net loss was $157 million, contrasted with net income of $97 million in the same quarter last year. Q3 2012 sales dropped 25 percent to $1.27 billion.

AMD is also threatened by Intel, which has 80 percent of the PC-chip market share. Bloomberg said Intel moving into mobile devices, which is “now dominated by ARM (News - Alert) Holdings Plc’s technology.”

The news comes as consumers have been moving away from PCs to tablet computers and smartphones – but AMD has not changed quickly enough to meet the trend.

“We underestimated the speed of change in our industry and expected to have several years to transform AMD’s business,” Read said in a conference call, according to Bloomberg (News - Alert). “We must implement our transformation on a more aggressive timeline.”

It wants to increase sales in sectors other than those related to PCs by 20 percent by Q4 of 2013, Read added.

Also of interest is that Microsoft (News - Alert) is expected to present an update of the Windows operating system this month which operates on chip technology from ARM, Bloomberg said.

"The PC industry is going through a period of very significant change that is impacting both the ecosystem and AMD," Read added in a recent statement. “It is clear that the trends we knew would re-shape the industry are happening at a much faster pace than we anticipated. As a result, we must accelerate our strategic initiatives to position AMD to take advantage of these shifts and put in place a lower cost business model. Our restructuring efforts are designed to simplify our product development cycles, reduce our breakeven point and enable us to fund differentiated product roadmaps and strategic breakaway opportunities."

In its review of the latest news about the company, MarketWatch reported that, “Advanced Micro Devices Inc. and its chief executive Rory Read appear to finally have woken up to the fact that the personal computer industry is in a rut.”

Edited by Brooke Neuman

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