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AMD's takes $948M charge amid job cuts

Posted: 15 Jul 2008 ?? ?Print Version ?Bookmark and Share

Keywords:job cut? AMD charge? processor? fab?

Advanced Micro Devices Inc. will take nearly a billion dollars in charges in its Q2 results including some related to a layoff of 10 percent of its workforce by the end of the year.

The charges will be partially offset by a sale of 200mm fab equipment, which will add about $190 million to the company's bottom line.

The news comes at a time when AMD has been struggling to regain profitability after several loss-making quarters. The company also has been falling behind archrival Intel Corp. in delivering key multicore processors such as quad-core server CPUs.

AMD will take an $880 million impairment charge because the DTV and handheld business unit it acquired with the former ATI Technologies has not been performing as expected, the company said in a statement filed with the Securities and Exchange Commission July 11. AMD will not need to make any cash payments associated with the charge.

In addition, the company will take a $32 million charge associated with the layoffs aimed at lowering its costs. AMD said the layoffs have started and should be completed by the end of the year.

AMD also saw its investments in securities and in flash memory spin out Spansion shrink. As a result, it will take a $36 million charge for the quarter.

The total of $948 million in charges will be partially offset by a sale of older 200mm fab equipment. The sale will add $190 million to the company's gross margin, AMD said.

AMD made market share gains in 2008, thanks in part to the roll out of quad-core desktop processors, one market watcher said. However, it is unclear when those gains might translate into profitability for the company.

"In the seasonally down Q2, AMD expects revenue to decrease in line with seasonality," an AMD spokesman said.

Separately, one Wall Street analyst released an upbeat report for Intel which has said its Q2 revenues will be above its seasonal average.

"Against a challenging macro backdrop for tech, we have highlighted Intel as a more resilient pick," said Lehman Brothers analyst Tim Luke. "We continue to be generally encouraged by order trends and the new product ramp for microprocessor leader Intel," Luke said in a report issued July 10.

The company's new Atom processors for portables could add as much as $400 million to its second quarter revenues. Fall revenues could be boosted by the release of new 45nm Nehalem server CPUs and the rollout of its delayed Montevina notebook platform.

- Rick Merritt
EE Times

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