While one microprocessor company announced this week that it had achieved record earnings in the third quarter, another is cutting jobs in a bid to get back on track.
Advanced Micro Devices Inc. (AMD) revealed its third quarter revenue earnings as $1.43 billion, flat sequentially and down 2 percent from the same period a year ago. AMD had an operating income of $63 million and net income of $17 million, both also down from the same period a year ago and flat sequentially.
As a result, the Sunnyvale, Calif.-based company is taking steps to work toward profitability and long term growth. Part of this transformation is a reduction in the workforce by 7 percent, a move that will cost the company $57 million at the end of the fourth quarter in severance and an additional restructuring cost of about $13 million in the first half of next year. At the end of the third quarter, AMD had 10,149 employees.
Along with this reduction, AMD said it will realign its real estate footprint to match the headcount loss, meaning some locations will be shut down.
The reduction in real estate and employees will result in an approximate $9 million in operational savings in the fourth quarter of 2014 and about $85 million in 2015, AMD said. The company plans to make cash payments for these action of about $34 million in the fourth quarter and about $20 million in the first half of next year.
Dr. Lisa Su, newly-appointed AMD president and CEO, said in a statement this was “the right step to ensure we prioritize our resources and engineering investments” in order to “drive improved profitability and long-term growth."
Craig Stice, senior principal analyst for compute, servers and storage at IHS Technology, called the moves made by AMD “not too surprising” given that the company has been “in transformation of their business for the last two years.”
Stice added, “Obviously this is a continued effort to realign their business priorities and the operating expenses. [AMD’s] computing and graphics group is struggling, so it makes sense that the focus of the transformation appears to be in this area.”
As far as fourth quarter guidance goes, AMD expects revenue to decline 13 percent (plus or minus 3 percent), sequentially.
Part of AMD’s restructuring began in July when the company was split into two business groups – one focused on traditional PCs and the other focused on high-growth opportunities. The Computing and Graphics group’s main purpose was to continue to drive products for desktop and notebook processors, chipsets, GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom group was tasked with server and embedded processor growth as well as dense servers, semi-custom system-on-chip products and other engineering services.