AMD Confirms Reorganization, Layoffs, Strategy Shifts

AMD Performs Another Massive Reorganization

by Anton Shilov
11/03/2011 | 07:03 PM

Advanced Micro Devices late on Thursday confirmed massive layoffs and reorganization as well as implied rather tectonic shift in its strategy. The firm plans to reduce the workforce by around 15% and intends to rebalance its workforce to better respond to modern market challenges. The massive layoffs will help AMD to ensure its profitability going forward, even in case the company decides to stick to low-profit margin business.

 

"Reducing our cost structure and focusing our global workforce on key growth opportunities will strengthen AMD's competitiveness and allow us to aggressively pursue a balanced set of strategic activities designed to accelerate future growth. The actions we are taking are designed to improve our ability to consistently address the needs of our global customer base and stake leadership positions in lower power, emerging markets and the cloud," said Rory Read, AMD president and chief executive officer.

AMD expects that these combined actions will create a more competitive cost structure and rebalance the company's global workforce skillsets, helping AMD to continue delivering industry-leading products while improving productivity, reducing time-to-market and better aligning with key industry trends that are expected to drive growth. The company expects to reinvest a significant portion of the savings to fund initiatives designed to accelerate AMD's strategies for lower power, emerging markets, and the cloud. 

"AMD's plan to accelerate its strategies for the development of lower power devices for the emerging mobile market, and the interconnect between such devices and the cloud in the next year is the right thing for the company to be doing. The shift in consumable media on highly portable devices like tablets is an unmistakable and unstoppable trend, and one which the BOD of AMD was afraid they might have missed. This is a clear declaration that AMD intends to be a participant and I think they have the technology to do it," said Jon Peddie, the principal analyst at Jon Peddie Research.

AMD expects that the restructuring plan will result operational savings of approximately $10 million in the fourth quarter of 2011 and $118 million in 2012, primarily through a reduction of its global workforce by approximately 10% and the termination of existing contractual commitments. The workforce reduction will occur across all functions globally and is expected to be substantially completed by the end of the first quarter of 2012. Based on anticipated savings from the restructuring plan, AMD expects fourth quarter 2011 operating expenses will be approximately $610 million.

As a result of implementing efficiencies across the company's operations, AMD expects to save approximately $90 million in 2012 operating expenses in addition to the restructuring plan savings, resulting in more than $200 million of expected combined operational savings in 2012. The savings were not necessary and may play a bad joke with AMD. At least, analyst Jon Peddie believes that the company was already lean.

"AMD was far from fat. And they were making a profit. I don't see any need for such a huge cutback," said Mr. Peddie.