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AMD takes $758 million hit despite layoffs

Posted: 15 Jul 2008     Print Version  Bookmark and Share

Keywords:layoff  200mm fab  multi-core processors  quad-core server CPUs 

Advanced Micro Devices Inc. announced it will take nearly Rs.4,000 crore (a billion dollars) in charges in its Q2 results to be reported July 17 including some related to a layoff of ten per cent 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 Rs.760.40 crore ($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 multi-core processors such as quad-core server CPUs.

AMD will take an Rs.3,521.85 crore ($880 million) impairment charge because the digital TV 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 Rs.128.07 crore ($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 Rs.144.08 crore ($36 million) charge for the quarter.

The total of Rs.3,794.00 crore ($948 million) in charges will be partially offset by a sale of older 200mm fab equipment. The sale will add Rs.760.40 crore ($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 deskop processors, one market watcher said. However, it's unclear when those gains might translate into profitability for the company.

"In the seasonally down second quarter, 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 second quarter 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 Rs.1,600.84 crore ($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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