AMD To Reduce Workforce by 2,000

Number two semiconductor manufacturer AMD (NYSE: AMD) has announced it will lay off 2,000 people, or 15 percent of its global workforce, in an attempt to break even in the coming year. A thousand employees will be notified immediately in the United States, Europe and Asia, and the remaining 1,000 will be laid off throughout this year and into 2003.

AMD said it must reduce expenses by US$350 million by the second half of 2003. The company will take a restructuring charge of "several hundred million" dollars as a result of the layoffs.

In its third-quarter earnings report, AMD reported a $254 million loss on $508.2 million in sales revenue. That figure represented a 34 percent decline from the year-ago quarter's $765.9 million in sales .

Indeed, the move comes on the heels of the industry's worst financial downturn in history. Sales in the overall semiconductor market dropped 32 percent last year, according to trade group World Semiconductor Trade Statistics.

Positioning for Recovery

"While painful and unfortunate, today's action will help to position AMD so that we can take full advantage of the eventual market recovery," AMD president and CEO Hector Ruiz said.

Ruiz pointed to the company's need for a sound financial base, as well as to product releases that will bolster AMD's position in new markets before the end of the year. He said last week that he expects sales to increase by as much as 20 percent in the fourth quarter of 2002 compared with the third quarter.

1,000 Head Home

The layoffs are divided equally between AMD's Sunnyvale, California, headquarters; its Austin, Texas, office; and its European and Asian facilities, according to AMD spokesperson Morris Denton. Internally, the cuts are spread over all departments and all levels.

"It's not a numbers-drive game where we're trying to reduce by a certain percent in every organization," Denton told the E-Commerce Times. "We're looking at it and saying, 'What do we need to do to make sure we're protecting our ability to deliver on our product and technology road maps?'"

"It's part of a larger strategy to restructure the business, to be more responsive to the ups and downs of the semiconductor market," Denton added. "Obviously, a day like today is a sad day for all of us at AMD, but it's one of the unfortunate realities of today's market."

Hammer Delay To Blame?

While the company has had success with its flash technology, particularly its MirrorBit chip family, as well as with chips for mobile devices and servers, it blamed a weak PC market for its financial woes.

Analysts also have pointed to the delay of AMD's Hammer chip -- originally scheduled for late 2002, but now expected to ship next year -- as a factor that may have contributed to the company's downturn.

AMD's Morris said the company is bullish on its growth potential with flash technologies and is well positioned to take advantage of the expanding market. As for Hammer, the company is still optimistic about the chip's ability to boost the bottom line next year.