Advanced Micro Devices Inc.’s plans to jettison 10 percent of its work force are the latest sign that the seesaw battle between semiconductor rivals Intel Corp. and AMD has taken its toll on both companies.
AMD said Monday that its job cuts, which will amount to more than 1,600 workers out of 16,800 worldwide, are slated to start later this month and finish by September. The cuts were widely expected as the slumping chip maker has been battered by product delays and burdened by heavy acquisition costs.
The Sunnyvale-based company also warned investors that first-quarter sales were lower than expected across all business lines, a miss that surprised Wall Street. Sales for the three months ended March 29 came in at about $1.5 billion, a 22 percent jump over last year but 15 percent lower than the fourth quarter and short of the $1.61 billion that analysts polled by Thomson Financial were anticipating. The company is scheduled to report its full quarterly results April 17.
The news comes as momentum in the notoriously volatile semiconductor industry has turned for the moment against AMD, whose own momentum just a couple of years ago was a major factor in a major restructuring by Intel.
AMD had not been a player in the lucrative server market until the company launched its first Opteron chip in 2003. Armed with the energy-efficient chip, AMD stole away valuable market share from Intel and eventually captured about a quarter of the worldwide server market.
The competition hurt Intel, whose profits slid sharply, the result of losing customers to AMD and furiously cutting prices to keep older chips competitive.
In 2006, Santa Clara-based Intel said it was cutting about 10,500 jobs, or about 10 percent of its work force, in a move to save about $3 billion annually.
But now it’s AMD that’s fallen on hard times as it confronts intensifying competition from Intel, which has regained some lost market share with a powerful line of new chips and has lowered its costs with a new manufacturing process.
Meanwhile, some of AMD’s most important products are viewed as out-of-date.
Lengthy product delays for AMD’s new Opteron server chip, a product critical to the company’s financial recovery, have hurt its competitiveness. Technical glitches pushed back the chip’s full release for months after the official launch in September.
AMD is also struggling to digest its $5.6 billion acquisition of graphics chip maker ATI Technologies Inc., which AMD recently said is worth about 30 percent less than when it was acquired.
AMD views the acquisition as a key way to attack Intel and incorporate better graphics capabilities into its chips.
Graphics are now a key battleground for chip makers as more and more Internet surfing involves video and as the graphics requirements for computer games are heightened.
AMD’s losses in 2007 were staggering, capping a brutal two-year stretch in which the company’s market value plunged from more than $20 billion to $3.84 billion today.
In 2007, AMD lost $3.38 billion, $2 billion of which were non-cash charges. Revenues were $6 billion.
The stock has fallen from more than $40 a share in early 2006.