PC chipmaker Advanced Micro Devices said it will cut its workforce by 15 percent in a bid to reduce operating expenses, its second round of layoffs in less than a year as it struggles with a weak global economy and a consumer shift toward tablets.
The chipmaker, with a staff of nearly 12,000, said in a statement it expects its restructuring actions, which will also include site consolidations, to result in operational savings of $190 million next year. It expects to record a restructuring expense in the fourth quarter of about $80 million.
"It'll bring earnings up, I guess, but you still have to ask how disruptive this will be and what roles are they cutting," said Stacy Rasgon, an analyst at Bernstein Research. "The market is not going their way and they're not in a strong position."
Last week, AMD warned that its third-quarter revenue fell more than previously expected and that gross margins suffered from a $100 million writedown due to lower future growth of some products.
MUCH FASTER PACE
New Chief Executive Rory Read took over at AMD last year promising to fix long-standing execution problems that have plagued the chipmaker. But since he took over, AMD has continued to lose money as well as market share to Intel and graphic chip rival Nvidia.
"The trends we knew would re-shape the industry are happening at a much faster pace than we anticipated," Read said in the statement.
Like its larger rival Intel, AMD was caught flat-footed in recent years with the emergence and fast growth of mobile devices like Apple's iPad.
Tablets and smartphones, once considered a niche market by Intel and others, are fast gaining favor with consumers and eating into sales of laptops and desktop computers, while a slowing global economy is dampening spending in general.
One of Read's first major moves was to announce a plan in November to slash 10 percent of its workforce to save about $200 million in operating costs.
AMD posted third-quarter revenue of $1.27 billion, down from $1.69 billion a year ago and a net loss of $157 million, or 21 cents a share, compared with a year ago profit of $97 million, or 13 cents a share.
Analysts had expected AMD to post $1.28 billion in revenue for the third quarter, according to Thomson Reuters I/B/E/S.
AMD estimated fourth-quarter revenue would fall 9 percent from the third quarter, plus or minus 4 percent.
Sunnyvale, California-based AMD's fourth-quarter revenue forecast translates into a range of $1.116 billion to $1.196 billion. Analysts on average expected $1.33 billion.
AMD's stock rose 3.4 percent in extended trade after closing down 5.41 percent at $2.62.
(Reporting By Noel Randewich; editing by Carol Bishopric)