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AMD cuts costs, predicts big charge

Lowering sights

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ComputerWire: IT Industry Intelligence

Advanced Micro Devices Inc will absorb a charge of "several hundred million dollars" in the fourth quarter it warned analysts yesterday as it scrambles to lower its breakeven point.

At a meeting with analysts AMD president and CEO Hector Ruiz reiterated the company's prediction that in the fourth quarter it will increase sales 20% sequentially on the previous period's $506.2m. AMD's third quarter was undermined as it attempted to balance its inventory. It also made a loss of $254.2m in the third quarter. Yesterday, Ruiz said that he was confident on the firm's outlook based on anticipated seasonal demand patterns, better balanced inventory, and expected significant flash sales improvement.

Ruiz said the firm was accelerating its plans to get back to break even, and had begun implementing aggressive actions that would significantly reduce its breakeven point. Nevertheless, this will mean a charge of several hundred million dollars in the fourth quarter.

The company did not go into great detail about what actions it planned to take. A spokesman said it wanted to get to a situation where 80% of its costs were fixed to one where fixed costs were about 30% of the total. Apart from cutting SG&A costs, making more use of foundries seems one obvious way of doing this.

However, the spokesman said the company would continue to keep R&D under its own control. "We look R&D as a source of competitive advantage. We're not going to jeopardize that."

AMD plans to bring its breakeven point to $775m. So even if it achieves the revenue target it has set itself for the fourth quarter, it still has some way to go before it ceases to lose money.

© ComputerWire

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