AMD sacks 1,400 to chase 'emerging markets'

Chip maker AMD has had its share of woes in the past year, and now it will cut its workforce by 11.6 per cent to save enough money to invest in low-power chips and cloud computing.

As the market closed on Thursday, AMD announced that it was cutting approximately 1,400 people from its workforce, which stood at 12,019 people at the end of the third quarter – that's 11.6 per cent, which is more than the "approximately" 10 per cent it announced in its press release. AMD said the "workforce rebalancing" would help it "better address faster growing market segments." It wasn't clear if AMD meant by geography or product type – or both.

Some of the employees who are getting pink slips have already been notified, while others will get theirs before the fourth quarter is over.

An AMD spokesperson told El Reg that the restructuring would cut about $118m from AMD's costs in 2012, which is primarily driven by the job cuts across AMD's global operations and across all functions in the company. AMD is also doing a bunch of other things as part of the restructuring, including closing offices and facilities, and rejiggering software licenses with vendors.

Also helping free up some cash are a number of initiatives to increase operational efficiency initiated earlier this year by Thomas Seifert, AMD's CFO and interim CEO until Rory Read took over two months ago after being brought in from PC maker Lenovo. These initiatives are expected to bring down costs by another $90m in 2012.

AMD says that it will book charges of $101m in restructuring expenses in the fourth quarter, with $56m of that being related to the layoffs and continuation of employee benefits, $44m related to program termination costs, and $1m for asset impairments. AMD expects to take another $4m hit in 2012, $3m for severance costs and $1m for facility closures.

The other thing that AMD wanted to make clear – and what it did not say in its 8K filing with the Securities and Exchange Commission – is that this is truly a workforce rebalancing. The AMD spokesperson said that AMD wanted to make sure it had the right engineering talent for low-power chips and cloud computing and other emerging markets, and to have the right sales and marketing people in the right geographies to chase these opportunities. That very likely means more feet on the street in Asia, as well as more engineers moving offshore.

"The point is that we are expecting to rehire for some of those positions based on looking for a different set of skills," the spokesperson explained. AMD says it plans to reinvest "a significant portion of the savings from the restructuring plan" in emerging market opportunities.

Not to split hairs, but if you reinvest savings, then did you really save anything? There's no question that with SeaMicro selling Atom-based cloudy boxes, Tilera peddling its Tile64 chips in low-power servers, and a school of piranhas with sharp ARM processor teeth. Applied Micro, for example, launched its 64-bit X-Gene ARM processor last week, Calxeda showed off its EnergyCore processors earlier this week, and Marvell and others are coming up fast behind.

With these chips coming to market next year, AMD has as many problems at the low end as it does at the high end, where it does not scale as far as Intel's Xeon E7 processors in terms of sockets and main memory. ®