AMD announces layoffs, salary cuts
Silicon Valley chipmaker Advanced Micro Devices will eliminate 1,100 jobs - roughly 9 percent of its workforce - in the first quarter, according to a report on Marketwatch. The company also said it will suspend its 401(k) match for employees and that executive chairman Hector Ruiz and CEO Dirk Meyer each will temporarily take a 20 percent base salary cut.
There will be smaller percentage salary cuts for other employees, as well - 15% for vice presidents and other execs; 10% for nonovertime-eligible employees; and 5% for all overtime-eligible employees. The company also plans to take a $622 million goodwill impairment charge related to its 2006 acquisition of ATI Technologies acquisition and will also post a $62 million charge related to the purchase.
In a statement, the company said:
As a result of the continuing global economic downturn, we have determined that we need to take difficult but prudent actions designed to reduce our costs. Beginning in February, we are undertaking several steps to lower costs, including temporarily reducing employee base pay and suspending some benefits programs.
Last year, the company said it plans to spin off its manufacturing business into a joint venture largely funded by Abu Dhabi investment companies, a move that would bring in the billions of dollars it was struggling to find to construct state-of-the-art chip plants needed to build the smaller, faster and more energy-efficient chips that compete with Intel’s.
The rough economy is hitting the chip industry hard. Yesterday, Intel reported a horrible fourth quarter - one of the worst since 2000. CEO Paul Otellini told analysts on a conference call that it was “only the second time in 20 years where revenues declined in the fourth quarter from third quarter." Larry Dignan wrote in his post yesterday:
In a nutshell, Intel was whacked by a demand shutdown that led to high inventory and factory underutilization. Pricing wasn’t an issue since rivals like AMD were also whacked.
Still, the short-term doom-and-gloom future wasn't stopping AMD from talking about how it's positioned for the rough economic road ahead. AMD’s global VP of advanced marketing Pat Moorhead sat down with ToyBox blogger Andrew Nusca at last week's Consumer Electronics Show to discuss AMD's latest products and the plan for 2009. Moorhead said, “AMD is positioned well for this economy,” referencing the company’s new product focus with regard to the current recession. According to Moorhead, AMD is targeting what he called the “sweet spot” of consumer: the $999 price point. With it, he’s offering an “enthusiast dream machine” in the form of the $699 HP dv2.