The news coming out of AMD hasn't been on the most positive
note in the past few weeks. The company announced in early April that it will cut
1,600 jobs by the end of 2008 representing 10% of its workforce. The reason
for the cuts came as a result of steep declines in every business arena that
Four days later, the company's Chief
Technology Officer, Phil Hester, stepped down from the company with no
replacement in sight.
Today, AMD released even more unsettling news in the form of
its Q1 2008 earnings report. As previously forecasted by AMD, revenue fell 15%
from the previous quarter to $1.505B and the company experienced a net loss of
$358M. Operating losses totaled $264M and the company faced a charge of $50M
due to its 2006
acquisition of ATI.
"A seasonally weak first quarter was amplified by a
challenging economic environment for consumers and lower than expected revenues
of previous generation products, resulting in lower than expected revenues in
all business segments," said
AMD CFO Robert J. Rivet. "However, we are encouraged by the market
acceptance of our Quad-Core AMD Opteron server processors as well as our new
chipset and graphics offerings."
After experiencing an entire year of losses, AMD is now
looking to restructure its business. The company will now put all of its
divisions under the microscope and make the decision to sell off some of its
underperforming units in order to become profitable in the second half of 2008.
"It is clear that our business environment has changed
from just the second half of last year when we saw some of our non-core businesses
on a path to growth and profitability. That is now questionable," said AMD
CEO Hector Ruiz.
"As a result, we are embarking on a significant
restructuring of our company to address the following: We need to intensely
scrutinize all of our businesses in order to ensure that our core x86 and
graphics products are on a healthy path to leadership and profitability,"
Ruiz continued. "We also need to scrutinize our non-core business and see
how they fit into our plans toward growth and profitability."
AMD's consumer electronics division could be a prime target
for cuts according to Technology Business Research analyst John Spooner.
"It makes sense because it's not a core part of their business, and they
can’t really afford to focus on consumer electronics at this point," said
Spooner. They need to focus on processors for PCs and servers as well as
AMD is indeed ramping up to unleash a new wave of processors
and graphics cards for consumers. As reported yesterday DailyTech, AMD is working on its quad-core 45nm Shanghai processor architecture along
with its 6-core
and 12-core variants.
On the graphics front, AMD is preparing for the launch of
its successor to the Radeon 3850/3870 graphics processors. Radeon graphics
processors based on the new RV770
core are expected to debut under the $300 price point.
quote: Moreover, we are still importing more than we are exporting (a weak dollar promotes exports) and our trade deficit has gone up not down. But, our debts over seas has decreased and our GDP has continued to increase http://www.bea.gov/newsreleases/glance.htm .
quote: Banks are said to be struggling? http://www.federalreserve.gov/releases/h8/Current/ In reality, for US banks as a whole, bank Residual (that is assets minus liabilities) has increased much higher than last year. In short, they are still getting richer.
quote: The only place where the economy is angry is where everyone suddenly realized that ARM mortgages were really, really stupid ideas. Which should have been outright obvious.
quote: he GDP may have increased in monetary terms, but the per capita product in real terms (adjusted for inflation, weakening dollar, population growth, etc) has fallen for the last two quarters.
quote: Banks simply aren't providing as much lending as they had before, and lending is an important part of the economy.
quote: The mortgage problem is big -- traditionally people build up equity in their home, giving a nice financial cushion to fall back on. However, house values have fallen, leaving many homeowners with homes less valuable than their mortgage, eliminating this cushion.
quote: So, it seems banks are doing just fine. Banks as a whole in the US. There are a few that aren't, but CPU makers as a whole are doing just fine in the US, it's only AMD that's struggling. One example does not make a market in either direction. At least if I'm interpreting the data right.
quote: Normal 30 year mortgages aren't having this trouble, and people who live in their houses instead of using real estate to get rich aren't the ones hurt too much by lowered housing values. It's kinda like the stock market, it'll go down for a quarter or two, but over a period of several years, it's always going up.
quote: This seems to be the root of the "economic problem" coupled with soaring fuel prices. Since the dollar isn't weakening that much (and it isn't something that's suddenly happened), and inflation isn't any higher than previous years (yet, and I hope it stays that way), it all points to the economy just going through its normal fluxes with only two real negative events occurring.