backtop


Print 46 comment(s) - last by spluurfg.. on Apr 22 at 6:52 PM

AMD announces plans to toss out its dead weight.

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 AMD competes.

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 graphics."

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.



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

RE: yeah, sure...
By geddarkstorm on 4/18/2008 12:58:08 PM , Rating: 4
<WARNING TANGET> Because it's been bugging me so much and I see/hear it wherever I turn...

I don't know why the media and everyone is harping about the economy being bad--it isn't, not at all. Sure, unemployment rates went up from 4.8 to 5.1, but if you look historically, from 1974 to now, unemployment rates didn't get as low as 5.1 till 1997 ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt . Moreover, hourly and weekly wage earnings are the highest they've ever been. And the dollar has not weakened all that much http://www.federalreserve.gov/releases/g5/current/ . 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 . And though 0.6 seems low, it's the same as back in 2006. Finally, personal consumer income has gone up, not down http://www.bea.gov/newsreleases/national/pi/pinews... along with gross national, gross domestic, and net domestic income http://www.bea.gov/national/nipaweb/TableView.asp?... .

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.

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.

It seems any "trouble" in the economy that's going on is mostly all hype aside from the small increase in unemployment, but that happens and has to happen every now and then as we can never get to 0, and it's still very low compared to historically. I live in the slums of Kansas City and everyone at the bottom of the ladder seems to be doing just fine.


RE: yeah, sure...
By masher2 (blog) on 4/18/2008 7:56:55 PM , Rating: 2
> "I don't know why the media and everyone is harping about the economy being bad"

The media always plays up a "bad economy" in election years with a Republican incumbent. With a Democrat in office, the same figues are magically much rosier.


RE: yeah, sure...
By spluurfg on 4/19/2008 4:03:07 PM , Rating: 3
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 .


The 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.

http://www.economist.com/finance/displaystory.cfm?...

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.


The practical value that banks offer society is providing liquidity and financial services, which has slowed significantly. The unfortunate truth is that banks are still counterparty to a staggering amount of complex securities whose value still cannot accurately be priced. The fact that the fifth-largest investment bank in the US collapsed should also tell you that investors are jumpy -- the mere rumor that Bear was in trouble caused investors to withdraw a significant amount of capital, causing a liquidity crisis. Banks simply aren't providing as much lending as they had before, and lending is an important part of the economy. The huge boom in the 80's was fueled significantly by the securitization of mortgages (lead largely by Salomon Brothers), which is about $6.5 trillion. Thus uncertainty in mortgage-derived securities has a huge effect on lending.

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.


What was stupid and obvious was the fact that the people selling mortgages would feel no financial impact from mortgages that defaulted. Thus there was no incentive for risk control. The mortgages would be securitized, packed up, and sold on. 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. Furthermore, the falling dollar and rising commodities prices have a negative impact on their real income. Add to this the reluctance of the banks to lend, and you have a pretty negative economy.

Now I'm with you on the fact that the media is overblowing it. It sounds like they want the banks to all explode in a big ball of flame. However, I think it's fair to say the economy is in a recession, but we'll steadily recover. The one promising thing is that the larger US companies have learned from the 2000-2001 event and have built large cash stockpiles.


RE: yeah, sure...
By geddarkstorm on 4/21/2008 3:38:22 PM , Rating: 2
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.


Correct me if I'm wrong. The link you posted shows that the GDP per head has increase in the US by at least 1.5% from 2001 to 2007. This trend is also matched by the world apparently, and of course follows GDP trends since it's a GDP divided by working population equation.

They say under the second header that a GDP increase by 0.6% corresponded to a GDP per head decrease by 0.4%? But this would mean that the working population of the US would had to have grown by 1% over that same period of time (two quarters). Counting babies hardly makes economic sense as they aren't making income and thus aren't party to a GDP. So, you can't simply count birthrate, but have to count the number of people coming into employment. Notice in my first link ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt that from 2006 to 2007, the number of eligible workers increased from 151,428K to 153,124K. That increase, over four quarters is only 1%. However, they said in their article that over two quarters this drop happened, that means between 2007 to 2008 there had to be a workforce increase of 2%. Not impossible, but unlikely.

Also, http://www.bea.gov/national/nipaweb/TableView.asp?... clearly shows that net domestic product, net domestic income, and net national factor income has increased. Along with the fact that wages are at their highest ever... I'm not exactly sure how they calculated the net, but net is more realistic a factor than gross, as consumption (consumer price index) is factored out of the net (thus also inflation, or this is what I'm assuming they mean by net).

The issue is very complex. The Economist link you posted didn't even go into how they derived their -0.4% GDP per head figure, not even implied. So I really can't say it's right or wrong. However, things are far from dismal and it doesn't seem we are in a recession (or not much of one at all, certainly nothing to write home about), but a moment of slightly slower growth, which is to be expected (so are minor recessions). This shouldn't be a surprise, but as Masher said, it is an election year.

Finally, inflation rates are no higher now than 2006 (actually lower) http://www.bls.gov/cpi/cpid0803.pdf , where the GDP also grew by 0.6% in 2006. Yet there wasn't talk of a bad economy then like now. Politics seems to be the major factor in all this.

quote:
Banks simply aren't providing as much lending as they had before, and lending is an important part of the economy.


Look at this again http://www.federalreserve.gov/releases/h8/Current/ especially "Loans and leases in bank credit" and "Securities in bank credit". There was a fall in these categories compared to February and January of 2008, but if you compare the March figures of 2008 to that of 2007, there was a net increase. Unless I'm reading this wrong or totally don't understand, it seems that banks are lending out much more this year than last year--that is, that growth is steady. Yes, there was a slight fall from the start of this year, but that trend is reversing according to this data. We need more to see where it'll go however.

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:
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.


Here is really where the only true trouble that I can see is occurring. This started with ARMs and a slew of foreclosures caused by them. Apparently, this sort of thing goes in cycles and has occurred in the past several times. The problem with ARMs is once they are unlocked from their usually 5 year lower than prime introductory interest rate, they go shooting up through the roof, far above prime. This shock to the budget of people leads some to lose their homes. Hence why you hear "sub-prime" lenders whenever the news talks about who are struggling in the housing market: that's the ARM guys.

The problem with all these foreclosures, mixed with a fall in the buying of new homes, has resulted in home values falling as you said. This of course kills equity which is important for home sellers. So those who got an ARM and planned to sell off the house in five years before the interest rate was unlocked, and thus make a marginal profit off the equity, got kinda skewered. 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. You can trade fast and quick, which makes you sensitive to minor fluctuations, but you get money fast and sometimes can make a lot--or go totally bust. Or you can hold on to stocks for years and be almost guaranteed to make a net profit--maybe not as much as fast trading and certainly slower, but you are relative immune to the normal day to day, quarter to quarter, market fluctuations.

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.

So, if we are in a recession it's very minor and we are already recovering nicely. But it is totally bogus for people like the media and AMD to go crying "woe woe, look at the economy!". It isn't their complaining that's bothersome, it's when everyone else starts to complain too because those sources did, and start a whole "doom gloom!" rhetoric without actually looking at any facts. "Oh, the US is doing so bad!" ... no. Politics as usual, sure, but still darnably annoying.


RE: yeah, sure...
By spluurfg on 4/22/2008 6:52:37 PM , Rating: 2
I believe the print version of that economist article had some footnotes -- I will try to dig it up to check. However, I just wanted to point out that when considering the simple definition of a recession in terms of growth per head, we have been in a recession for the last two quarters, if their calculations are correct.

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.


But while the financial institutions themselves might pull through fine, the financial services sector itself has slowed meaningfully, which has a negative impact on commercial activity. With regard to the availability of debt, while the size of their books may have increased overall, syndicated loans have fallen significantly over 2007.

http://www.thomsonfinancial.co.jp/pdf/loan1Q08%20E...

While this is not an absolute measure of loan activity, it does give an indication of the availability of debt for US corporations, and to some degree, of the availability of debt to wider commercial entities in general, which is an important factor in economic growth.

Further, earnings of large US corporates has fallen significantly from 1H07 to 2H07.

(TTM EPS on S&P 500 http://www2.standardandpoors.com/portal/site/sp/en... )

While banks' balance sheets are looking healthier, this may be partly due to uncertainty on their part -- again, using the example of Bear Stearns, a liquidity event is an all too real possibility. Consider the additions of billions of capital by Citi, UBS, and now RBS to shore up their capital ratios. This is prudent in such uncertain times, but again reduces the amount of financing available to commercial enterprises, entrepreneurs, etc. Debt has also gotten much more expensive, with sub-investment grade senior loans pricing at CP+500 instead of CP+300 a year ago. The debt from the big LBO-megadeals like Harrahs Entertainment is still on the banks' books, which will make them reluctant to syndicate more debt if they can't sell it.

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.


I'm not sure if I'm willing to write off the at-risk borrowers in the real estate loan market as consisting largely of speculators. One fifth of the US mortgage market ($1.3tn) was composed of sub-prime borrowers. It was simply a systemic problem of brokers giving mortgages to people who simply couldn't afford it, then selling complicated securities derived from those mortgages to those who were not fully capable of assessing the risk.

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.


The dollar has weakened significantly against the Canadian Dollar, the Euro, and the Yaun, which significantly increases the cost of imports from some of America's largest
trading partners, which is a strong inflationary pressure. Additionally, increased fuel and food prices have a particularly strong economic impact.

Again, I agree that it's not all doom and gloom like the media makes it out to be. The US will not sink into the ocean and you don't need to start storing bottled water in your basement, but the issues in the economy and particularly the financial services sector are real, and probably will not go away in a matter of a quarter or two.

At any rate, I really appreciate being able to have such an intelligent discussion here. It's very true that the leading economic indicators and bank balance sheets paint a fairly solid foundation.


"It seems as though my state-funded math degree has failed me. Let the lashings commence." -- DailyTech Editor-in-Chief Kristopher Kubicki














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki