Despite this success and boosted sales, AMD is still struggling heavily
financially. The acquisition of ATI, while finally becoming a success, was a
costly one. This is reflected in its predictions for its second quarter
financial results, which will be announced July 17. AMD is expected to take
USD in charges to cover its deep debt.
The discovery came from an AMD filing with the U.S. Securities and Exchange
Commission (SEC). Leading a variety of charges will be the big one -- an $880M
USD related to the Consumer Electronics division of ATI. AMD complains that the
division's handheld and TV units are performing very poorly.
It appears that ATI may be planning to spin off or sell its
struggling Consumer Electronics division in response. The consumer electronics
division makes the graphics chips for the Wii and formerly made chips for
Microsoft's defunct HD DVD expansion.
Another $32M USD writedown will be taken based on the layoffs announced earlier
in the year, to cover various severance packages and other expenses. AMD had
announced plans to cut 10 percent of its workforce earlier this year, or about
1,650 employees. The cuts will target
underperforming divisions to try to return them to profitability.
Finally, AMD is taking an additional $36M USD writedown based on various other
investments, including its investment in Spansion, a flash memory company which
AMD jointly co-owns with Fujitsu and private investors.
AMD hopes to control some of the costs by selling off some 200-millimeter wafer
equipment from its fabs. The equipment is expected to total $190M USD. It is
unclear, however, exactly what AMD plans to do with the fabs in question. It
may elect to close them or try to develop more partnerships under its
"asset smart" strategy.
Ross Seymore, an analyst with Deutsche Bank, said the numbers were noteworthy
of some broader issues with AMD, but not game-changing by themselves. He stated,
"AMD is taking several one-time charges, but we believe they do little to
change the fundamentals of the company. AMD will take an additional $880
million impairment charge related to the ATI acquisition. This brings the total
impairment charges related to ATI to approximately $2.2 billion or more than 40
percent of the original $5.4 billion acquisition price."
AMD is hard at work secretively designing a dual CPU/GPU, which it currently
dubs "Accelerated Computing", its eventual goal in acquiring
ATI. However the cost of developing this future-looking offering has been
large, as the acquisition cost $5.4B USD at a time when AMD was already
It is the hope of AMD that its upcoming 45-nm
processor, Shanghai, and its
newly released Puma
mobile platform for laptops will help return it to profitability. Meanwhile
it will try to make its operations leaner by cutting jobs, taking writedowns,
and possibly ditching its struggling consumer electronics division.