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Mandatory pay cuts for everyone else in North America

Embattled AMD will cut 1,100 people and impose mandatory pay cuts on all North American employees. The figure is approximately 9 percent of its global workforce. The good news is that some of the layoffs will come through attrition, so not everyone will be seeing pink slips.

The cuts start from the top, as Executive Chairman and former President Hector Ruiz will see a 20 percent cut in his salary. Many analysts and investors blame Ruiz as the cause of the downfall of AMD, which for a time held a sales and technology lead over Intel in several key sectors. After his seventh consecutive quarterly loss, he was replaced as CEO by Dirk Meyer, who will also see a 20 percent pay cut.

Senior North American executives that are vice presidents or higher will see a 15 percent pay cut. Salaried workers will see a 10 percent cut, while hourly workers will face a 5 percent wage reduction. AMD will also halt its 401(k) matching program.

Last month, AMD took a $70 million charge after laying off 600 workers.

Longtime veterans of AMD have been longing for the good old days of Jerry Sanders, who led AMD for over 30 years. Despite going through several difficult recessions, he often refused to lay off employees, having seen the effects of layoffs that had occurred at Fairchild Semiconductor. Instead of cutting employees, he instituted efficiency programs, such as working on Saturdays and longer shifts.

AMD will also take an additional $622 million write-off on its purchase of ATI, after a $800 million impairment charge last year. AMD paid $5.4 billion to takeover ATI, which it sees as critical in its plans for Fusion products to compete against arch nemesis Intel.

Many layoffs have been announced in the last month, including Logitech, Seagate, and mighty giant AT&T. Earlier today, Circuit City announced that all 30,000 employees will lose their jobs.

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AMD cannot survive without a breakup or buyout
By Slappi on 1/16/2009 11:53:06 PM , Rating: 2
They will run out of cash in Nov of this year if they hit their estimates, which they won't.

No one will loan them money anymore and they have $4 billion in debt.

I cannot see how they will survive. They are going to be BK by this Summer unless they get a miracle.

Hate to see this happen to them but I can see no way out for them unless they sell ATI or are bought out completely.

By kilkennycat on 1/17/2009 12:40:01 AM , Rating: 3
Very rich Arabs and Chinese are helping to bail AMD out, between taking ownership of their fabs and loans to the core company. May see some fresh ethnic faces on the board of AMD before long, although both the Arabs and Chinese usually try to employ US-originated puppets on the boards and in the management of US companies in which they have large vested interests.

RE: AMD cannot survive without a breakup or buyout
By Viditor on 1/17/2009 7:01:59 AM , Rating: 2
They will run out of cash in Nov of this year if they hit their estimates, which they won't

Not true at all...
You are obviously going by their former cash burn rate which included the costs of Fabs...
Based on their costs (estimated) in their now Fabless state, they have enough cash for at least 2 years.

RE: AMD cannot survive without a breakup or buyout
By Slappi on 1/17/2009 8:58:12 AM , Rating: 2
I think a lot of you guys will be surprised.

That is INDEED their new burn rate after the sales.

They cannot survive in this type of economy.

Companies with large debt fail in tough economic times.

By Viditor on 1/18/2009 1:25:08 PM , Rating: 2 it's not.
Some things to keep in mind...

1. It costs about $1 Billion to design and develop a new chip line, but it costs about $4 billion to make the equipment to build that chip. AMD has made a well timed move here as they have vastly reduced their mandatory expenses during an economic downturn.

2. AMD will have a little over $2 billion in cash and equivalents after the deal, but their capex spending will drop from ~$1.7 billion/year down to near nothing.

3. The Foundry deal also cuts their debt by $1.2 billion in addition to the cash infusion.

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