AMD Cuts Deep to Fight Hard

Advanced Micro Devices (AMD) Thursday made sweeping cuts to its workforce, which it claims is a strategic move to keep up with rival Intel .

The Sunnyvale, Calif.-based semiconductor maker said it will reduce its global work force by about 2,000 positions (roughly 15 percent of its staff) by the end of the second quarter of 2003. Approximately 1,000 affected employees were notified today. The cuts impact AMD employees in the United States, Europe and Asia.

“While painful and unfortunate, today’s action will help to position AMD so that we can take full advantage of the eventual market recovery,” said AMD President and CEO Hector Ruiz. “Over the next 180 days, we are unleashing a number of intensely competitive products and solutions to the marketplace that will enable us to compete in segments of the market where we have not yet been before.”

AMD has been struggling this year against the triple-whammy of a weak economy, product delays and stiff competition from Intel. AMD has already lost third-quarter processor market share to its larger rival, according to Mercury Research.

Intel is aggressively pushing its latest Pentium 4 with Hyper-Threading. AMD is also working on a similar multithreading design to incorporate in its Hammer-based series of Athlon XP processors, but the company reported in September that it has postponed delivery of those chips until next year. That’s when Intel is expected to chip away at AMD’s wireless chips with the arrival of its Banias mobile-specific processor.

Meantime, an industry group is reporting that global sales of chip making equipment rose in September from year-earlier levels for the first time in 19 months, climbing 19.8 per cent to $2.34 billion.

Semiconductor Equipment and Materials International (SEMI) said its latest research shows their figure was the highest monthly total since April 2001.

The job cuts at AMD are not entirely unexpected. Last week, CFO Robert Rivet told analysts that the company’s cost-cutting program would include layoffs and that the number would be “significant.” The company said the cuts are part of an effort to trim expenses by $350 million in 2003. AMD said it will add the charges to its fourth quarter earnings statement.

“Our success is predicated upon a sound financial base,” Ruiz said. “In essence, we are confident that we are taking the steps needed to solidify our financial position while extending our competitive reach across broad segments of the market.”

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