AMD To Shed 10% of Its Workforce

stress_life writes "Recent rumors about AMD firing 5% of its workforce proved to be understated. AMD just announced that the company is going to deliver pink slips to 1600-1700 workers, or around 10% of its employees. AMD needs revenue of $2 billion per quarter, but Q1'08 is expected to come in around $1.5 billion. These firings have to be complete by Q3'08, the quarter by which Hector Ruiz promised to be profitable." We most recently discussed AMD's struggles in February.

And if...

AMD dies, then Intel will jack their rates up about double.

We saw something like this with Blu-Ray when HDDVD was announced to be dead.

And Via.. Well, they're VIA. Leaves a bad taste in my mouth.

Re: And if...

AMD dies, then Intel will jack their rates up about double.

Of course. But we've seen AMD "lose" the CPU war before, and recover. Hopefully that will happen again.

Too bad about the layoffs, though. I think this is going to get worse (across the whole economy) before it gets better. Business is so slow that my state's tax revenues have plummeted.

Re: And if...

The problem this time is that they seem to be failing both sales-wise and technically. As much as I hate Intel, you have to admit, when you look at the product lines, and what's coming down the pipe in the next year or two, Intel has a pretty major advantage over AMD.

I think there is a risk over the next five years of Intel again gaining monopoly or near-monopoly status in the x86 world (or whatever precisely it has morphed into now).

AMD isn't comatose

AMD's product line can't beat Intel right now but they started out that way and managed anyway. They had gotten along quite well selling a second-rate cpu that was good enough for a lot of applications whereas Intel was always pushing the performance envelope and charging accordingly.

When the Athlon came along, I think AMD was as surprised as the market was that Intel couldn't compete technically. Those days are gone, at least for awhile, and AMD is back where they started. There'll always be a market for a cheap cpu that does the job.

Re: And if...

Intel has a pretty major advantage over AMD.

Measured by performance, yes. But then, I haven't based CPU purchases on performance since I was a teenager and computers had single-digit MHz's. Over time you end up with far more computing power if you buy best price/performance more often and every time, instead of spending the premium for higher end on more rarely occuring purchases.

I think there is a risk over the next five years of Intel again gaining monopoly or near-monopoly status

I doubt it. It's not a new situation, and as long as AMD can keep delivering better price/performance they will retain significant marketshare. If they fail at that tho, or if Intel lowers prices... but then again, Intel is too fond of charging what the market will bear, so that would be unlikely.

Re: And if...

Reducing your workforce when your problems are based on Sales and Technical issues is a stupid move. Because those are some of the major areas which need people to get the product back on par.

Massive Layoffs are usually bad business decisions.
1. You reduce people who make your products better.

2. When/if you do start growing you need new people back, and then there is the turn over cost to take account of.

3. You in the short term raise your profits but don't fix the problem of the declining profits. The people on Top are Fat and Happy because they see the big numbers. But by not fixing the underlining problems The next quarter or fisical year the problem will reoccure again.

4. Layoffs effect the moral of those who are hired. Causeing them to spend more time and effort in either A. Politicking themselfs to not get laied off. B. Spenind time to find a new job. Niether of these means they are working harder at their actually jobs.

5. Ex Employees go work for the competition with their own Intelectual Property with them.

6. For big companies like AMD Layoffs effect the local economies of the areas. Which will normally cause a raise in taxes on the local companies (Including AMD) where if they were a big employeer then they may have tax breaks to incorage the company to attract people and businesses in the town.

7. Any slowdowns in production or product releases (due to limited labor) will cause customers to switch to cometitors.

8. Empty offices account to paying for unused property.

9. Extra workload on existing employees may lead to increase mistakes.

10. New Employees will be hesident in joining. Making rerecruting difficult if business does pick up.

See the MBA program is not all about Evil.

Transportation Stocks Suggest Recovery

Too bad about the layoffs, though. I think this is going to get worse (across the whole economy) before it gets better. Business is so slow that my state's tax revenues have plummeted.

People that I have talked to in the transportation business seem to think the recession already took place from around mid last year into this quarter, but now they think the economy is recovering. They are basing this on a rather dramatic falloff in freight shipments and then a recovery.

This followed a similar pattern in the early 1990s.. that is, by the time Clinton said "It's the economy stupid", the recession was already technically over. It's just now the pundits and papers need something to scare people with to sell more punditry and their papers.

Re:Transportation Stocks Suggest Recovery

Last night on NPR's Marketplace they talked about how the credit crunch was showing signs of easing.

Only problem, none of the things that caused the credit crunch have been fixed:
* No regulations for transparency, so you can know the real risk of the "financial product" you're buying.
* The responsibility breakdown between loan origination and loan execution remains. (How the HECK can you get into a position to get a commission for writing a loan, with no responsibility to know that the borrower can really pay? What a job!)
* No regulations on allowable margin, or even for margin transparency.
- I'm sure there are more.

Nothing has been fixed, we merely appear to have dodged THIS bullet, but the madmen are still out there with their machine guns.

Re:Transportation Stocks Suggest Recovery

people will not be able to save because of the Fed's efforts to prevent saving from occurring.

Many people don't save because there is no real incentive to save anymore. These days, the average bank around me (So Cal) offers roughly 3% or less for savings accounts. CDs are slightly better, but not by much. Am I supposed to be grateful for that? (inflation aside) When I put my money in the bank, the bank makes much more off of it than I do by loaning it out to other people at prime rate or better. Why should I help banks make money in return for a pittance when my money can be put to work more effectively elsewhere?

The only way to get ahead is to invest in appreciating assets. IRAs and 401Ks are good for supplementing a well-rounded investment portfolio, but there's no way I would stake my entire future in them alone.

Re:And if...

AMD dies, then Intel will jack their rates up about double.

We saw something like this with Blu-Ray when HDDVD was announced to be dead.

You're obviously correct that Intel would drop the fast pace a bit and increase the rates, but comparing this situation to the media disk war of HDDVD and BD is just wrong. The industry was basically waiting for a winner because two competitors on this type of market is just too much. Certainly, the industry is not waiting for AMD or Intel to die.

On the other hand, I doubt that Intel would eliminate competition completely because there is certainly room for more than just one company. I'm not saying AMD is going to survive, but sometimes the best thing for a business is to terminate and reinstate itself.

Re:And if...

Please tell me about all of the successful new entries into the non-embedded CPU marketplace in the last 10 years.

If you're working on stuff like CPUs, the semiconductor industry has positively WICKED barriers to entry.

I don't disagree in general...

But Bluray drives dropped in price by almost half when HDDVD kicked it. They were about $250-$300 then, and are about $150 now.

Re:And if...

AMD dies, then Intel will jack their rates up about double.

AMD, as a company, may die. I seriously doubt their processors and GPUs will anytime soon. My guess would be either IBM or a Japanese semiconductor fab will resurrect their product line out of the smoldering crater.

A not-so-outlandish idea, however, is Samsung. To me, Korean ownership, development, and production makes a hell of a lot of sense.

Re:And if...

> the covered-up TLB bug which prevents reliable virtualization

Where is this FUD comming from? The bug was never covered up. They delayed production for an entire quarter and publicly announced why. All CPUs have errata, and AMD took a huge hit by doing the responsible thing with disclosure and a delay.

Second of all, AMD provided a BIOS patch to motherboard makers that ships with every K10 capable board. If you want to argue the patch degrades performance or bring up the faster B3 revision, fine. However, don't imply AMD's chips can't do virtualization reliably. The patch completely fixes any chance of a crash from the TLB issue.

AMD and ATi

I guess AMD buying ATi didn't help things either (?).

Re:AMD and ATi

In the short term, it was always a bad idea and I think they knew that. ATI didn't have anything to offer against nVidia for dx10 and they wouldn't for a while. In the medium term it looked like it might start being profitable, and in the long term they were hoping to be able to start revolutionizing the video industry with tighter integration between the CPU and video card.

Right now (heading into the medium term) it looks like they had some missteps but they're doing okay. It's still hard to tell what's going to happen long term, though. Intel's in the entrenched position since they're already the #1 video card maker because of their integrated chipsets. If ATI actually started changing the video card industry, then Intel's in a very good position to start competing with them quickly. I doubt Intel wants to start lagging behind AMD in performance again, especially with their CPUs actually beating AMDs for the first time since the original pentium came out.

All told, buying ATI was questionable, but it's not to the point yet where I would call it either way. AMD's already come into a market dominated by another company and beat it on its own ground, I wouldn't be surprised if they can do it again.

Re:AMD and ATi

In the short term, it was always a bad idea and I think they knew that. ATI didn't have anything to offer against nVidia for dx10 and they wouldn't for a while.

As far as current products go, I think AMD was more interested in ATI's chipsets and embedded graphics, which are quite good, and help AMD build better 'platform' stories. Now they can provide a platform using mostly AMD chips, and that offers high performance, whereas before AMD made chipsets but they were generally not the best performing.

in the long term they were hoping to be able to start revolutionizing the video industry with tighter integration between the CPU and video card.

It's a neat idea, and there's a lot of potential there. We'll see if the potential ever becomes reality.

If they keep shedding people, probably not would be my guess. :P

10 percent not so bad

They can just make it up through overclocking !

Buggy products

I wonder if they will be getting rid of the people who decided to release the Phenom X3s and the energy efficient Phenom X4 with the TLB bug intact? By releasing a lot of new chips at the same time, some with the fix and some without, it seems as though AMD are trying to confuse people into buying buggy chips with awful performance.

Apparently we have to wait even longer before this mess will be cleared up. Is it any surprise that revenue is down?

Lay off 10%?

I'm not an economist, but I have a good head on my shoulders and I have a masters in business. Help me understand how AMD hopes to turn around their company by laying off 10% of their staff? They're hoping the remaining 90% demoralized, repressed, deflated staff will do it? What are the chances the 10% that walk out the door may be their best and brightest and may have the answers to turn their company around?

It drives me crazy when companies think that the only way out of their mess is to lay off the staff, when the people responsible for the mess (board of directors and executive), don't give themselves a pay cut of 10%. Chances are, knowing how US exeuctives pay themselves, it would proably equal the amount saved laying off 10% of their staff. But what do I know?

Re:Lay off 10%?

Well, if your revenue is down, you've got to cut costs in order to remain profitable. Since employees are by far the largest expenditure (ignoring for a second the opening of a new fab), it makes sense to cut costs there. Furthermore, in light of the fact that the last set of products were pretty underwhelming, I'm sure that there was some fat there that needed some trimming.

That said - I agree with your feeling that executives never seem to take responsibility for screw-ups. Instead, they take million dollar golden parachutes into semi-retirement. I'd love to see an exec who says: "Wow, we stunk this year. I'm cutting my salary in half to help the company stay profitable." Or a CEO who says "Wow, we stunk these past two years. I'm obviously the wrong person to run this company, and am forfeiting all salary, bonuses and payments that were supposed to come my way." I guess that technically, the Board of Directors is supposed to do this, but that's a whole different issue.

Re:Lay off 10%?

IMHO here in the US we don't have real managers any more, who know their business. We have a bunch of snot-nosed hothouse MBAs who are comfortable only with spreadsheets and abstract numbers. I'm sure there are more, but it sure seems that Steve Jobs, reality distortion field aside, is the only US CEO who understands his business and can make it grow - the only CEO with a growth plan other than, "Do what we did last week, only cut costs."

But take what you said for a moment... We need a general expectation around here: Executive suite cuts the workforce 10%, they take a 10% pay cut. They get NO credit for growing profit by shrinking the company. Rather than shrinking the company, an executive worth his pay would figure out how to turn that "idle" resource into more revenue.

10% layoff is healthy

Jack Welch at GE advocated the 20-70-10 principle which says to periodically purge the lowest-performing 10% of employees to keep a company healthy. First, it gets rid of nonproductive employees. Second, *not* firing the lowest 10% is bad for the morale of the top-performing 20%.

Other Layoffs: Dell, Google, Chrysler, Motorola,

"Dell Job Cuts to Top 8,800 as U.S. Spending Slows" (Dude! You're getting a pink slip!)
http://www.bloomberg.com/apps/news?pid=20601103&sid=aEO1GX_CC.8U&refer=u [bloomberg.com]...

"Google DoubleClick cuts 300 jobs"
http://www.newsoxy.com/google_doubleclick_cuts_300_jobs/article10671.htm [newsoxy.com]

"Motorola to lay off 2,600 workers"
http://www.chicagotribune.com/business/chi-fri-motorola-8k-jobcuts-motap [chicagotribune.com]...

"Chrysler Slashing Tech Jobs - The latest cutbacks affect 400 technology workers"
http://www.thecarconnection.com/blog/?p=1095 [thecarconnection.com]

In other news, according to the NYT:

> The economy shed 80,000 jobs in March, the third consecutive month of rising unemployment, presenting a stark sign that the country may already be in a recession.

> The unemployment rate ticked up to 5.1 percent from 4.8 percent, its highest level since the aftermath of Hurricane Katrina in September 2005.

> The downturn has even come to San Francisco, where highly trained workers with elite degrees flock to work for some of the world's biggest technology companies. CNet Networks, the online media giant, laid off 10 percent of its staff -- about 120 workers -- this year in an effort to increase profitability and its share price. Yahoo, the search engine company, said it would cut its work force by 1,000.

http://www.nytimes.com/2008/04/04/business/04cnd-econ.html?em&ex=1207540800&en=c1de4fb13c4ec4bd&ei=5087%0A [nytimes.com]

Re:Other Layoffs: Dell, Google, Chrysler, Motorola

Your examples are good, other than the Google doubleclick one. Google is not laying off these people because they are doing poorly, they're just not needed any more. It's fairly typical of acquisitions, you end up with a bunch of redundant employees and someone has to go.

Also, your link to newsoxy seems to be some kind of spammy site. A better article is here: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/03/BUA2VUNAO.DTL&tsp=1 [sfgate.com]