AMD loses over 1,000 jobs during evolution

During last night's Q3 financial call, AMD executives delivered the news that KitGuru has expected for almost a year – a significant reduction in workforce going forward. It simply doesn't need the same workforce going forward as it did in the past. KitGuru pulls out the abacus to calculate the impact.

As Rory Read dealt with the usual barrage of analyst questions following his Q3 report, one thing became very clear. While AMD might be looking to project an air of confidence – there are far too many unknown factors for any of the usual forward looking statements that you might expect. Devinder Kumarhas stepped into the Chief Financial Officer role vacated recently by Thomas Seifert and, during the financial call, he was very careful to keep repeating “We are giving no guidance on 2013 numbers”.

When we predicted that around 1,000 jobs would go at the start of the month, we also said that AMD would be targeting new customers.

While in the past, that might have meant a switch from Dell to HP or a similar kind of change, the AMD post-financial call comments from people like CEO Rory Read made it clear that he was talking about non-PC businesses.

KitGuru will analyse these moves in a separate article, but – for now – we'll keep our focus on AMD and its traditional business. Specifically ‘products we would recognise as a PC'.

Rory Read and his colleagues kept getting pushed on an answer to the company's Wafer Supply Agreement (WSA) with production centres like Global Foundries (GF). The numbers appear to go like this:-

• $1.5 Billion was the spend agreed with GF for 2012
• So far it looks as though AMD has placed orders for $700m
• By the end of this year, with no unusual changes in pattern, AMD might finish with a spend of just over $1 Billion
• GF wants to know where the additional $500m worth of orders will come from

It seems that AMD is holding back the carrot of 2013's WSA as it tries to negotiate a mutually satisfactory agreement for the remainder of 2012's un-taken commitment.

Read was clear about the state of the traditional PC market, “It is soft and will continue to be soft”.

How far into the future will AMD be able to continue the traditional source of its business and revenue – products that are recognisable as processors?  Read predicts that there will be demand in a significant, but shrinking way, for around the next 10 years.

That brings us back to the predicted job cuts. So what about the AMD personnel that have lined up to leave with long-service redundancy packages? It seems that the market is crying out for their skills. Companies competing in the AMD space don't see a lack of revenue and progress as being something that the personnel themselves can be blamed for.

Instead, the big challenges seem to have come from AMD delivering product late (Llano), into a soft market and – when there was a ‘crunch moment' with supply – prioritising the multi nationals over the local channel.

AMD was forced to announce a $100m write off of product (Llano?) on its books? When asked if that meant it would arrive in the market at a reduced rate, Devinder Kumar said that, in this case, the answer was no, it is “just being written off our books”.

KitGuru says: There are a lot of ex-AMD personnel who believe that buying ATi in 2006 was a mistake. However, listening to the AMD executives last night, predicting the market's move away from CPU to GPU-led products, it's hard to see how it could have done anything different. The ONLY wins that AMD outlined were for products with a strong graphics focus. If AMD shareholders are going to be able to visualise a time when they can take a dividend – then that return will be based on pixel pushing and not traditional CPU registers generating cash.

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