AMD Lowers Sales Outlook, Plans Job Cuts

SAN FRANCISCO (AP) Battered by product delays and acquisition costs, beleaguered chip maker Advanced Micro Devices Inc. said Monday that it will jettison 10 percent of its work force and warned investors that first-quarter sales were lower than expected across all business lines.

The Sunnyvale-based company's job cuts, which amount to more than 1,600 workers out of 16,800 worldwide, were expected. The cuts are slated to start this month and finish by September.

But the sales miss surprised Wall Street. Analysts polled by Thomson Financial were expecting AMD to ring up $1.61 billion in sales; the company says sales for the three months ended March 29 were closer to $1.5 billion, a 22 percent jump over last year but 15 percent lower than the fourth quarter.

AMD shares fell 14 cents, or 2 percent, to $6.20 in after-hours trading. The stock had risen 11 cents to close at $6.34 before the layoffs and sales warning were released.

AMD has fallen on hard times as it confronts intensifying competition from Intel Corp., the world's largest semiconductor company, and tries to digest the $5.6 billion acquisition of graphics chip maker ATI Technologies Inc., which AMD recently said is worth about 30 percent less than when it was acquired.

AMD views the acquisition as a key way to attack Intel and incorporate better graphics capabilities into its chips.

Graphics are now a key battleground for chip makers as more and more Internet surfing involves video and as the graphics requirements for computer games are heightened.

Lengthy product delays for its new Opteron server chip, a product critical to the company's financial recovery, also hurt AMD's competitiveness. Technical glitches pushed back the chip's full release for months after the official launch in September.

Intel has endured its own financial hardships as a result of the battle with AMD, whose restructuring is the latest in a series of aggressive cost-cutting maneuvers by both the No. 1 and No. 2 makers of microprocessors, which act as the brains of personal computers.

Last year, Santa Clara-based Intel cut about 10,500 jobs, or about 10 percent of its work force, in a move to save about $3 billion annually.

The restructuring was triggered by Intel's sharply sliding profits, the result of losing customers to AMD and furiously cutting prices to keep older chips competitive.

AMD's losses in 2007 were staggering, capping a brutal two-year stretch in which the company's market value plunged from more than $20 billion to $3.84 billion today.

In 2007, AMD lost $3.38 billion, $2 billion of which were non-cash charges. Revenues were $6 billion.

The stock has fallen from over $40 a share in early 2006.