SAN FRANCISCO--Advanced Micro Devices Inc. (AMD) Thursday (Nov. 3) announced layoffs set to cut the company’s workforce by 10 percent, as well as the termination of some of the firm’s contractual arrangements in measures aimed at reducing operating costs by $118 million in 2012.
The firm says it plans to implement a “more competitive cost structure” by reducing operating expenses by around $200 million next year, $118 million of which will come from layoffs and $90 million of which will come from other initiatives set to streamline the business. AMD did not detail what those initiatives might be, but said they were a “broad set of process transformation activities within the company across finance, marketing and other groups.”
“Think of things like how we handle internal PO approval/routing, etc.,” an AMD spokesman said. The spokesman also pointed to AMD Chief Financial Officer Thomas Seifert’s comments during the company’s earnings call last week, where he mentioned steps that would be taken to streamline business and decision-making processes across AMD’s operations, R&D and go-to-market functions.
“We are in full executional deployment across each of the key work streams,” Seifert said at the time. “These efforts are aimed at accelerating our transformation to a world-class design company….growing revenue, lowering costs and reducing time-to-market. We expect to see material benefits from this project in 2012.”
“This is CEO Rory Read putting his stamp on the company and clearing house,” said In-Stat analyst Jim McGregor, saying the move was “probably long overdue.”
AMD was hiring through the whole of last year, said McGregor, adding that this was certainly the time to be taking a long hard look at the company’s various business units and seeing what had been successful and what had not.
“Every now and then it’s good for a company to clean house and to eliminate instances of duplication left over from the hiring of previous executives,” McGregor said, positing that those executives “with a C in their title” may be those most at risk of being purged.
A source at AMD said 50 percent of the job cuts would affect the company’s North American operations, where around half of the firm’s workforce is based. The firm said the cuts would “occur across all functions globally,” and were necessary in order to “re-balance the workforce skill set.”
A source at AMD explained that this meant the firm would be looking to make cuts in some areas in order to re-hire engineers and staff in areas of larger growth opportunity. These areas include low-power, emerging markets and the cloud.
“This is primarily about looking at our global workforce and determining what incremental skills we need to pursue new growth opportunities in these key areas,” said an AMD spokesman. “Do we have sales/marketing folks in appropriate geographies, etc. If not, we need to get the right people,” he added.
As well as using the money from current layoffs to hire people with more fitting skill sets, AMD said it also planned to “reinvest a significant portion of the savings from the restructuring plan to fund strategic activities,” in the same segments--low-power, cloud and emerging markets.
“Reducing our cost structure and focusing our global workforce on key growth opportunities will strengthen AMD’s competitiveness and allow us to aggressively pursue a balanced set of strategic activities designed to accelerate future growth,” said Read in a press release.
“Shifting the focus to emerging markets doesn’t necessarily mean AMD’s going after low-cost staff,” a source at the company said. Instead, he said, it meant hiring people with the knowledge and skills needed to build products more suited to developing markets.
“Wall Street certainly cheered the move as news of it leaked out during the day today,” said analyst Roger Kay from Endpoint Technologies.
“This is Rory Read's first big reorganization. He has indicated that later on there will be hiring, probably in the high mobility space, where AMD has yet to make a move. Nvdia has moved into ARM processors with Tegra, and Intel is doubling down on Atom, but AMD has nothing in this space,” Kay added.
“While staff cuts are always painful and my heart goes out to those who will be affected, there's a message buried in the press release about changes in AMD's strategic direction that could be quite positive for the company's future,” added Kevin Krewell, a senior analyst at The Linley Group.
“I think that AMD is in the process of altering it's direction and that new trajectory looks a lot like the direction that ARM is taking. So AMD is either heading toward a direct conflict with ARM or it's heading toward a partnership,” Krewell posited.
AMD would not comment on any potential future plans involving ARM, but did say it was highly focused on lower power.
Businesses are not charities. Why should companies and competent staff carry the incompetent staff. If you're in the bottom 10% of any industry then you really don't belong.
It has been well documented that good staff can be as much as 30x as productive as the bottom 10%. Keeping those lower 10% just slows companies down.
I'd personally like to see more bottom-10% style cuts.
50% of the entire workforce is in North America where 50% of the layoffs are occurring. I don't see how you can say that this is unfairly targeting US employees.
"Rebalancing" likely means that the required skills are not where they are needed. For example US might have an excess of fab skills and engineers relative to the size of US-side fabs.
Likely too, changes in the number/type of chips being designed might change the need for design staff relative to fab staff.
@ daleste - Getting rid of the bottom 10% of your performers is not a "layoff", this should be done everyday and it is called good HR policy which was made famous by the GE CEO, Jack Welch.
@Junko - I agree, although I would not use the word "outraged", "sad" maybe. AMD is trying to "Carly" their way to profitability for the sake of their stock price. Wonder how this is going to work out in the long term? I am not optimistic.
The key to success is to motivate, encourage and enable your engineering, marketing and sales teams, not lay them off. More like Steve Jobs, less like Carly........
Yes, all the large corporations use the rank and rate. When times get tough, they jetison the bottom 10. It is an imperfect system, but at least it is a system. You don't want to be in a place without a chair when the music stops. I like the way they only hire the top 10% so they have only the best, then they lay off the bottom 10 anyway.
Except that the rank & rate process is imperfect and the resulting "bottom 10%" will inevitably include good employees that you really want to keep, while the top 90% will include some who you really could get by without.
I don't know who came up with the scheme of rank & rate, but the notion of pitting employees against each other -- particularly those who work together as a team -- has always struck me as bizarre and counter-productive.
Very very tough. I wish they do not have to do this. There is no job out there. I am so unhappy why people keep thinking that cutting jobs is the only way to stay profitable. It is an excuse that makes no sense. When CEOs lack strategic vision, they use families to make Wall Street happy.
AMD is washing out the bottom 10% of performers across the board. They have a ranking system just like every other company today.
This is the easiest thing to do right now and of course you get the biggest $$ for each employee laid off in the US.
In my opinion it is an outrage. Lets prey on the bottom 10% cause its the easy think to do. Everyone will be in the bottom 10% at some time cause stuff happens; divorce, illness, money, etc. So lets make it worse and lay you off.
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