LONDON – Microprocessor vendor Advanced Micro Devices Inc. (Sunnyvale, Calif.) has swung to a net loss in the third quarter of 2012 and has announced it will restructure in the fourth quarter and reduce its global workforce by approximately 15 percent. AMD said that job cuts would be mainly be completed in the fourth quarter of 2012.
In a conference call with analysts to discuss the results CEO Rory Read also indicated that AMD would be resetting to a new business model that would include the use of third-party intellectual property (see AMD eyes ARM for 2014).
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For the third quarter AMD announced a net loss of $157 million on sales revenue of $1.27 billion. This compares with a net profit of $37 million on sales of $1.41 billion in 2Q12 and a net profit of $97 million on sales of $1.69 billion in 3Q11.
AMD's 3Q12 sales revenue declined 9.9 percent sequentially and 24.9 percent on a year-on-year basis. The company said it expects to continue falling. AMD said it expects sales revenue in the fourth quarter to decrease by between 5 and 13 percent sequentially.
Read said: "Our third quarter financial performance fell significantly short of our expectations. We understand the dynamics behind the shortfall, and we are taking decisive actions to address the core issues."
In the call Read said that macroeconomic conditions and purchases deferred because of the imminent arrival of Microsoft's Windows 8 operating system had created a "challenging selling environment." However, Read also said he did not expect the personal computer market to improve for several quarters.
At least part of the blame for the poor results was placed on the Llano accelerated processor unit (APU). Llano was a 32-bit processor that combined CPU and GPU and was designed for implementation by Globalfoundries in a 32-nm silicon-on-insulator process. The part was known to have supply problems in 2011.
AMD said that gross margin decreased sequentially due to several factors including: an inventory write-down of $100 million consisting primarily of A-series APUs; weaker-than-expected demand leading to lower average selling prices; and lower utilization and AMD back-end manufacturing facilities.
The company said it is putting in place a business model to achieve a breakeven point at $1.3 billion of quarterly revenue and said it expects to achieve breakeven by the end of third quarter of 2013. AMD said its cash and cash equivalents to hand at the beginning of the third quarter were $1.015 billion and this was reduced to $776 million by the end of the third quarter.
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