AMD confirms 10% workforce cut, declining outlook

The worst is not over by a long shot for AMD. This afternoon, the company confirmed it would have to make very painful cuts, the repercussions of which are already being felt in terms of declining revenues.

Up until today, AMD had been saying it expected its revenue from the first calendar quarter of this year to decline "in line with seasonality" -- meaning, it would be lower than over the Christmas holiday because January always drops from December. And analysts had been responding to that claim, for the most part, with disbelief. As it turned out, the analysts were right.

Late this afternoon, ten days prior to its scheduled quarterly earnings report, AMD warned investors that its first quarter revenue would indeed come in lower than expected. Worse, however, is the news that the company plans to reduce 10% of its workforce by the end of this September, and will incur an extra restructuring charge in so doing.

The move is the clearest indicator to date that AMD's financial woes are not, as CEO Hector Ruiz indicated in March 2007, a "blip." "Seasonality," as companies put it, tends to be a high-single-digit point drop in revenue, but in its warning this afternoon, AMD said it expected a 15% revenue decline over the previous quarter, to around $1.5 billion.

That's still a 21.6% increase over the first quarter of 2007, which shows that AMD continues to sell processors one way or the other. But Intel continues to squeeze AMD back into the value segment of the market from which it launched its most successful attack against Intel at the start of this decade. And as a result, AMD is finally admitting, sales are falling. "The decrease is due to lower than expected sales across all business segments," reads one sentence of its brief statement this afternoon.

Just three weeks ago, two AMD spokespeople told BetaNews that the company is not laying off 5% of its workforce, and that did not depend on what our definition of "is" was. But that was a present-tense answer, and it did not reflect what the company intended to do in the future...or how soon that future would come.

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