Published in News

AMD misses earnings targets, announces layoffs

by on17 October 2014

7% of workforce to go

AMD has missed earnings targets and is planning a substantial job cuts.

The company reported quarterly earnings yesterday and the street is not impressed, as the numbers reveal soft demand for most products.

AMD's black October

At 3 cents per share, AMD's net income was down 2 percent from a year ago on revenue of $1.43bn. In Q3 2013 AMD reported revenue of $1.47bn and earnings of 4 cents per share.

AMD's gross margin in Q3 was 35 percent. The company also said it would reduce its workforce by 7%, saving $9 million this year and $85 million in 2015.

“While decisions that impact the size of our global team are never entered into lightly, this is the right step to ensure we prioritize our resources and engineering investments in our highest-priority opportunities that can drive improved profitability and long-term growth,” said AMD CEO Lisa Su.

However, the move will also end up costing the company $57 million in restructuring charges in Q4.

Wall Street did not like the news and the stock was battered in after-hours trading. The stock dipped more than 8 percent at one point, but since then it has managed to recover some ground and closed up 1.1 percent. The second half of September and the first two weeks of October have been very bad for shareholders – AMD is now trading at $2.64, down from $4.20 a month ago.

Cautious optimism moving forward

AMD's new CEO tried to downplay the results.

“AMD’s third-quarter financial performance reflects progress in diversifying our business. Our Enterprise, Embedded, and Semi-Custom segment results were strong; however, performance in our Computing and Graphics segment was mixed based on challenging market conditions that require us to take further steps to evolve and strengthen the financial performance of this business,” said Su.

Su said the management's priority is to deliver new technologies and products as it continues to transform AMD.

However, in the short term the company expects a 13-percent decline in revenue in the fourth quarter, so things will get worse before they get better.

There is some good news though. AMD managed to score another Apple design win this week. Aside from the Tonga Pro GPU, the company has not introduced new products in months, but a number of rollouts are expected in early 2015. These include AMD's first generation of 20nm GPUs, as well as its first 20nm APUs.

Execution still remains a problem for AMD, but if it manages to stick to its roadmap, the company has a good chance of launching a number of competitive products in the first half of 2015.

Rate this item
(0 votes)

Read more about: