How bad can AMD get?

Submitted by Ben Stevens on Mon, 04/07/2008 - 22:32

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Financial News

Advanced Micro Devices, Inc. (Public, NYSE:AMD) plans to can 10% of its employees and expects Q1 08 revenues to fall 7%. The stock is down after hours and is fighting to stay above $6 a share. Will this company ever turnaround?

AMD said it expects Q1 revenue of $1.5 billion, a 22% increase from the year-earlier period, but a 15% decline from the fourth quarter.

Analysts had expected AMD to report a loss of 40 cents a share on revenue of $1.6 billion, according to a survey by FactSet Research. Yet another miss for AMD.

More from MarketWatch.com:

AMD will begin reducing its workforce mid-April and the process is expected to be completed by the end of September, a company spokesman said.

Analyst Brian Piccioni of BMO Capital Markets said the size of the job cuts was a "major surprise," which suggests that AMD does not expect strong revenue growth in 2008 "because if they did, they would not see a need to reduce staff."

The job cuts could make up for the revenue shortfall, but could backfire, he added.

"A 10% staff reduction is a major cut, and experience dictates that major cuts are a double edged sword," he said. "While an effort is made to cull underperforming employees, top performers tend to leave of their own volition."

The revisions highlight the ongoing problems faced by the chip industry, which has been reeling from weakening demand due to an oversupply of memory chips and uncertainties in the broader economy.

AMD also has been hampered by production missteps that caused it to fall behind in its competition with archrival Intel Corp. (INTC) . The company also is struggling with the financial burden of its 2006 acquisition of ATI Technologies.

AMD's 1 Year fall from grace is just terrible: