AMD Announces Layoffs; Declining Revenue to Blame

Microsoft wasn't the only firm to report significant revenue losses last week. Advanced Micro Devices, popularly known as AMD, revealed that its revenue recently hit a three-year low.

In response, the firm says it must cut costs by eliminating close to 1,800 jobs worldwide.

AMD is a major producer of computer microprocessors. A few years ago it was neck-and-neck with Intel in the race for market leadership. Today it's still in second place, but much farther behind.

Overall PC sales are down throughout the industry, leaving the entire personal computer market to face an uncertain future. Part of the problem is that many consumers are opting for cheaper tablet computers and smartphones.

Declining PC Sales Hurt Revenue Forecast

Last Thursday, AMD reported its third-quarter revenue plummeted to $1.27 billion, down from $1.69 billion a year ago. Even more troubling was net income, which declined from $97 million in the third quarter of last year to a loss of $157 million in the third quarter of 2012.

That represents a loss of approximately twenty cents per share. (Source: businessweek.com)

AMD warned investors that it doesn't believe things will improve in the fourth quarter.

AMD to Cut 15% of Global Workforce

To help improve its financial picture, the firm announced it will cut 1,800 jobs, representing about 15 per cent of its global workforce. As of February, AMD employed just under 12,000 people. (Source: cnn.com)

That news led analysts to predict AMD will have a harder time competing with Intel in the coming year.

Analysts Stacy Rasgon and Craig Berger both said they expect AMD's cash levels to decline, meaning revenue numbers are unlikely to rebound any time soon.

Credit ratings firm Moody's reduced AMD's corporate family rating from Ba3 to B1, citing "significantly weaker than expected operating performance over the next year." (Source: businessweek.com)

AMD stock dropped 45 cents per share, a decline of 17 per cent. It's AMD's lowest stock price since March 2009, having lost more than half their total value since the year began.