Thu, Sep 27, 2001 page21

• AMD plans to slash 2,300 jobs

  DEEP CUTS The chipmaker will fire about 15 percent of its workforce and close two plants as it tries to cope with what analysts call the industry's worst sales slump ever

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  Advanced Micro Devices Inc, Intel Corp's main rival in computer processors, plans to fire 2,300 people, or about 15 percent of its workforce, and will close two older plants as demand slumps.

  The company will take a third-quarter charge of US$80 million to US$110 million to cover the moves, which will save US$125 million a year.

  Advanced Micro shares fell US$0.60, or 6.1 percent, to US$9.21 on Tuesday. Chipmakers from Intel to LSI Logic Corp have eliminated positions as they cope with a sales slump that analysts say will be the industry's worst ever.

  Advanced Micro manufactured chips for other companies in the two factories to be shut in Austin, Texas, a business the chipmaker has moved away from as it increased its focus on personal-computer processors and flash memory.

  "Business ain't there," said Jack Geraghty, a Gerard Klauer Mattison analyst who has a "buy" rating on the stock and owns the shares. "They're cutting costs in a tough market."

  The Sunnyvale, California-based company's shares have lost 64 percent of their value in the past year, compared with Intel's 52 percent drop and a 30 percent decline in the Standard & Poor's 500 Index.

  Advanced Micro's so-called foundry services business accounted for 3 percent of the company's second-quarter sales, and Geraghty said it's unlikely that much work was coming in from those outside clients.

  Other foundries in Taiwan are using only about 40 percent of their capacity now, he said.

  About 1,000 of the job cuts will take place at the Texas plants, the company's oldest, built in 1984 and 1985. The rest will come from restructuring chip-testing and assembly businesses in Penang, Malaysia.

  Advanced Micro may try to find other jobs for some of the employees. Because hiring already has been reduced, most people at those plants probably won't get such offers, the company said.

  "They were not profit centers for us," spokesman John Greenagel said.

  "They were basically a wash. They were pretty ancient facilities."

  The chipmaker on Aug. 29 said it expected a third-quarter loss and predicted a sales decline of about 15 percent from the previous period.

  Greenagel declined to comment on whether Advanced Micro will meet that sales target.

  Analysts say they expect a loss of US$0.10 a share, the average estimate in a Thomson Financial/First Call survey. Advanced Micro will report results for the quarter Oct. 17.

  In last year's third quarter, the company had profit from operations of US$219.3 million, or US$0.64 a share, on sales of US$1.21 billion.

  Advanced Micro, once an also-ran to Intel, has overhauled its manufacturing and design practices and spun off businesses such as communications chips to hone its focus.

  The company is now the second-biggest in both its chosen markets.

  "We will focus our organization around our two most promising opportunities: flash-memory devices and PC processors," Chief Executive Jerry Sanders said in a statement today.

  On the PC side, the chipmaker has shored up its reputation with the Athlon processor, which competes with Intel's Pentium 4.

  Athlon held the title for fastest chip on the market for most of last year and has beaten the Pentium 4 on some analyst benchmarks.

  Still, progress has stalled this year.

  As PC sales have stalled, Intel has chopped the cost of its Pentium 4 by as much as 84 percent since the chip's November introduction, forcing Advanced Micro to cut prices and hurting profit, even as unit sales rise.

  PC maker Gateway Inc on Tuesday said it will drop Advanced Micro as a chip supplier and buy all its microprocessors from Intel.

  In flash memory, the chips that store data when devices like cell phones and electronic organizers are turned off, demand has tumbled this year. The makers of communications gear that buy from Advanced Micro and Intel have shelved purchases while they work through inventory built up last year, when demand was booming.

  Intel on Monday unveiled plans to move into a business that's similar to the one Advanced Micro is exiting. Intel will design and build chips for other companies.

  Unlike Advanced Micro's foundry services business, Intel will manage chipmaking services for clients, yet spin out the manufacturing work to partners instead of handling it in the company's own plants.

  Advanced Micro handled most of the manufacturing in its own factories, and 90 percent of the company's sales in this segment came from businesses it had spun off, rather than outside clients.
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