Reports: AMD to cut 375 jobs in wake of ATI acquisition

Four weeks after beating Wall Street estimates for financial earnings, chip maker Advanced Micro Devices (AMD) will lay off 375 workers, reports say.

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The move will weed out redundant positions caused by AMD's acquisition Oct. 25 of graphics chip maker ATI Technologies, analysts said. It could also give AMD extra resources in its competition with rival Intel Corp. The layoffs were widely reported in newspapers, with information attributed to an AMD spokesman. AMD did not return calls seeking confirmation.

AMD his been winning spots for its chips  on computers from vendors such as Dell Inc. and IBM Corp. in recent months, despite a raft of new processors launched by Intel. To keep that momentum rolling, AMD must increase its production capacity, said Martin Kariithi, an analyst with Technology Business Research Inc.

The company can gain the flexibility to do that by cutting redundant jobs in the sales and marketing and general and administrative (SG&A) departments, he said.

AMD has announced plans to combine its processors with ATI's graphics and chipset technologies to create a family of more integrated chips for PCs and other consumer electronics devices. Once it has launched those new chips, AMD might replace some of the lost positions.

"From a manufacturing standpoint, AMD will keep driving to increase production capacity to keep gunning for Intel," Kariithi said. "To facilitate this I expect AMD to continue increasing its manufacturing, tech support and engineering workforce. Toward mid-2007 AMD will once again seek to boost SG&A staff in order support the new ATI/AMD products coming to market at that time."

The number of layoffs is small, both in comparison to AMD's total roster of nearly 15,000 employees and to Intel's plan to cut 10,500 jobs by the middle of 2007, amounting to about 10 percent of its workforce.

Still, AMD has been so successful lately that the cuts came as a surprise. AMD reported third-quarter profits of $134 million in October, more than three times its number for that period last year.