Chipmaker AMD will cut staff by 7 percent

AMD's layoff news comes just a week after Lisa Su took over as CEO

AMD's new chief is making her mark quickly: By the end of 2014, the chipmaker will cut worldwide headcount by about 7 percent in a restructuring plan it hopes will put it on the path to improved profits.

The layoffs will start immediately, and come just a week after AMD appointed former chief operating officer Lisa Su as the company's CEO. She replaced Rory Read, who held the post since August 2011.

The company did not share specific plans about the restructuring or which parts of its business will be impacted by layoffs. AMD employed 10,149 people at end of its third fiscal quarter on Sept. 27.

AMD has struggled over the last couple of years, reporting just a few quarters of profit. As a result of the layoffs and slashing costs such as real estate expenses, the company expects to save US$9 million in the fourth quarter and around $85 million in fiscal 2015.

AMD's third-quarter revenue reported on Oct. 16 was $1.43 billion, declining by 2 percent compared to the same quarter last year. AMD reported GAAP net income of $17 million, a decline from the net income of $48 million reported in the same quarter last year.

Chip sales into the PC market account for most of AMD's business. But with PC sales slowing down, the company is focusing more on the growing area of graphics and custom chips, and devices such as gaming consoles. AMD is also revamping its server roadmap to include ARM processors.

The company's existing CPU or GPU product lines won't be impacted by the restructuring or layoffs, Su said during a conference call to discuss the third quarter earnings.

AMD's top priority is to protect its engineering resources and intellectual property, which are important for its custom chip business, Su said. The company uses its CPU and GPU technology in chips for the Xbox One and PlayStation 4 gaming consoles.

Brighter days may be in store for AMD. The company won two custom-chip contracts that will bring in revenue of $1 billion over three years starting in 2016. Su did not name the customers, but said AMD's is in a good position to win lucrative contracts to make device-specific chips.

AMD's also taking a fresh look at the PC and tablet market and will focus on areas that are profitable. It has no intention of following in the footsteps of Intel, which has been selling chips at a subsidized cost to tablet makers in an effort to gain market share from ARM.

"We are certainly competing in the low-end, but we're not after business that's not profitable," Su said.

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