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AMD to cut 15 per cent of staff as PC demand drops

Advanced Micro Devices has announced it will lay off 15 per cent of its workforce around the world with a "significant portion" of the downsizing to occur in the final quarter of this year.

AMD had been expected to reveal a major restructuring effort while reporting a disappointing third quarter, though the number of layoffs the company announced was well below rumours that pink slips could be handed out to as much as a third of the chip manufacturer's employees.

"These actions will return AMD to profitable growth," AMD president and CEO Rory Read said on a call with investors and analysts. The chip maker said the restructuring would also include closing down unspecified sites around the globe.

"Our restructuring efforts are decisive actions that position AMD to compete more effectively and improve our financial results. Reducing our workforce is a difficult, but necessary, step to take advantage of the eventual market recovery and capitalize on growth opportunities for our products outside of the traditional PC market," Read said.

The company said it expects its restructuring to result in fourth-quarter operational savings of $20 million (£12.5 million), along with a savings of $190 million (£118 million) in 2013, though AMD will "record a restructuring expense in the fourth quarter of 2012 of approximately $80 million [£50 million] in connection with these actions."

The company already underwent a round of layoffs that saw its workforce reduced by 10 per cent between last November and the early part of this year. AMD currently employs about 11,700 people worldwide, so the upcoming layoffs will result in around 1,750 employees losing their jobs.

AMD didn't specify where the cuts would be made, but one source with knowledge of the matter earlier said that they will primarily affect AMD's US workforce and the downsizing will mainly target employees working in platform engineering, mobile and embedded chip development, and sales.

The restructuring is expected to allow AMD to reach a break-even operating income level of $1.3 billion (£810 million) of quarterly revenue by the third quarter of 2013, the company said.

For the quarter, AMD's sales of $1.27 billion (£790 million) represented a 10 per cent decline from its second quarter of this year and a 25 per cent decline from the third quarter of 2011. The chip maker reported a net loss of $157 million (£98 million) in its fiscal third quarter.

"The PC industry is going through a period of very significant change that is impacting both the ecosystem and AMD. It is clear that the trends we knew would re-shape the industry are happening at a much faster pace than we anticipated," Read said in a statement accompanying the company's earnings report.

"As a result, we must accelerate our strategic initiatives to position AMD to take advantage of these shifts and put in place a lower cost business model. Our restructuring efforts are designed to simplify our product development cycles, reduce our breakeven point and enable us to fund differentiated product roadmaps and strategic breakaway opportunities."