AMD misses earnings target and cuts 710 jobs

AMD announced third quarter revenue of $1.43 billion, flat sequentially and a decrease of 2 percent year-over-year with a net income of $17 million, or 2 cents per share. Non-GAAP net income comes in at $20 million, or 3 cents per share. AMD failed to meet expectations from Wall Street analysts, who predicted earnings of 4 cents per share on revenue of $1.47 billion.

As a result of the company's continuing financial struggle, new CEO Lisa Su announced AMD will enter another round of restructuring that will lower the firm's headcount by 7 percent, roughly 710 jobs based on AMD's most recent employment figure.

AMD's earnings report says revenue of the computing and graphics division fell 6 percent quarter-over-quarter and 16 percent year-over-year. The company claims the sequential decline was caused by lower chipset and GPU sales, whereas the yearly decline was primarily due to lack of demand for AMD laptop processors and poor chipset sales. The enterprise, embedded and semi-custom unit on the other hand saw its revenue increase by 6 percent sequentially and 21 percent year-over-year thanks to strong demand for semi-custom SoCs which are used by the PS4 and Xbox One.

AMD (NYSE:AMD) today announced revenue for the third quarter of 2014 of $1.43 billion, operating income of $63 million and net income of $17 million, or $0.02 per share. Non-GAAP(1) operating income was $66 million and non-GAAP(1) net income was $20 million, or $0.03 per share.

“AMD’s third quarter financial performance reflects progress in diversifying our business,” said Dr. Lisa Su, AMD president and CEO. “Our Enterprise, Embedded and Semi-Custom segment results were strong; however, performance in our Computing and Graphics segment was mixed based on challenging market conditions that require us to take further steps to evolve and strengthen the financial performance of this business. Our top priority is to deliver leadership technologies and products as we continue to transform AMD.”

Q4 2014 Restructuring and Transformation Initiatives
As a part of AMD’s ongoing transformation work, the company has developed a targeted restructuring plan to better position AMD for profitability and long-term growth while aligning investments and resources with high-priority opportunities.

The restructuring plan, which will be largely implemented in Q4 2014, is expected to:

Reduce global headcount by 7 percent, largely expected to be completed by the end of Q4 2014;

Align AMD’s real estate footprint with its reduced headcount;

Result in a restructuring and impairment charge of approximately $57 million in Q4 2014, primarily related to severance, and a restructuring charge of approximately $13 million in 1H 2015, primarily related to real estate actions;

The company expects to make cash payments related to these actions of approximately $34 million in Q4 2014 and $20 million in 1H 2015;

Result in operational savings, primarily in operating expenses, of approximately $9 million in Q4 2014 and approximately $85 million in 2015.

“While decisions that impact the size of our global team are never entered into lightly, this is the right step to ensure we prioritize our resources and engineering investments in our highest-priority opportunities that can drive improved profitability and long-term growth,” said Dr. Su.