AMD plans layoffs, outsourcing

NEWS

Advanced Micro Devices is expected to lay out a restructuring plan that will include more job cuts. The company, which discussed parts of a plan to cut $350m (£223m) in costs in 2003 during an earnings conference call in mid-October, will offer more details on that plan and related charges during its annual meeting with financial analysts on Thursday. The plan is aimed at cutting items such as administrative costs, which aren't related to engineering, the company said during the call last month. AMD already closed two older factories and cut 2,300 jobs -- or 15 percent of its work force -- earlier in the year. An AMD representative said Wednesday that the plan will also include more job cuts. "Due to our aggressive cost reductions...we do expect we'll have to reduce our workforce in the coming quarters," the representative said. "It's inevitable as part of our cost cuts and restructuring. But we don't have any details (on timing) right now." The representative declined to elaborate on the time frame or the actual number of cuts planned. But analysts expect AMD to get moving soon. "We suspect that the company's plans include...potential substantial layoffs, and...an accelerated outsourcing road map, which allows AMD to outsource a significant portion of its manufacturing to UMC, and (thus) reduce (capital expenditures) significantly in 2003," Douglas Lee, an analyst at Banc of America Securities, wrote in a report issued on Wednesday. "Outside of us getting our hands around the size of potential one-time charges, we do not expect any changes in the company's near-term demand outlook." AMD announced a manufacturing agreement with United Microelectronics Corporation, or UMC, in January. Under the deal, the two companies said they would build a joint factory in Singapore. UMC will also begin making AMD chips at some point. AMD's cost cutting is part of a new overall strategy. The plan also includes reducing the inventory of AMD processors in the market and an effort to increase cash flow by securing asset-based loans. AMD is seeking a total of $155m and will use assets such its Fab 25 chip plant in Austin, Texas, as collateral. The result of the measures, AMD hopes, will be reaching the breakeven point by the second quarter.

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