Layoffs Alone Might Not Help AMD

Advanced Micro Devices Inc. (NYSE: AMD) is trading slightly higher on reports that the troubled chip and processor outfit is likely to announce workforce reductions of up to 30% in the very near future. With as poorly as AMD has been doing, this may not be all that unexpected.

AMD has already undergone a transformation in recent years to a fab-lite model. The transition has lowered its costs. It has also made it harder for the company to rapidly scale any major changes on any premature changes that it would like to make. AMD’s largest problem is not just a highly dominated processor market by Intel Corp. (NASDAQ: INTC). Intel does dominate there, but the move to tablets and smartphones means that many historic computing device buyers are just not seeing AMD. If you look through the latest PC-sale trends you probably noticed sales declining for Dell Inc. (NASDAQ: DELL), Hewlett-Packard Co. (NYSE: HPQ) and even Apple Inc. (NASDAQ: AAPL) on PC units sold. Many of these buyers are skipping over Intel too.

AMD is without solid leadership at the moment. Whatever changes are going to be made need to come soon. We have seen two recent earnings warnings from AMD, and there is unfortunately no end in sight. Will AMD be able to blame Intel for the market domination this time around? It does not seem likely. The implication is that, even if PC sales do recover, AMD will be left further in the dust.

It is a sad thing when Wall St. cheers a company for announcing layoffs. While that has not yet happened, AMD shares are up more than 2% at $2.81 so far this Monday. That is after hitting a 52-week low yet again last week as the 52-week trading range is $2.74 to $8.35.

JON C. OGG