Arik Hesseldahl

Recent Posts by Arik Hesseldahl

AMD Prepares for January Reorganization, Including More Job Cuts

Having recently laid off about 1,700 people — amounting to nearly 15 percent of its workforce — whispers around the offices at chipmaker Advanced Micro Devices are already focusing on another corporate reorganization that would probably include even more layoffs.

Multiple sources confirm to AllThingsD that senior managers are girding their teams for yet another shakeup, though they are saying that the number of jobs that will be eliminated this time around will be much smaller. Some employees are being quietly told by managers that they will lose their jobs in January, but are being kept around for the moment as insurance against the possibility of other key people quitting before then, one source told me.

Another source told me that it’s an open secret around the corridors of AMD’s offices in Sunnyvale, Calif., and Austin, Texas, that another round of job cuts are coming. “The thinking is that management needs to get a few things right that they didn’t in the last round of layoffs,” one source told me.

It’s unclear exactly how many jobs will be eliminated in the pending reorganization. One source described the target number as “in motion,” in part because AMD managers are waiting to see how many more people quit on their own accord between now and January — and thus don’t require expensive severance packages. “Once the rate of attrition is known, they’ll know how many more they need to fire to get to the final target,” one source told me.

An AMD spokesman didn’t return messages.

Word of yet another shakeup comes only days after a Reuters report saying that AMD has hired investment bank J.P. Morgan to help advise it on strategic options, including a sale of certain assets, or even of the company itself.

AMD took pains, both in external and internal statements, to dispute the notion that a sale is possible in the days and hours after the report. Hours after the Reuters story on Tuesday, AMD issued a carefully worded statement saying that it is “not actively pursuing a sale of the company or significant assets at this time.” Note that the statement addressed nothing about J.P. Morgan’s hiring.

CEO Rory Read took a similar take in an internal memo issued to all AMD employees that day, and shared with AllThingsD.

CONFIDENTIAL-INTERNAL ONLY

To: All AMD

Subject: Media Speculation

Team,

Within the past couple hours, a major media outlet wrote a piece speculating about the sale of AMD. As you know, articles such as this periodically surface in the media. I want you to know exactly how we are responding to this speculative piece, as we expect some additional media outlets to inquire. Our official response is below, along with the original news article.

But let me personally reinforce to you: we are not actively pursuing the sale of AMD or any of our significant assets. It’s full steam ahead with our strategy … we absolutely are on the right path.

Rory

————–

AMD Media Statement
AMD’s board and management believe that the strategy the company is currently pursuing to drive long-term growth by leveraging AMD’s highly-differentiated technology assets is the right approach to enhance shareholder value. AMD is not actively pursuing a sale of the company or significant assets at this time.

The denial didn’t stop anyone from doing some back-of-the-envelope math concerning what AMD might do should its ongoing cash crunch worsen significantly. Vijay Rakesh, an analyst with Sterne Agee, speculated that AMD could make $150 million on a sell/leaseback deal on its corporate real estate in Sunnyvale. Patent sales, he wrote, could net as much as $2.2 billion.

Nor did it stop any speculation about potential buyers, few though they may be. Qualcomm is the most often mentioned candidate, with a private equity buyer coming in a close second. Fortune’s Dan Primack pretty much shut down that idea, quoting a private equity executive who said the very thought of AMD put him in a “cold sweat.”

Meanwhile, another concern is the state of employee morale. While it wouldn’t be the first time that AMD has seen a phase of corporate difficulty — competing with Intel tends to guarantee that — people both inside and outside the company are starting to remark that even for AMD, morale is reaching new lows.

One significant problem is the number of executives who have departed, either for other jobs or who have been fired in either of the two rounds of recent layoffs. Without experienced executives who have seen tough times at AMD before, younger employees are finding it difficult to feel confident that the company can bounce back. As one source put it: “All the old AMD street-fighters are gone, and a lot of them feel that Rory has made a big mistake in getting rid of them. Without them, people feel like they’re in a losing battle.”

Update: So an AMD spokesman just got back to me, saying that another round of restructuring, including cuts, has been on the table since AMD first announced its plan last month. Here’s the statement:

As we communicated during our third quarter earnings results, we expect to take further restructuring actions in the first half of 2013. At that time, we did not know what specifically they would consist of or if they would be material. We have not provided any updates since then and don’t comment on rumor or speculation.

Okay then. So consider it confirmed, or, re-confirmed.


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