Advanced Micro Devices to Cut 2,300 Jobs

SAN JOSE, Calif. – Computer chip-maker Advanced Micro Devices Inc. said Tuesday it is cutting 2,300 jobs and closing two factories in Texas to cut costs and strengthen its core business.

The cuts represent about 15.3 percent of AMD's global work force of 15,000.

"These actions will allow us to reduce costs without impairing our new product development activities in pursuit of long-term growth opportunities," said W.J. Sanders III, AMD's chief executive.

A total of 1,000 positions will be lost as a result of closing two factories in Austin. The remainder will be cut as AMD restructures operations in Penang, Malaysia.

The reductions will be complete by the end of the second quarter 2002.

Sunnyvale, Calif.-based AMD, like other chip-makers, has been hard hit by the economic downturn and slowing demand for personal computers.

AMD also has been cutting prices on its Athlon and Duron processors to match price reductions by rival Intel Corp. on its Pentium lines.

"This is the inevitable consequence of the not only continuing, but intensifying, price war between Intel and AMD," said Drew Peck, an analyst at SG Cowen Securities.

But the price war is not just simple competition between rivals, he added.

"It has to do with the moribund environment in the personal computer business," he said. "These companies have to use pricing in order to induce buyers to consume more microprocessors."

Sanders said the company will continue to focus on PC processors and flash memory, which is used in cellular phones, digital cameras and other consumer electronic devices.

The two Texas factories have most recently been used as foundries that supply chips for other companies. Demand has been much lighter than expected, AMD spokesman John Greenagel said.

AMD will take a one-time charge of between $80 million and $110 million in the current quarter for the restructuring. The cutbacks will save about $125 million annually once fully implemented.

Also Tuesday, Gateway Inc. announced it is phasing out AMD as a supplier of processors in favor of Intel. Last month, IBM Corp. said it has stopped selling PCs in the United States with AMD processors.

San Diego-based Gateway, which is in the midst of restructuring itself, said the move is aimed at simplifying its product offerings and reducing the cost of manufacturing.

Shares of AMD fell 60 cents, or more than 6 percent, to $9.21 in Tuesday trading on the New York Stock Exchange and another 10 cents during the after-hours session.