AMD mulls next move

Advanced Micro Devices Inc. CEO Hector Ruiz disclosed the company will consider exiting its non-core businesses if they do not show clear signs they "are on a healthy path to leadership and profitability.

The move is part of the steps being taken by the company to restore its operations to profitability. AMD has previously said it will cut 10 percent of its workforce and is now considering a wider range of reorganization options that could result in deeper cuts and possible business unit disposal.

"We are embarking on a significant restructuring of our company," Ruiz said during a conference call with analysts on Apr. 17. "We need to intensely scrutinize our non-core businesses and revisit their strategic fit into our plans and their path to growth and profitability. Absent these, we will exit those businesses."

Asset-smart move
As with a previous plan announced by the company one year ago to adopt what AMD has described as asset-smart manufacturing, Ruiz declined to provide details of the changing strategic focus, promising instead to address the issue soon.

"We have made significant progress in our asset-smart strategy and I am very hopeful that we will be able to communicate details of this rather complex effort in the near future," Ruiz said during a conference call on the company's first quarter results.

"At that time, we believe we will also have an opportunity to further restructure the company for increased focus and added flexibility while placing us in a better position to deliver sustainable, profitable growth," Ruiz said.

MPU, graphics focus
AMD has three operating units, including computing solutions, graphics and consumer electronics. The computing division accounted for almost 80 percent of the company's Q1 revenue and recorded an operating loss of $160 million.

The graphics segment reported revenue of $230 million for Q1 and operating loss of $11 million, while the consumer electronics division recorded $81 million in revenue and posted operating loss of $8 million.

Since AMD considers microprocessors and graphics IC core businesses, it can be assumed the company plans to keep the two while dumping any other units. It's also possible the company could trim product portfolio even within the MPU and graphics semiconductor units.

Even if AMD exits the consumer electronics business, this would not be enough to restore the company to profitability.

The troubled semiconductor company is struggling in its battle with rival Intel Corp. for market share in the microprocessor sector. Its latest quarterly results were "characterized by poor top line performance," according to AMD chief financial officer Robert Rivet.

The company's Q1 net loss narrowed to $358 million, or 59 cents per share, from $611 million, or $1.11 per share, in the year-ago quarter.

Revenue rose 22 percent during the same period to $1.5 billion, from $1.23 billion in the first quarter of 2007 but dropped a wider than expected 15 percent from the December 2007 quarter.

- Bolaji Ojo
EE Times