This lack of real direction combined with bloat in the upper management continues to plague AMD to this day. Their recent Q3 earnings report show this quite well with net income down 2% year on year. During the call AMD also announced that they would be laying off about 7% of their work force. This will help them save around $9 Million in 2014 and an expected $85 Million next year. The difference in the savings is due to the associated costs of reorganization. AMD is expected to shell out around $57 Million for this next quarter.
Newly anointed CEO Lisa Su put an optimistic spin on the earning call by saying the layoffs would allow AMD to focus on products that will allow them to improve profitability. We wonder how many of that 7% will be engineers that help create the products and how many will be management and project leads. If the management situation has not changed then AMD will really not be able to do much moving forward. We can expect a rough Q4 and probably a fairly stagnant 1H 2015.
For those that wondered about the impact of AMD’s console wins well there is good news and bad. The Enterprise, Embedded, semi-custom group earned around $648 Million with an operating income at $108 Million. In the Computing and Graphics group we saw revenue of $781 Million with an operating income of -$17 Million. In very simple terms AMD had to divert too much money away from computing and graphics to get the Xbox One and PS4 wins. This is putting the graphics division in a tight spot. They simply do not have the money to make a competitive product at the moment without borrowing money from embedded systems.
AMD has been playing a shell game with money for a while in order to appear stable. Under Rory Read they even went so far as to sell off property only to lease it back. This gave them the impression of having more operating capital than they really did. The move to reduce the work force by 7% is a feeble effort to have additional R&D money in hand moving into 2015. This could indicate that AMD will be working hard to come up with something that can get them back market share. Or it could be an attempt to keep their heads above water until things calm down as AMD cannot keep borrowing from one side to pay the other for long.
We said it when Lisa SU took over, she will have a difficult time turning AMD around. Read’s mobile first strategy did not work out as intended and it has put AMD in a place where they cannot compete in the market space they are in. Su has the difficult job of putting on a happy face for investors while trying to come up with a product that will grab the attention of the market. Without a product that they can sell at a decent margin they will still continue to try and live off of console revenue. This money is not going to last long and once it runs out AMD will be in real trouble.
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