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AMD eyes 4Q charge
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November 1, 1999: 7:00 p.m. ET
Despite stronger sales, chip maker remains cash starved
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NEW YORK (CNNfn) - Advanced Micro Devices Inc. might take a fourth-quarter restructuring charge as part of an ongoing drive to cut costs, according to documents filed with the federal Securities and Exchange Commission Monday.
In the filing, AMD, the world's second-largest manufacturer of microprocessors, said it may incur restructuring charges in addition to the $33 million the company already has taken this year in the first and second quarter. No such charges were taken in the third quarter.
Earlier this year, executives have said that AMD could take as much as $50 million in restructuring charges this year, according to a company spokesman.
After conducting a review of its costs earlier this year, AMD (AMD) took several steps to bring its costs in line with its expected revenue growth rates, including selling its programmable logic business, closing a development laboratory, and laying off 178 employees.
The company earlier this month also announced that it would sell its communications division, which makes computer chips for communications devices such as wireless telephones.
However, the steps that it has taken so far have not been enough, according to the SEC filing. Although the company has achieved the expected cost savings as a result of the realignment, it has not achieved the expected revenue growth rates, officials said in the filing.
Despite strong sales of the company's new high-end Athlon processors - which compete against Intel's Pentium III line - and marked increases in sales of flash memory - which is used extensively in portable computing and communications devices - AMD's sales of $662 million during the third quarter were off 3 percent from last year.
"As a result, we will continue to evaluate our cost structure and may incur additional restructuring and other special charges during the fourth quarter of 1999," the report said.
A company spokesman said that the chances of a fourth-quarter charge were negligible, and the disclosure was made in the SEC document just in case there is one.
"Our expectation is that there won't be any," said John Greenagle, AMD's director of corporate communications. "But there remains the possibility."
Analysts were uncertain where the company has room to further restructure its business. When it sells its communications unit, AMD will be left only with its flash memory business in addition to microprocessors, noted Mark Grossman, an analyst at SG Cowen Securities Corp. in Boston.
When AMD reported its third-quarter earnings earlier this month, the company said its flash memory sales had risen 28 percent from the preceding quarter and enabled the company to post a net loss of 72 cents per share, much less than the 97 cents per share Wall Street had anticipated.
"Flash memory has been doing very well, so I don't think they have any plans to sell that," Grossman said.
AMD shares closed up 1/2 to 20 5/16 in trading Monday. 
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Advanced Micro Devices
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