AMD (NASDAQ:AMD) Restructuring Business And Cutting 5% Of Workforce Whilst Preserving Engineering Talent

Khalid Moammer
Posted 1 year ago

AMD announced a restructuring plan yesterday to cut about 5% of its global workfroce and outsource certain operations in a bid to cut costs.
In addition to the reduction of the company’s global workforce, AMD has also revealed that it will consolidate a number of real-estate facilities, outsource certain application development and IT services, restructure the Eneterprise Embedded and Semi-custom business unit (EESC) as well as task a couple of veteran AMD executives to head two vital regional operations.

AMD logo feature
According Drew Prairie, director of corporate communications at AMD the actions do not involve AMD’s drivers teams or AMD’s globally deployed product design and engineering teams. The actions were carefully considered in an effort to protect the company’s roadmaps, engineering talent and product design capabilities.

Talking to Drew Prairie said :
“The outsourcing is not related to software teams working on drivers, ISV [independent software vendor] enablement or engineering/product design,”

AMD’s Restructuring Plan In A Nutshell

Talking to Drew Prairie outlined AMD’s plan and summed it up in five major actions :

Creating the Enterprise Solutions Teams within our Enterprise, Embedded and Semi-Custom (EESC) segment to align our business, engineering and sales efforts in this key part of our business around our largest growth opportunities in the data center and targeted embedded/semi-custom markets;

Streamlining our computing and graphics sales structure by focusing our teams on our priority customers, markets, and geographies;

Bolstering our operations in parts of the world critical to our long-term success by creating two regional President positions for Europe and China;

Aligning our global real estate footprint with our business needs;

Simplifying our IT model by outsourcing our IT support and internal application development.


AMD’s EESC And CG Restructure

The new structure of AMD’s Embedded, Enterprise and Semi-Custom business unit will be divided into three enterprise solutions teams. These teams will be responsible for business management, engineering and sales. The new structure is hoped to accelerate the growth of the segment as well as facilitate an effective response to on-going industry challenges.

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For AMD’s Computing and Graphics (CG) business unit the restructuring plan involves appointing Spencer Pan as AMD’s president in the Greater China region and Darren Grasby as president of AMD in the Europe, Middle East and Africa region.

AMD’s Restructuring Plan To Cost $42 Million, Save $67 Million By The End Of 2016

The restructuring actions are expected to cost AMD a total of $42 million, $31 million of which related to severance and benefit costs, $1 million to facilities related consolidation charges and $9 million related to software licenses. Of the $42 million, $41 million will be paid in the third quarter of 2015.
AMD expects that these actions will result in savings that amount to $9 in 2015 and an additional $58 million in 2016 for a total of $67 million by the end of 2016.

On September 26, 2015, Advanced Micro Devices, Inc.  adopted a restructuring plan (the “Plan”). The Plan is focused on the Company’s ongoing efforts to simplify its business and align resources around its priorities of building great products and deepening customer relationships.

The Plan provides for a workforce reduction of approximately 5% of the Company’s global workforce. The Plan includes organizational actions such as outsourcing certain IT services and application development. The Plan also anticipates a charge for the consolidation of certain real estate facilities. The Company currently expects to record restructuring and asset impairment charges in the aggregate of approximately $42 million resulting from the Plan. The Company expects to record a majority of the restructuring charge in the amount of approximately $41 million in the third quarter of fiscal year 2015, of which approximately $31 million is related to severance and benefit costs, approximately $1 million to facilities related consolidation charges and approximately $9 million of intangible asset related charges associated with the impairment of certain software licenses that have ongoing payment obligations. The Company expects the Plan will likely result in total cash payments of approximately $26 million and $15 million in the fiscal years 2015 and 2016, respectively.

The savings from the Plan are anticipated to be approximately $2 million and $7 million in the third and fourth quarters of fiscal year 2015, respectively. The Company anticipates savings of approximately $58 million in fiscal year 2016. The actions associated with the Plan are expected to be substantially completed by the end of fiscal year 2016.

All of these actions are in an effort to push AMD’s operational efficiency and drive profitability as the company enters the next phase with major product launches coming up next year on FinFET technology. AMD’s President and CEO Lisa Su’s message as soon as she assumed here role was to simplify the business and focus the company’s energy and investments on product design and core research and development endeavors. These latest restructuring actions are a continuum of that philosophy to set the company up for a more successful trajectory and steer it towards profitability in 2016 and beyond.

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