Another Semiconductor Company Delivers Bad News About The Industry And Now Its Stock Is Tanking

Advanced Micro Devices just announced it will cut staff by 7% and take $US70 million in charges, and now the stock is tanking.

In after hours trade on Thursday, shares of AMD were down about 6%.

Along with its third quarter earnings, AMD announced that it will reduce its workforce by 7% in a move that it expects to complete by the end of the year, which the company says will save it $US9 million this year and $US85 million in 2015.

This move will results in a restructuring and impairment charge of $US57 million in the fourth quarter and $US13 million in the first half of next year.

In the third quarter, AMD reported gross margin of 35%, flat compared to the prior quarter, with earnings per share coming in at $US0.03 against expectations for $US0.04 on revenue of $US1.43 billion against expectations for $US1.47 billion.

In its earnings statement, AMD CEO Lisa Su said, “Our Enterprise, Embedded and Semi-Custom segment results were strong; however, performance in our Computing and Graphics segment was mixed based on challenging market conditions that require us to take further steps to evolve and strengthen the financial performance of this business. Our top priority is to deliver leadership technologies and products as we continue to transform AMD.”

Thursday’s announcement from AMD follows news from semiconductor peer Microchip, which last week said, “We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future.”

In a note to clients following that announcement, analysts at Citi said that the “industry correction” Microchip CEO Steve Sanghi was referring to, “occurs whenever demand drops off for a moderate period of time and can occur during economic expansion or contraction. Inventory corrections typically last 2-3 quarters with a step-down in demand and reduced visibility.”

Following that warning from Microchip, the semiconductor space saw widespread weakness last Friday.

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