AMD costs layoffs at $70 million, can’t say yet about ATI writedown

Advanced Micro Devices has put the cost of the layoffs and other cost reductions it announced during the fourth quarter at around US$70 million, higher than it had expected, but said it can’t yet put a value on a goodwill impairment charge it will make related to its 2006 acquisition of graphics chip maker ATI Technologies.

The announcements came in a regulatory filing AMD made Monday with the U.S. Securities and Exchange Commission relating to its results for the fiscal quarter ended Dec. 27.

As part of its plan to cut costs by spinning off its chip manufacturing activities to focus on chip design, AMD had previously reported that it expected to lay off 500 employees in the fourth quarter, with costs totalling $50 million.

However, during the fourth quarter, AMD eventually told around 600 workers they would laid off, increasing the expected cost of the job cuts, it said Monday.

In the filing with the SEC, AMD put the costs of these lay-offs at around $70 million. Of that, $34 million related directly to severance costs and the continuation of employee benefits, $13 million to the cost of terminating contracts and programs, $17 million to asset impairments and $6 million to the cost of closing and consolidating sites.

The company also told the SEC on Monday that it planned to make a goodwill impairment charge in its accounts relating to its October 2006 acquisition of ATI, a manufacturer of graphics processing chips. Goodwill, the part of a company’s value not related to tangible assets such as buildings and equipment or intangible assets such as patents, can vary with market conditions, and businesses such as AMD periodically reevaluate the goodwill value of recent acquisitions.

AMD said it expects the ATI impairment charge will be “material”, but that it cannot yet put a value, or even a a range values, on it. However, it said the charge will be included in its results for the fourth quarter, which it plans to discuss in a conference call on Jan. 22.

Finally, the company noted that it will mark down by $20 million the value of its investment in flash memory manufacturer Spansion. Now an independent company, Spansion started life as a joint venture between AMD and Fujitsu. As of March, AMD still held 9 per cent of Spansion’s stock — the price of which dropped in early trading to Tuesday to $0.19, its lowest for the year. In February, the price topped $4.

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Jim Love, Chief Content Officer, IT World Canada

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