AMD Slashes Sales Forecast, Jobs

Updated from 4:37 p.m. EDT

SAN FRANCISCO -- Advanced Micro Devices(AMD - Cramer's Take - Stockpickr) cut its sales outlook for the first quarter because of poor sales in all of its business segments, and announced plans to cut its headcount by 10%.

The Sunnyvale, Calif., chipmaker said revenue for the three months ended March 29 will be approximately $1.5 billion, down 15% sequentially.

The company had previously projected that sales would follow seasonal patterns, which the company said typically meant a decline of between 5% and 10%. Analysts polled by Thomson Financial were looking for $1.62 billion in sales, with a loss of 40 cents a share.

AMD blamed the shortfall on lower-than-expected sales "across all business segments."

Shares of AMD were halted following the announcement, and were down 2.5%, or 16 cents, to $6.18 when extended trading in the shares resumed Monday. The company's stock is down more than 60% from its 52-week high of $16.19.

AMD's business has suffered in the face of intense competition from rival Intel(INTC - Cramer's Take - Stockpickr), as well as internal problems. AMD lost $3.38 billion in 2007 (including a $1.6 billion writeoff for its acquisition of ATI ) and was forced to delay the general release of its quad-core microprocessors because of a bug.

In recent weeks, the chipmaker appeared to be making progress in righting itself, delivering bug-free versions of its desktop microprocessors , as well as new graphics chips that have won praise from some analysts and investors.

Monday's revenue warning suggests the company's management continues to struggle gauging business conditions and throws into doubt its promise of returning to an operating profit by the third quarter 2008.

AMD may try to keep its word and return to operating profitability by slashing costs. The company said Monday that it will lay off roughly 10% of its workforce by the end of the third quarter. That would amount to more than 1,600 workers, given the 16,420 employees that AMD had on its payroll, as of Dec. 29.

AMD said it expects to incur a restructuring charge in the second quarter as a result of the layoffs, but said it was unable to estimate the amount at this time.

AMD laid off roughly 430 employees, almost 3% of its workforce, in May 2007.

The company is due to report its first-quarter earnings on April 17.