Updated from 12:46 p.m. ESTSAN FRANCISCO -- Longtime investors in chipmaker Advanced Micro Devices ( AMD) are used to disappointment -- why not end 2008 with another bleak signpost for the months ahead? The company reported late Monday in a Securities and Exchange Commission filing that it laid off 100 more workers than expected during its most recent quarter (a total of 600), which would also result in a charge of $70 million, $20 million more than previously projected. That's not the really disappointing part -- for investors, not for the additional 100 now without jobs -- and it even led one media outlet to post the unfortunate headline earlier Tuesday " Intel ( INTC), AMD Lead Broad Advance by Chip Issues." AMD shares ended Tuesday's trading session up 11 cents, or 5.2%, to $2.21. (By the way, it's probably time for a couple of business journalism versions of " "Man Laws": 1) A 4-penny rise by a $2 stock should never be called an advance, and 2) the words "AMD" and "lead" should, going forward, never be used in the same sentence.) Yes, taking another $20 million out of AMD's coffers isn't good, and the idea that 100 more bodies had to be cut doesn't say much for future demand, but you have to give AMD props for scaling down costs amid a dire economic slowdown. The company still employs about 16,000 workers. Here's the real kicker: AMD will once again be writing down the value of goodwill related to its 2006 acquisition of graphics chipmaker ATI Technologies, following an updated outlook for that business. How much of a writedown? The company has no idea. "The Company expects that the impairment charge will be material, but, as of the time of this filing, the Company is unable to estimate the amount or range of amounts of the impairment charge," AMD said in the filing.
AMD also will review whether there's any impairment to ATI's intangible assets, which would result in an additional -- and possibly material -- noncash charge. Two quarters ago, AMD took an impairment charge related to ATI of more than $800 million. Despite the noncash nature of these charges, a significant diminishing of the company's assets is the last thing the company needs as it likely faces several quarters of continuing losses and increasing doubts about its viability as a standalone company. Ironically, the company's ATI division is probably its most viable business. AMD warned Dec. 4 that its fourth-quarter revenue would plummet 25% from the third quarter to about $1.18 billion. This prompted investment banking firm Collins Stewart, which was already projecting calendar 2009 operating losses of $700 million, to say it didn't expect the company to achieve operational break-even revenue before 2010. On Tuesday, additional dourness came forth from a report by Friedman Billings that recent checks with Asian chip distributors were worse than their prior expectations, reflecting continued global demand weakness. The firm believes shipments from AMD, Texas Instruments ( TXN), Microsemi ( MSCC) were down as much as 20% to 30% month over month in November. In his widely read "20 Surprises for 2009" published Monday, Doug Kass compiles a list of what he calls outliers, events that have a reasonable chance of occurring next year despite their long odds. Kass puts and AMD bankruptcy filing on his list, citing a general lagging of tech stocks in 2009 as capital spending by companies loses ground to maintenance expenditures.
AMD ends 2008 (until we see fourth-quarter results) with $1.3 billion in cash, four times that amount in debt, and an operating loss of $1.9 billion over the last four quarters. Add to the mix an unprecedented slowdown in global economic demand and AMD's own tenuous market share in servers and PCs, and it becomes increasingly difficult to see the company's failure as an outlying event.