AMD hasn't been having the greatest year. After drastic first and second quarter loses, a lackluster graphics card launch that didn't quite meet consumer expectations, and the recent departure of Jim Keller (one of AMD's most prominent microprocessor architects), many are assuming these are the first signs of the company's pending demise. However, AMD appears to be taking measures to correct its course, and it disclosed more of the company's restructuring plans that were announced back in July with its recent 8-k filing.
In an official statement to Tom's Hardware, AMD clarified the details of its restructuring goals, which included the development of several new key positions and teams. The Enterprise Solutions Team will be created within the company's enterprise, embedded and semi-custom segment to align business, engineering and sales efforts in the data center and embedded markets, a segment in which AMD sees huge potential for growth.
Two Regional President positions will be created in Europe and China to bolster operations in parts of the world critical to AMD's long-term success. The restructuring to-do list also includes aligning AMD's global real estate footprint with its business needs, so perhaps we will see an AMD home office in Beijing or London sometime in the future (though this is of course just speculation).
AMD is also streamlining its computing and graphics sales structure by focusing its teams on priority customers, markets and geographies. This includes the formation of the already-announced Radeon Technologies Group, which will be headed by Raja Koduri and is meant to bring a vertical focus to the graphics side of the business.
The part of the restructuring plan that has people upset is the section describing the goal of its IT model, which will be simplified by outsourcing AMD's IT support and internal application development. However, the end user experience will not be impacted by any of this, as these cuts are specifically targeted at AMD's internal IT support for employees, not its customers. End user drivers and programs will not be affected. The term "outsourcing" is a sensitive subject these days, but AMD's estimates of workforce reduction are not as damning as some have made it out to be.
The company estimated that as a result of these strategic decisions, approximately 5 percent of AMD's current workforce will be purged. With the company employing just about 10,000 people (and using the power of math), we deduce that these reductions will eliminate around 500 positions in the company. The cuts are expected to affect almost every division, but least of all its engineering and development teams, which are being properly invested in for future products.
The estimated cost of the restructuring and impairment charges tops $41 million, with AMD expecting savings of $9 million for the remainder of 2015 and $58 million in 2016. The restructuring will more than pay for itself in roughly a year's time, and by no means does it indicate the company is on some sort of funeral march.
If anything should be taken from this announcement, it's that AMD is focused on cutting costs and expanding enterprise solutions, not that the end is near. Although it's always unfortunate when people lose their jobs, a 5 percent cut in the workforce is a drop in the bucket compared to some other companies' restructuring plans, and it should be taken with a grain of salt. AMD is confident about its future. With Zen cores arriving next year and VR about to hit the mainstream, the company is simply positioning itself for the future, and we shouldn't be quick to judge a restructuring as a death knell.