Chipmaker AMD to cut about 500 global jobs

Advanced Micro Devices Inc., reacting to a continued slump in its business, said it will cut its workforce by about 5% as part of a restructuring to trim costs at the chip maker. The plan also anticipates a charge for the consolidation of certain real estate facilities.

The chipmaker will record charges of roughly $42 million for the reorganization plan that includes outsourcing few IT services and app development. Furthermore, the company said that it would benefit from the restructuring in the coming year, starting with the estimated savings of nearly $58 million.

The company has decided that the majority of restructuring charges will be billed in the third quarter of fiscal year 2015 (3QFY15) expenses. The actions are expected to be substantially completed by the end of fiscal year 2016.

Shares of AMD were flat at $1.74 in after-hours trading. Equities analysts predict that Advanced Micro Devices will post ($0.47) EPS for the current year.

Credit Suisse analyst, John W. Pitzer has maintained an Underperform rating, along with the price objective of $1.90 on Advanced Micro Device’s stock.

But aside from the cost cutting and all its details, the major question, which the company has yet to answer its critics and investors alike, is that will such a strategy be fruitful in future. The company’s weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Its market capitalization is $1.30 billion. Advanced Micro Devices has a 52-week low of $1.61 and a 52-week high of $3.46. From that period onwards the company lost 98% of its market value till date.

AMD recently announced it would also separate its graphics chip business into a separate division, Radeon Technologies Group, under Raja Koduri. The Business sells its products in both international and domestic markets through direct sales force and through independent distributors and sales representatives.