AMD’s July 2008 filing did not support the $758 million figure in the headline “AMD takes $758 million hit amid layoffs.” Ahead of its second-quarter results, AMD estimated about $880 million in goodwill and intangible-asset impairment, $32 million in restructuring charges and $36 million in investment impairments. The later finalized results used different categories and figures, so those estimates should not be treated as the final quarter’s total.
What AMD disclosed before its second-quarter results
On July 10, 2008, AMD filed an 8-K about its fiscal second quarter, which ended June 28. The figures were estimates ahead of the earnings release, not finalized results. AMD described three distinct categories:
- Goodwill and intangible-asset impairment: approximately $880 million. AMD said this impairment required no current or future cash expenditure.
- Restructuring: approximately $32 million, most of it related to employee severance. AMD said terminations had begun during the quarter and were expected to conclude by fiscal year end.
- Investment impairments: approximately $36 million—$24 million on AMD’s Spansion investment and $12 million on auction-rate securities.
These are the estimates AMD disclosed in its July 10, 2008 Form 8-K. They should not be collapsed into one number without preserving the different accounting labels.
Why the headline and article figures do not reconcile
EE Times’s July 11, 2008 article, “AMD takes $758 million hit amid layoffs,” says in its body that charges totaled $948 million. Neither figure matches the three estimates in AMD’s filing: $880 million plus $32 million plus $36 million is approximately $948 million, while the headline’s $758 million is not explained by those listed estimates. The mismatch is in the contemporaneous article itself, not a figure that can be resolved by choosing one of the filing’s categories.
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The article also noted an expected favorable gross-margin impact of about $190 million from the planned sale of certain 200mm wafer fabrication tools. That expected benefit is separate from the estimated charges; it should not be subtracted from them and presented as a revised impairment figure. AMD’s filing described the expected impact as favorable to gross margin.
What AMD reported when results were finalized
AMD’s July 17, 2008 earnings release reported the quarter using a different presentation. It recorded a $920 million loss from discontinued operations, including $876 million of asset impairment charges. A reconciliation separately listed $36 million in marketable-securities impairment and $30 million in restructuring charges. The release also reported a $193 million gain from the sale of 200mm equipment.
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Those are finalized figures and categories from AMD’s July 17, 2008 second-quarter earnings release. They are not interchangeable with the pre-results estimates: the filing and release describe items under different labels and scopes. In particular, the $920 million discontinued-operations loss is not simply another way to state the earlier $948 million estimate or the headline’s $758 million.
How layoffs relate to the charges
EE Times reported that AMD planned to reduce its workforce by 10 percent by year end. AMD’s filing tied most of the estimated $32 million restructuring charge to employee severance, said terminations had started during the quarter, and expected them to conclude by fiscal year end. The impairment charges were a separate accounting matter; the filing specifically said the goodwill and intangible-asset impairment would not require current or future cash expenditure.
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Reading the “hit” accurately
- Impairment is not the same as cash paid: AMD explicitly said the goodwill and intangible-asset impairment required no current or future cash expenditure.
- Severance is a restructuring cost: most of AMD’s estimated $32 million restructuring charge related to employee severance.
- The equipment sale was an offsetting benefit in a different line: AMD first expected a roughly $190 million favorable gross-margin impact and later reported a $193 million equipment-sale gain.
- Estimate and result are different snapshots: the July 10 filing described expected charges; the July 17 release reported finalized second-quarter results.
AMD CFO Robert J. Rivet said in the July 17 release: “While we had a disappointing quarter financially, customer adoption of our recently introduced microprocessor and graphics products and platform offerings is strong, and we see increasing momentum across our businesses,”
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Sources
- EE Times, Rick Merritt, “AMD takes $758 million hit amid layoffs,” July 11, 2008.
- Advanced Micro Devices, Inc., Form 8-K filed July 10, 2008.
- Advanced Micro Devices, Inc., second-quarter 2008 earnings release filed July 17, 2008.
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