Advanced Micro Devices Inc., the second-largest producer of personal-computer processors, will cut about 600 jobs, 100 more than previously planned, as it struggles to return to profitability.

The cuts will result in an expense of about $70 million in the fourth quarter, including $34 million from severance costs and the continuation of some employee benefits, the company said today in a regulatory filing. Sunnyvale, California-based AMD said earlier that the job reduction would cost $50 million.

The company, on course for its third-straight annual loss this year, is striving to keep up with larger rival Intel Corp. as demand for PC chips slumps. Intel has captured market share by adopting newer technologies more quickly.

Source: Bloomberg Tech News

Intel Corp. is the latest computer chip manufacturer to see a drop in sales and profits. Share price fell by over 7% in European trading after Intel slashed its final quarter sales forecast, confirming that the credit crunch is affecting global technology spending.

Intel’s computer chips run more than three-quarters of the world’s computers. It has reduced its revenue estimate by about $1 billion, stating that “significantly weaker” demand for all of it products is to blame.
Its profit margin is also predicted to fall short of previous forecasts.

This is further evidence that global orders for computers and gadgets are not as resistant to the economic slowdown as originally thought. Applied Materials Inc., the top maker of semiconductor equipment, and National Semiconductor Corp., the supplier of chips for the biggest mobile-phone companies, are cutting jobs as they cope with their worst slump since the dot-com bubble burst in 2000. In addition to this, BT, Britain’s largest telecommunications company, announced that 10,000 jobs will have to go over the next year to reduce costs.

“It’s shockingly bad. I and most of us have been wrong on how bad this could get. The holiday season is a bust. Scratch 2008 out and maybe some kind of recovery will come, but this is a disaster.” Hans Mosesmann, Raymond James & Associates Inc. in New York.

Intel’s stock value has plummeted this year as the company has seen its value halve over the last year. The MSCI Asia Pacific Information Technology Index dropped as much as 6.5 percent.

According to research firm IDC.com technology spending in 2009 will grow far less than previously predicted. Spending will rise 2.6%, down from an earlier estimate of 5.9%, the Framingham, Massachusetts-based company said. Growth in the U.S. will probably slow to 0.9%, less than a quarter the pace IDC forecast in August.

Intel’s report came minutes after National Semiconductor reduced its revenue forecast and announced plans to cut about 5 percent of workers. Applied Materials reported a 45 percent drop in fourth-quarter profit and said it will cut 1,800 jobs.

“It’s just starting now — it’s not just going to be a few months. There are going to be job losses going into the first half of the year. That’s going to drive down the economy more.” Applied CEO Mike Splinter, a former Intel executive.

Technology companies generally make more sales in the final quarter, as many of their products are popular in the holiday shopping season.

Microsoft, the world’s largest software maker, also fell yesterday. Applied Materials decreased 4.3% to $9.52, while National Semiconductor dropped 7.8% to $10.45. Micron Technology Inc., the largest U.S. producer of computer memory, declined 20 cents, or 6.5%, to $2.90.

Semiconductors take as long as three months to go through production lines. The sudden drop in orders may reflect the eagerness of computer makers to avoid being stranded with expensive stockpiles of unused parts. Lean inventory may help chip makers’ earnings improve more quickly after demand rebounds.

It seems that all consumers are cutting back. Companies are reducing their IT and hardware budgets, making do with older computers and older technology, and the general public are also deciding not to buy the latest gadgets and computers at the moment. Maybe most people are planning to hold off until Christmas, and then treat themselves to the latest gadgets, phones, consoles and computers. However, one problem is that at the moment it seems that hardware is developing faster than software changes. Although there is a lot of new web and offline software technology available, uptake seems to have slowed. People are mostly happy with the current functionality of their mobile phones and personal computers, and see no great benefit in buying the latest models. If you are just surfing the net, chatting to mates on Skype or GMail, or being sociable on Facebook, then older chips work just fine.

Source: Bloomberg Tech News

Europe’s biggest computer chip maker, STMicroelectronics, has forecast a drop in final quarter profits, citing the economic slowdown and reduction of demand for mobile phones. It is expected that sales will be down 8% from the third quarter’s $2.7 billion.

The economic decline and credit crunch is making consumers more cautious, and many are simply not upgrading mobile phones or personal computers. This is reducing demand for microchips asnd semiconductors from mobile and computer manfucturers. Although globally the mobile phone market is still growing, rate of growth is declining.

STMicroelectronics shares hade fallen by 37% this year, compared with a 43% drop in the 18-member The Philadelphia Semiconductor Index. This news follows our reports two weeks ago of job losses in Scotland at Freescale Semiconductor, a US-owned computer chip company. It seems that no company in the communication hardware sector is immune to the economic downturn. Texas Instruments Inc., the second-largest U.S. chipmaker, has also seens its share price drop to it lowest level in years.

Europe’s third biggest player in the semiconductor sector, NXP BV, has predicted that sales would fall by 14% in the final quarter of 2008. NXP has reported a “rapid deterioration of demand” toward the end of the third quarter, particularly among businesses that sell chips to the car industry and consumer-electronics makers.

Nokia Oyj, the world’s biggest maker of mobile phones and STMicroelectronics’s largest customer, reported a 30 percent slide in third-quarter profit this month as prices fell and it lost market share in high-end devices.

In July, Carlos Bozotti cut his forecast for industry growth this year to between 4 percent and 5 percent, from a May prediction of 5 percent to 6 percent. He forecast “a little deceleration” in global chip sales in the second half.

“STMicroelectronics’ end-product exposure means that, despite the company’s recent share gains and positive customer momentum, it is vulnerable to weakening consumer demand across its portfolio” Jonathan Crossfield, Merrill Lynch & Co.

In June, the Semiconductor Industry Association cut its forecast for global semiconductor sales growth this year to 4.3 percent, from 7.7 percent.

“In the fourth quarter, STMicroelectronics expects its gross margin, the percentage of revenue left after subtracting manufacturing costs, to be 38.8 percent, plus or minus 1 percentage point. That forecast is based on an exchange rate of $1.40 to the euro. ” Bloomberg.com

President and CEO Carlo Bozotti commented, “The third quarter reflected continued focus on both our operating and strategic initiatives. From a financial perspective, our third quarter performance demonstrated further progress in strengthening our market position, building on the results of the first half of this year. Before including the additional revenue from the recently created ST-NXP Wireless joint venture, net revenues increased 12.4% year-to-date.

“We are gaining share overall, in particular in our areas of focus: multimedia convergence applications and power solutions. Indeed, we continued to harvest the benefits of our sales expansion initiatives and we increased our sales to new target key accounts by 16.0% on a sequential basis.

“We continue to build scale in the critical area of wireless applications with our joint announcement in August with Ericsson to form a joint venture composed of Ericsson Mobile Platforms and ST-NXP Wireless. We believe this new leader will have the industry’s strongest product offering in semiconductors and platforms for mobile applications and will be well positioned to continue and extend customer relationships with the most innovative players in the wireless industry.” ST.com

Sources and references:
Bloomberg.com
STMicroelectronics
Texas Instructments
Semiconductor Industry Association

In recent months the forecasts for chip makers has been poor, with companies deciding not to update computer hardware until after the current economic turmoil is overcome. However it seems that Intel have somehow managed to resist the worse of the forecasts and are showing signs of a stronger than expected quarter. Intel say that so far 4th quarter sales have risen, with the retail sector driving sales with a higher demand for personal home computers.

Shares in Intel still fell 94 cents today, or 5.9 percent, to $14.99 at 4 p.m. New York time in Nasdaq Stock Market trading. Broader U.S. markets declined after retail sales fell the most in three years and a gauge of New York manufacturing dropped to a record low, increasing concern over the depth of the economic slump.

Revenue from laptop processors, which sell for more than desktop chips, jumped 20 percent last quarter. Third-quarter profit was also higher than expected because the company was able to run its plants more efficiently, Chief Financial Officer Stacy Smith said yesterday in an interview.

Technology companies often make most of their sales in the fourth quarter during the run up to the Christmas season, and also as businesses spend the year’s remaining equipment budgets. Accounting for that seasonal effect, the Intel forecast is actually worse than normal, thus the drop in share price today.

It seems that the credit crunch is affecting manufacturers of computer chips on both sides of the Atlantic.