The axe falls at AMD as layoffs sweep through the company
primesuspect
Beepin n' BoopinDetroit, MI Icrontian
primesuspect
Beepin n' BoopinDetroit, MI Icrontian
Comments
It seems Rory Read is playing the most basic page out of the old investor appeasement playbook? I'm really disappointed in AMD right now. Chump move.
This is why shareholders suck.
Everyone affected by the layoffs has my sympathy and best wishes that this will end up a net positive.
Whirlpool did the same thing this quarter. Made huge profits, but they weren't huge enough so they're laying off a bunch of people.
And people wonder why Occupy is spreading, not dissipating.
As for Rory Read, we all know what motivates. Nothing like missing the mark on your stock price targets missing millions in potential executive compensation to keep your mansion payment up to date. If you value the options missed at current stock over the three years, I just have to wonder how many jobs his potential fifteen million or so in bonus compensation may have saved. I suppose that's the motivation to do whatever is necessary to drive value for the investor, but when so many decent hard working people are paying such a high price? It's just not fair. I know no corporation is above this, but part of me hoped AMD could be. I'd understand if they were still posting losses, but this, it's just stabbing at getting the stock price near $7 a share so the CEO can cash in. No doubt in my mind.
A combination of bringing CEO pay down and worker pay up would be even better. Either way, the gap is INSANE and needs to be closed.
http://online.wsj.com/article/SB10001424052970203687504577003362235867958.html
You aren't going to continue to operate at a specific level with a certain number of employees if you can see a recessed demand coming - plants were already operating below ideal capacity. Something has to give. We can't fire from the hip without taking a closer look to understand what is actually going on. Numbers don't tell the whole story.
Could you shed some light on the situation then? Since you seem to know the actual reasons?
Okay, how about the guy who does know what he's talking about? (That would be me, by the way.)
The shareholder trigger argument is in fact, spot on, period. Shareholders are not happy unless they are seeing absolute maximum profit on their investment, period. MBAs are taught, erroneously, that the quickest way to improve profits is to reduce headcount. Guess who the typical institutional investors screaming for blood are. Why? Because employees are highest cost with highest risk.
What we are not seeing is the financial impact of Bulldozer going into a ditch; that will be seen when AMD announces Q3 financials. (Or is it Q4? I honestly don't track everybody's FYs. Either way. Next quarter.) This is likely to have a significantly negative impact not only on AMD's current bottom line, but also likely to turn outlook negative, since the next generation Opteron is based on the same cores.
I can tell you from testing that Bulldozer versus ERP and BI systems is a recipe for disaster, doubly so for virtualized environments. (We've done two tests where we were able to basically overload the PRF due to excessive FMAC queuing.) This is something that AMD knows, and something that is going to impact their bottom line. They're either going to have to spin new revisions for Opteron, which is extremely expensive, or take a sales hit, also extremely expensive.
So what's the quickest way to cut costs to improve profitability? Lay people off. Bam - several million dollars just evaporated from the costs column. Shareholders like it because stupidly, they want profits up short term so they have the option to unload shares at a profit. C-levels like it because stupidly, they believe short-term profits and happy shareholders are all that matters. So yes, it's not just pay that's a disasterpiece, it's the entire way of doing business these days. If Boeing was run like this, you'd be taking the train everywhere to this day.
To put this in perspective though, as to why it is so stupid, we need to look at WHO was laid off. We have a lot of people in marketing and a lot of people in engineering. I shouldn't have to explain why laying off the people who sell your product and the people who can fix the problems is incredibly stupid. If they were realizing efficiencies in say, accounting, and laid off 10% of the people because they had nothing to do, then yes. That's a sound business decision as much as it sucks for the folks who get the axe. Axing the people who are critical to fixing the problems and driving your sales is about the most boneheaded move you can make.
Then you should take the time to understand the fact that the capital markets as they exist today, are completely broken and non-functional, period. Don't like it? Tough. That's the fact.
The greats in this country are companies like Ford, Boeing, Lockheed-Martin, and Hughes. Yes, these are all old companies which are now cruising on because of their behemoth size. The fact is that none of these companies would have gotten here if they hadn't done something no business today seems even remotely capable of: saying "fuck the short-term, we're looking 10 years down the road." Today's ignorant shareholders don't tolerate that. They are special snowflakes who the company owes profits now.
As I said: you would be taking the train everywhere if Boeing ran their business like that or was subjected to today's broken markets. The 747 would not exist, period. Boeing took a huge bet in 1963, starting with something called the CX-HLS. This cost them millions of dollars and never went to production. That turned into the 747. Boeing spent hundreds of millions of dollars between 1963 and 1966 when Pan Am placed their $525M order, and went to multiple banks to keep funding the company's operations. These operations included hiring thousands of people to design, test, and build the 747. Boeing nearly went bankrupt twice between '63 and the mid 70's as a result of the 747 project. But they knew that even if they went into a hole that deep, for that long, it would pay off in the long run - and it did. The 747 remains one of their most profitable aircraft ever, and they held a virtual monopoly on large airliners for 35 years. Because they looked at the 10 year outlook instead of the 1 year outlook, everybody knows what a 747 is, who makes it, and investors and the company realized excellent profits.
Try doing that today. I dare you. Go to the "markets" and tell them you need $1M, you have a solid plan, but it'll take 5 years for them to see a return. Nobody will talk to you. They will throw you out. (VCs don't count, and don't get me started on some of the crap they do. I have firsthand experience.) It's all "either show me profit next quarter or get out." They don't want to talk to you about something that will show them reasonable profits - if it isn't a virtual cash printing press, they aren't interested. If they can't IPO it for stupid money, no deal.
If AMD was able and willing to take some losses, I have no doubt that they could take their engineering teams and produce a processor that would beat the crap out of Intel's best any day of the week. But it would take them 3 years. And in those 3 years, the CEO would just get the boot from shareholders demanding their money right the hell now. They don't want stable profits in 3 years that last for 5 years, even though that's going to net them more money. They want 20% margins on everything and they want it this quarter or you're fired.
Even I don't consider add two words to something you have already said a response to RW.
That having been said; it seems to me that RootWyrm has strong arguments. Plus; since when are shareholders supposed to have non-public knowledge of the company (which, to you is a requirement before making an "informed argument")? If I were a shareholder (without insider info), lay-offs would give me less faith in my holdings (compared to a potential response of an intelligent strategy of marketing and pricing in response to product reviews).
Also seems kind of ridiculous that this sentence simultaneous proclaims that the speaker *does* know what they are talking about... Trying to waltz in and drop knowledge on us "uninformed" with a guest account is trollish. That having been said, it is futile to argue with a troll.
Also, wow, I don't think I've ever seen such a concentration of buzzwords in a single place before... and I've taken business courses. Thats some pretty impressive CEOing.
The best part is that he is SO informed that he can't tell us where or why we're wrong. Just saying "no, you're wrong, stupid" and nothing else is THE BEST.
I was never, ever, ever taught that.
But you surely understand what he is saying.