Summary
Advanced Micro Devices, Inc. (AMD) filed an 8-K on December 29, 2008, reporting significant restructuring and impairment charges. The company is implementing a plan to reduce its ongoing cost structure, which includes the termination of approximately 600 employees and other cost-reduction actions. This restructuring is expected to result in a pre-tax charge of approximately $70 million in the fourth quarter of fiscal 2008, with a substantial portion ($45 million) leading to cash expenditures in fiscal 2009. Furthermore, AMD announced a material impairment charge related to goodwill from its 2006 ATI acquisition. This is attributed to a weaker long-term financial outlook for the former ATI businesses, current market conditions, and a reduced market capitalization. The exact amount of this goodwill impairment is yet to be determined but is expected to be material. Additionally, the company will record an other-than-temporary investment impairment charge of approximately $20 million related to its investment in Spansion Inc., driven by a significant decline in Spansion's stock price.
Key Highlights
- 1AMD is undertaking a significant restructuring plan, including approximately 600 employee terminations, to lower its cost structure and achieve a lower operating break-even point.
- 2The company expects to record a restructuring expense of approximately $70 million in Q4 2008, with about $45 million to result in cash expenditures in fiscal 2009.
- 3AMD anticipates a material goodwill impairment charge related to the 2006 ATI acquisition due to a revised long-term financial outlook and market conditions.
- 4The specific amount of the goodwill impairment charge is not yet determinable but will be disclosed once estimated.
- 5The company will also incur an other-than-temporary investment impairment charge of approximately $20 million on its investment in Spansion Inc.
- 6These charges are being recognized in the fiscal quarter ended December 27, 2008, and will impact the company's financial statements.
- 7Further cost reduction actions are expected in the first half of fiscal 2009, with additional charges to be disclosed when estimable.