AMD To Close Plants, Lay off 2300, Lose Gateway

cdrudge writes: "According to this article on CNN, AMD will be closing 2 plants in Austin, TX and also their operations in Penang, Malaysia due to slack demand. 2300 jobs will be cut in the process. The same article mentions Gateway dropping it's 'Select' line of computers. Their 'Select' line of computers were Gateway's only AMD-based systems. A Gateway spokesperson said 'We're consolidating all of our offering behind Intel, which was the biggest part of our mix already.'"

Comments

Hey if that still fails

[SpanishInquisition]

They can still enter the 'heating componment' market.

For Gateway, Intel = cheaper

[Brento]

Here's a quote that stands out in the article:

Separately, embattled PC maker Gateway (GTW: down $0.10 to $6.07, Research, Estimates) said Tuesday it will phase out all of its systems based on AMD processors as part of its broader cost-cutting efforts.

It's cheaper for them to just source Intel CPU's and motherboards than to run two product lines, basically. I'm stunned that the price difference in the CPU alone wouldn't be enough to keep Gateway using AMD, but there you have it. For once, Intel is a cheaper decision.

Re:For Gateway, Intel = cheaper

[garcia]

Intel is still not less expensive. It is absolute bullshit to think that AMD wouldn't be a better choice for Gateway to sell.

The problem here is a lot similar (at least in my eyes) to the Pepsi/Coke college thing. Pepsi came on campus here at BGSU and gave them $8 million dollars to take PepsiCo as the main supplier of soft drinks (rather than having both like they did before).

Intel is pulling the same bullshit. They want to squeeze out the competition so they best way to do that is to force large outlets of computers to stick w/one chip vendor.

I consider this very unethical.

I don't know if this is exactly what happened in this case (but I can only assume that it is)

I can't see why people would want to spend more money for less output on an Intel machine when the AMD is tons cheaper and faster.

Yes, yes, we know the public is misinformed and really believes that clock-size is important but price is what gets most people.

AMD still wins there.

Bad choice Gateway.

Re:For Gateway, Intel = cheaper

[phillymjs]

For once, Intel is a cheaper decision.

Perhaps Intel made Gateway an offer they, in their increasingly-desperate financial straits, could not refuse. An offer like, "If you exclusively sell machines based on Intel processors, we'll give you a significant discount over what you'd pay if you offered your customers a choice."

This is a Microsoft tactic from way back, used with great effect to obtain their OS monopoly. The Microsoft File gives a detailed account of them using this tactic to stop Vobis, a German PC maker from offering DR-DOS. Microsoft gave Vobis a huge discount on the then-new Windows 3.x if they would exclusively sell MS-DOS and stop distributing DR-DOS.

~Philly

Re:For Gateway, Intel = cheaper

[MikeTheYak]

What case would that be? A few years ago, the DOJ investigated Intel on antitrust measures. Intel and the DOJ quietly settled out of court; no harm, no fuss. Considering that AMD DOES make an Intel-compatible product with around 20% marketshare, I don't think you can really show that Intel is a monopoly, even if you restrict yourself to looking at Windows-compatible processors.

The previous poster admits that he has no evidence that Intel is doing anything illegal, but assumes that they must be anyway. I find this to be just a teeny bit presumptuous. Intel may have simply offered better terms than AMD. Since Gateway only has to pass the cost of CPUs on to the consumer, I don't think that price/performance is so much the issue as a streamlined manufacturing pipeline and/or a worry about public perception.

And yet more slashes to the crippled workforce

[weslocke]

That brings it up to what? 30,000 or so lost jobs over the last couple of weeks? Definitely not very encouraging.

Though on another note, it's very disappointing to see Gateway abandon AMD in favor of Intel. Considering that the AMD processors have a tendency to 'whoop the crap' out of comparable Intel chips (when you factor in the cost, especially) it seems that AMD would've been more logical as a "More bang for the buck" system.

Would anyone like to guess what sort of 'Incentive' was offered by Intel?

Re:And yet more slashes to the crippled workforce

[FFFish]

I really suspect that the job cuts that have been happening in industries in all sectors are more opportunistic than realistic.

By which I mean that these people have been deadwood for a good long time: it's just that while the stock market was rewarding those companies unjustly during the boom, those companies couldn't cut their workforce without severely impacting their stock value.

Now that everything is in the shithole, it's real easy to trash employees: hell, it's even desirable to drop the stock price, so that the company can buy it back for resale at a far greater value once the market recovers!

In support of this, look at the number of companies writing off intangibles. They're deliberately beating down their stocks, or at the very least don't care whether the stock drops any further.

Finally, the one big question I have is this: how the fuck do you end up with thousands and tens of thousands of excess employees? You'd have to be insane to retain that many staff when they're unnecessary -- why weren't they being hired/fired in trickles and dribbles, as the company needed/didn't need them? Makes more sense than the freaking cattle-calls they must have chosen when hiring en masse.

One last note: while being fired is stressful, many of these people are skilled and creative. It may take them a few months to get over the loss, but once they do -- look out! We're going to see entrepreneurship skyrocketing!

I think that's pretty exciting. There's going to be a lot of innovation over the next few years. Gonna drive the economy to new heights!

Not to sound like a nay-sayer...

[Rev.LoveJoy]

But with the power glut that's become the norm of a 'household' PC and the general economic slow down of late, news like this strikes me as making sense...

However, the line about Intel "aggressively pricing" their P4's is just so much CNN tripe. A quick look at Sharkey's Extreme Weekly CPU prices shows this to be BS.

(hint: top of the line AMD - 100 bucks, Intel -- 500 bucks)

- Cheers
- RLJ

I'm no economist

[sllort]

'We're consolidating all of our offering behind Intel, which was the biggest part of our mix already.'

So, because consumer spending is down, Gateway is discontinuing its' discount line of computers. Because consumers want to buy more expensive computers when the economy is in trouble.

I must be missing something.

While the price war has left scars on each company, AMD's wounds have been more severe than its larger, deep-pocketed rival.

Now is the time for Intel to use all of its' financial muscle to crush AMD once and for all. This is capitalism. If Intel can continue bleeding longer by slashing prices below manufacturer cost, AMD will eventually run out of money. Once the economy picks back up, Intel will look out on the sunny pasture of monopoly, where it can play in peace with Microsoft now that the U.S. government has said "OK" to monopolies.

My advice: buy Intel stock.

big deal

[TheSHAD0W]

Yes, I heard AMD was going to close 2 fabs, and take a $100 million charge against earnings. I also heard it'd save $125 million a year doing it. Getting your money back in ten months isn't a bad thing.

As for Gateway, most of the people who buy them are the ones who are charmed by the sexy "Intel Inside" logo. Those of us who know better don't buy from Gateway anyway.

Just accelerating plans...

[Freedom Bug]

There's not much unexpected here.

The plants being closed were mainly used for foundry business. AMD does not want to be a foundry: the TSMC's of the world do that much better, and AMD wants to focus on their core competencies: processors and flash. The foundry business is almost accidental. It generally comes from AMD spinoffs designing communications and analog IC's who were transitioning to traditional foundries. Now they'll just have to transition faster.

The Gateway move was also not unexpected. Gateway is in lots of trouble. They want their big friends (Intel) to help them out, and so they are demonstrating their loyalty to their big friends.

Bryan

Not the end...

[rkischuk]

AMD clawed its way up on the merits of its products and zero OEM arrangements. In some ways, not having OEM arrangements is good, since computer manufacturers bully their suppliers down to razor thin margins. NVidia's increasing support for AMD should push things along in the end-user/gaming market, and the new multi-processor chipsets are helping AMD crack a market they've hardly touched - the server market.

The plants they are closing are their oldest plants, and coincide with a reduction in output that has been seen throughout the sector. It is even possible that it was becoming increasing difficult to find current products that these fabs were capable of producing.

This isn't the end of AMD, it just means they won't be posting earnings of 50 cents a share each quarter for a while. Intel's feeling the same crunch, and AMD's still got some decent cash reserves.

Talked to an AMD Rep

[strictnein]

Sell computers for my job (in addition to being a full time CS student). I talked to the AMD rep who comes to our store. He had threemajor points:

One: no new processors from AMD anytime soon. Just renaming the processors and removing mention of the Athlon name (AMD 1600 for the 1.2 GHz, AMD 2100 etc).

Two: They are making a killing in the corporate market.

Three: There next big focus area is the laptop market. This will be the only place with "new" AMD processors. Most likely people will see more 1.0 GHz+ AMD based laptop systems soon.

Here's an Idea

[ClubPetey]

This might be a little off-topic, but as far as I see it, the problem with Gateway not being able to support a line of computers that does sell that many, is the support cost behind it. You need AMD-knowledgeable tech support, different MoBos, different assemblies, etc.

Dell, IBM, etc. all have the same problem. And it all seems to be related to the fact that the support costs for a low-margin, low-sales product line is too high. So why are the costs so high? From my experience, it's customer support. Too many people don't know how to use a computer and call (harass) the computer companies tech-support for the most minor of issues.

So I was thinking... let's turn it around. Create a computer company for smart people. Do not offer tech support. Do not offer customer service (outside of basic order processing) Just assemble and ship the product. If you don't know how to use it, don't buy it from us. A side benefit of this idea would be that "hard-core" computer geeks can stop wandering from site to site to build their computers. Since there's little over-head to cover, prices will stay cheap.

The same idea can be applied to ISPs. The major cost of an ISP is the customer support staff to go along with it. I'm sure there's a LOT of people out there that would gladly save 10%-25% of their Internet fee in exchange for having no customer support (since most people-in-the-know don't use it anyway).

AMD Products

[mach-5]

I will continue to purchase and recommend AMD products for my customers. Just because Gateway is leaving them behind doesn't mean the rest of the world should too. Buy what you think is best, and what you can trust.

I wish people would stop saying the word recession

[Ghoser777]

I remember when Bush kept talking about our economy being on the path to a recession several months ago. It sent chills down my spine everytime he said it. What kept the boom economy of the 90's going was what Alan Greenspan called "Irrational Exuberance" - people where so confident in the economy that they invested more than any economic indicator would have shown.

But now, if we start talking about out economy in a negative manner, we're settings us up for "Irrational Fear," where people think the economy is worse than it really is and pull lots of money out. Just the word recession can get stock holders antsy.

One of the main reasons that several business are now having problems is that a lot of people are holding onto more of their money instead of spending it and putting these people to work. Recession -> hold onto money -> more job cuts -> more recession -> hold onto more money -> ...

I don't have to remind programmers what happens to their apps when they get stuck in infinite loops...

F-bacher

Re:This doesn't mean anything!

[b0r1s]

the ability to overclock a chip says nothing for the quality of that chip .... i've never seen anyone throw away a processor out of a sun box because it couldnt be overclocked... besides, nobody overclocks in real situations, as it's known to cause computational errors. So, go ahead, buy your cheap $50 durons, and coverclock them to your heart's delight, but realize that that is NOT how businesses who buy systems operate, and what works in your house doesnt work for large companies.

Re:Capitalism in Action

[zhensel]

Your forgetting that it's mid-september and this kid just aced his first econ 101 test. Let the flurrish of economic knowledge continue.

Blame it on the Gateway cow!

[peter303]

In those recent Gateway TV commercial a cow has
been telling the Gateway CEO how to run his business.