AMD makeover moves show limited choices in slump

Slumping sales, big layoffs and devastated stock prices are becoming the norm, resurrecting memories of the malaise that gripped the Valley for years after the dot-com meltdown in 2000.

Chip makers delivered the latest installment this week in what is becoming a litany of bad news from the technology sector. Intel Corp. and National Semiconductor Corp. both slashed their sales guidance, and National Semiconductor and Applied Materials Inc. said they will cut a combined 2,130 jobs. Intel imposed a hiring freeze.

Semiconductor companies' fortunes say a lot about the health of other tech industries, because slowdowns in chip sales can reflect slumping demand for everything from personal computers to cell phones.

Meanwhile, Silicon Valley icons Yahoo Inc. and Google Inc. are also suffering. Shares of Yahoo, which is cutting 1,500 jobs, are trading around $11 per share, a third of the price that Microsoft Corp. was willing to pay to buy the company last May. Google's shares sunk to a 52-week low of $287.76 this week after trading above $700 a year ago.

Poor execution and a heavy debt load at AMD have allowed Intel to inflict severe damage on its smaller rival since 2006. The world's No. 2 maker of microprocessors, AMD has lost $5.6 billion over the past eight quarters.

AMD's story about how it plans to reverse course offers a look at the drastic moves other struggling companies might have to consider if their problems worsen, from hacking off parts of the business in an effort to save costs to re-pricing employee stock options that are now worthless.

"We've had enough of losing money," the company's new CEO, Dirk Meyer, told financial analysts Thursday at the company's Sunnyvale headquarters. Executives were unveiling new server chips and outlining AMD's plans for financial recovery.

The company has already changed CEOs, announced 2,100 layoffs this year and is cutting back on expenses. Travel is scrutinized more and even cell phone and computer upgrades for employees are being delayed. Ironically, scaled-back spending on computer upgrades at other companies is a big reason chip makers are struggling in the downturn.

AMD is also banking on some unusual strategies, highlighting the contortions that other deeply wounded companies might have to undertake in order to find funding and survive.