Double trouble for AMD

Struggling PC maker Gateway will part ways with chipmaker Advanced Micro Devices once again.

AMD separately announced Tuesday that it will lay off 2,300 workers by the end of the second quarter of 2002--or 15 percent of its work force--and close two fabrication facilities.

Looking to cut costs, Gateway will eliminate sales of its Select line of Athlon-based PCs over the next "couple of months," Gateway spokeswoman Lisa Emard said Tuesday. Gateway will also re-brand its PCs, replacing the Essential, Performance and Professional brands with 300, 500 and 700 labels.

The move marks another blow to AMD, which has seen its fortunes change with the decline of the PC market.

"This was a premier customer in AMD's target market," said Ashok Kumar, an analyst at US Bancorp Piper Jaffray. Kumar estimates that Gateway accounted for 5 to 6 percent of AMD's processor sales.

A year ago, AMD was gaining market share and trying to establish a foothold in the U.S. corporate market. Since then, the slow PC market, price cuts from Intel and the need for PC makers to simplify their product lines have begun to constrict the outlets for AMD chips, although its market share remains higher than it was a year ago.

IBM phased out AMD chips in computers sold in North America and Europe over the summer, and MicronPC announced it was solidifying its line behind Intel. With Gateway stepping aside, Hewlett-Packard and Compaq Computer become the only top-five PC companies in North America to market the company's chips, and they are planning to merge.

In August, AMD confirmed it expects an operating loss during the current quarter.

News source: ZDnet

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