AMD has told Globalfoundries to stop making so many of its chips because no one is buying them.
According to Bloomberg, AMD has formally reduced chip orders from supplier Globalfoundries as part of a cost cutting move to preserve cash during a PC-market slump.
AMD thinks that it will only buy wafers from GloFo for about $115 million in the fourth quarter. This deal replaces one where AMD would buy $500 million of chips.
In October, AMD forecast fourth-quarter sales that fell short of analysts’ estimates, putting the company on course for its fourth consecutive quarterly sales decline.
Analysts such as Sanford C. Bernstein’s Stacy Rasgon predicted that, if the trend continues, AMD would run out of cash reserves.
AMD agreed, saying that liquidity and cash management remained a key focus for AMD.
Interim Chief Financial Officer Devinder Kumar said on a conference call that AMD would go bacl to the days of actually generating cash from operations in the second half of next year and can stay close to its target level of $1.1 billion in cash reserves, he said.
Terminating the contract to reduce the payments will cost AMD $320 million, to be paid off by the end of 2013.