AMD's Penny Pinching Pays Off... For Now

Last Updated Nov 20, 2008 9:50 AM EST

On the same day Intel chopped $1 billion off its fourth quarter sales target, its nearest rival, Advanced Micro Devices, said its business was just fine. And as it turns out, the financial health of AMD, the world's second largest semiconductor maker, owes a lot to its caution in buying chips for its own use.

Unlike so many companies that are just now starting to shift into recession mode, AMD has been ruthless about spending for some time. AMD's year-long makeover owes a great deal to a corporate culture that did a lot more than pay lip service to cost cutting -- one, in fact, that found costs to cut around every corner and, it seems, on every employee desktop:

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.
Yes, AMD has also undertaken a major restructuring that included the spinoff of its manufacturing operation and a cash infusion from an Abu Dhabi sovereign wealth fund, that's probably worth a lot more in the long run than some delayed employee computer upgrades. But in punishing economies like the one we're in now, every bit really does count, including mundane things like coach flights for executives and computers for rank and file employees that work just fine, but perhaps a little slower than you'd expect from state-of-the-art chips.

Clearly, cost-cutting moves that spare the bottom line are one thing, while sales are another. Judging from the response to the fact that AMD hasn't followed Intel in issuing a revenue warning, a lot of people are still skeptical. AMD has decided to wait until Black Friday, the day after Thanksgiving that traditionally kicks off the holiday shopping season, to get a better grasp of how the fourth quarter is likely to go down:

Bargain-hunting consumers are AMD's core audience, while Intel does far better with higher-end consumers and businesses. Holiday buying will surely take a hit this year.... But if enough coupon clippers show up on Nov. 28 to buy cheap PCs, AMD could get a boost.