NEW YORK -- Shares of Advanced Micro Devices dropped to their lowest point in more than three years on Friday as a pair of analysts downgraded the chipmaker after it announced it will cut nearly 1,800 jobs by the end of the year to reduce spending in the face of dwindling sales. Its third-quarter results also missed analysts' estimates.
THE SPARK: The job cuts at Advanced Micro Devices Inc. represent about 15 percent of its workforce.
The Sunnyvale, Calif., company also reported on Thursday that its third-quarter revenue dropped to $1.27 billion from $1.69 billion. It lost $157 million, or 21 cents per share, in the quarter in contrast to net income of $97 million, or 13 cents per share, a year earlier. Excluding certain items, AMD lost 20 cents per share.
Analysts polled by FactSet forecast a loss of 13 cents per share on revenue of $1.28 billion.
AMD also provided a disappointing fourth-quarter revenue forecast.
THE ANALYSIS: Stacy Rasgon of Bernstein Research said that AMD's quarterly performance was worse than expected. The analyst said in a client note that she now sees potential for structurally lower margins, and that AMD may burn through cash.
Rasgon also believes that the job cuts that were announced will be "significantly disruptive" to the company.
FBR Capital Markets & Co.'s Craig Berger said that the job cuts will make it harder for AMD to engineer and sell competitive products.
Both Rasgon and Berger lowered AMD to "Market Perform from "Outperform." Rasgon slashed AMD's price target to $2.50 from $4, while Berger reduced it to $3 from $5.
SHARE ACTION: AMD's stock tumbled 38 cents, or 14.3 percent, to $2.24 in afternoon trading. Earlier in the session the stock dropped as low as $2.21, the lowest it's been since March 2009. The shares have lost more than half their value since the beginning of the year.