The chip producer AMD is planning a reduction in its workforce, with 3% total layoffs. It had deep financial problems even before the economy soured, losing $5.6 billion over the past eight quarters, and Wednesdays announcement says more about the Sunnyvale-based companys anxiousness to improve its balance sheet than the effect of the economy on the chip industry as a whole.

AMD is the worlds No. 2 maker of computer microprocessors, the electronic brains of personal computers, and most of its pain lately has been self-inflicted: The company has been hurt by product delays and a costly acquisition, both of which have contributed to heavy losses and allowed bigger rival Intel Corp. to gain more ground. Intel owns about 80 percent of the worldwide microprocessor market; AMD has essentially the rest.

AMD said Wednesday it had already notified all U.S.-based employees who were being laid off in the latest round of cuts.

The job cuts will affect all AMD departments worldwide except for the companys manufacturing operations, which have roughly 3,000 employees and are being spun off into a separate company, spokesman Michael Silverman said.

AMD revealed last month that it struck a deal to spin off its factories by creating a joint venture with an investment arm of the Persian Gulf state of Abu Dhabi. The new company will take on the responsibility of producing AMDs chips, which reduces the costs to AMD of manufacturing cutting-edge microprocessors.

The deal, expected to be complete by January, is seen as a necessary move to help AMD improve its finances.

The cuts announced Wednesday come after AMD cut 1,600 workers earlier this year.

In July, AMDs CEO Hector Ruiz stepped down after six years on the job as pressure mounted to turn the company around. He was replaced by Dirk Meyer, then the companys president and chief operating officer.

The moves have done little to appease Wall Street.

AMDs stock price fell as low as $2.65 per share on Oct. 28, a mortifying drop of more than 90 percent since early 2006, when AMD shares traded above $40 as the company was enjoying big market-share gains against Intel. Intel regained its footing with strong new products and benefited from several AMD missteps.

Investors arent expecting AMD to turn a profit soon.

AMD shares fell 25 cents, or 6.6 percent, to $3.55 in regular-session trading Wednesday. After the layoffs were announced, the shares fell another 6 cents to $3.49 in after-hours trading.

Source: iades