"We want to lower our break-even point," said Morris Denton, an AMD spokesman.
"There's really only a few ways to do that, one way is through lowering operating expenses. Some of those lowered operating expenses will include workforce reductions," he said.
The company is expected by industry analysts to lay off 10% to 15% of its workforce of 13,000 employees, but this was not confirmed.
The company said during in its third-quarter earnings that it expects revenue to increase 20% in the fourth quarter based on its efforts to correct inventory problems, and amid strong seasonal demand for PCs and flash memory.
An increase in production, coupled with a drop-off in demand in the first half of the year resulted in AMD having to cut production during the third quarter to correct channel inventory levels.
Market research company Investec expects AMD's revenue to come in at $600m (£383m) in the fourth quarter, and the company to post a loss of 54 cents a share. Consensus estimates as polled by Thomson Financial/First Call predict a loss of 45 cents per share for the fourth quarter.
Investec director of electronics research Eric Ross expected AMD to cut jobs beyond the reported 10% and said the company will still need some kind of financing event to stay competitive.
AMD has no plans for selling off business units, Denton said. The company really only has three main businesses, its Athlon and Duron microprocessors, its flash memory business, and its Alchemy wireless chips division.
The company's road map for future products will be unaffected by the expense cuts, Denton said. AMD still remains on track to deliver its Hammer processors for servers and desktops in the first half of next year, and will introduce a new Athlon XP with its higher-cache Barton core in the first quarter of 2003.
The reasons behind AMD's struggles are apparent, said Peter Kastner, chief research officer at Aberdeen Group. "AMD has been struggling to maintain market share against an onslaught of new Intel products, as well as significant price cuts from Intel in late August."
Only within the past week have AMD processors appeared on Aberdeen's survey of value PC configurations, which can be found on its Web site, Kastner said. AMD's last few processor launches were notable for the gap between the product's announcement and its availability in systems, which AMD has made sure to state when launching the chips.
The most recent processor to appear in retail from AMD is the Athlon XP 2400+, Kastner said. That processor was announced in August.
"AMD needs a retail presence outside of the white box market in order to regain and extend the market share gains it made last year," he said.