The company, which makes processors for PCs and servers, could let go 20 percent to 30 percent of its employees within coming weeks, according to people familiar with the matter, though they added that the number of affected workers might also be lower.
AMD may announce the move -- its second big staff cut in the past year -- as soon as next week. It reports quarterly earnings Thursday. AMD had 11,737 employees as of the end of the second quarter, the company said in a financial table on its Web site.
An AMD spokesman declined to comment.
The chipmaker, whose shares hit a multiyear low today, has been struggling of late. Rival Intel has been dominating the PC and server markets, while graphics competitor Nvidia has gained strong traction with its latest GPU. It doesn't help, either, that the overall computer market has been slumping badly.
AMD laid off about 10 percent of its staff a year ago. At the time, the company said the move would allow it to focus on new growth areas such as lower power processors.
AMD yesterday preannounced its third-quarter results, saying its revenue would decline about 10 percent sequentially instead of being down 4 percent to up 2 percent as it earlier projected. It cited weaker-than-expected demand across all of its product lines due to the challenging macroeconomic environment. Rival Intel last month also cut its guidance, which it blamed on the rough market.
The PC industry -- the most important market for Intel and AMD -- has slowed of late as consumers hold off on computer purchases in favor of smartphones or tablets. Tech research firms Gartner and IDC earlier this week said third-quarter PC shipments tumbled more than 8% year-over-year, worse than either firm predicted. And the computer industry is also poised to decline this year for the first time since the dot-com bust in 2001.
Meanwhile, Intel and AMD are both struggling to adapt to changes in the broader technology industry. They have traditionally competed against each other to provide processors for PCs and servers, and against Nvidia in graphics. But they now face new rivals, like Qualcomm, that have traditionally built low-power chips for phones.
Intel has made a big push into the mobile market, and it is gradually starting to garner some design wins. AMD, meanwhile, doesn't currently offer a processor to address tablets, not to mention smartphones. Earlier this week, it said its chip for tablets would launch this year in conjunction with Windows 8.
While AMD has been hit by a slowdown in PCs, it also has been dogged by missteps in its operations. It wasn't able to manufacture enough chips to meet demand for a period last year, something that hurt its sales. It has since resolved those production problems.
Still, concerns linger that AMD's woes may be company specific, not just a byproduct of the difficult economy.
Bernstein analyst Stacy Rasgon earlier today questioned whether AMD is close to a bottom or if the market is "watching a slow-motion train wreck."
"AMD remains a fundamentally risky choice in our view, and given several ugly quarters, shares are likely to be dead money for some time," he noted.
Updated at 3:10 p.m. PT with additional background and analyst comments and again at 3:45 p.m. PT with information about the current headcount.