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AMD's earnings for Q1 to come in at $1.225 billion USD

AMD is due to issue its Q1 earning report ten days from now, but the company announced today that it will have to restructure its business to compensate for a substantial drop in quarterly revenue. Revenue for Q1 is expected to come in at $1.225 billion USD; down from the projected $1.6 to $1.7 billion USD.

In response to the reduced earnings, AMD will reduce its capital spending by $500 million USD and will "significantly reduce" its discretionary spending. Likewise, the company will limit new hires to "critical" positions.

The restructure comes amidst a resurgent Intel which has been cranking out 65 nanometer quad-core Xeon and Core 2 products while at the same time trimming prices across the board. AMD is still months away from releasing its 65nm response to Intel's quad-core server processors; however, the company has countered on the pricing front which has resulted in ASP erosion.

"They are seeing not only lower [average selling prices], which we would expect from the ongoing price war with Intel, but also 'significantly lower unit sales,' which would imply they are also losing market share," said BMO Capital Markets analyst Brian Piccioni.

News of the restructure was met positively by analysts. AMD's restructuring plans are "modestly positive as management is finally addressing its cash flow issues," said UBS analyst Uche Orji.

As DailyTech reported in early March, AMD was fully aware that it would miss its projected revenue guidance of $1.6 to $1.7 billion USD for the first quarter ending March 31, 2007 -- it was just not known by how much they would come up short by. At the time, AMD CEO Hector Ruiz noted that part of the shortfall was due to a miscalculation on its part for OEM/channel processor distribution.

"In a very short period of time, we went from being four years ago a significant player whose vast majority of products went to the channel distribution and not the OEM channel. In a very short period of time that has flipped to the point now where a vast majority of our products go to OEMs and less to distribution," said Ruiz at the Morgan Stanley Technology Conference in March. "That sort of transition frankly occurred in our view probably faster than we had planned."

AMD's dip in revenue can almost certainly be attributed, at least in part, to the continuing price war between its largest competitor, Intel.  Intel has already announced internally it will continue the war of attrition by cutting the prices of its current generation processors aggressively before AMD debuts its next-genreation K10 architecture. 

However, AMD shows no sign of letting up on the price war either. Just hours after the pledge to reduce spending, AMD also announced it will cut prices on much of its existing processor lineup.

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939>>am2,f
By whickywhickyjim on 4/9/2007 6:50:31 PM , Rating: 1
quote:
AMD's dip in revenue can almost certainly be attributed, at least in part, to the continuing price war between its largest competitor, Intel.


The real reason is that both AM2 and socket F suck. Moving away from 939 has isolated the AMD faithful and few have bought their current deadend lineup. Maybe we'll return when stars comes to market, if it's not also crap.




RE: 939>>am2,f
By FITCamaro on 4/9/07, Rating: 0
RE: 939>>am2,f
By whickywhickyjim on 4/9/2007 10:25:51 PM , Rating: 4
I'm not mad and I did upgrade - I bought the asrock 939 board with the upgrade slot for am2. However, i see nothing compelling to upgrade to am2 over 939. High latency ddr2 offers an imperceivable 2-3% performance gain at a cost premium. AM2 is a deadend because ddr3 and AM3 (with a better memory controller and HT 3.0)will be arriving by the time ddr2 latecies come down to the point where there will be a perceivable performance gain over ddr. Once again, I'm not angry, I'm just choosing to not invest in a lame product line that's going to be replaced shortly.


RE: 939>>am2,f
By Targon on 4/9/2007 7:34:26 PM , Rating: 4
Socket AM2 was a good idea in many ways, as is the plan for socket AM2+ and AM3. AMD could not afford to make it more difficult for OEMs by sticking with DDR memory, so was forced to go with DDR2 memory support. The only way to support DDR2 memory was to go to a new socket type.

So, the socket change really wasn't the source of the problem, it really has been Dell and the other OEMs which get processors for significantly less than distributors. This cut into the ASP for processors.

In addition to this, AMD decided not to release K8L(or K10, whatever it's being called these days) before moving over to 65nm. This delay has affected the ability to sell processors since K8L is a huge design improvement over the current K8 generation. AMD is seen as being competitive in the low end of the market only, and the profits come in at the higher end of the market, which again hurts profits.


RE: 939>>am2,f
By MrBungle123 on 4/10/2007 11:28:38 AM , Rating: 2
ok this is old news but.

K8L = low power version of the K8 chip aka "turion"

K10 = new architecture... barcelona, agena etc.


RE: 939>>am2,f
By KristopherKubicki (blog) on 4/10/2007 1:13:54 PM , Rating: 2
That's what AMD is saying now anyway. It was very clear about a year ago that K8L was the name for Barcelona. It was only recently that AMD changed the story on this.


RE: 939>>am2,f
By knowom on 4/9/2007 7:36:20 PM , Rating: 2
Yeah agree with that AM2 and socket F is killing AMD right now the fact is I don't want to have to upgrade my cpu, mobo, and ram all at the same time. That's the biggest reason why I'm going to switch to a intel for my next upgrade because at least I don't have to buy new ram for that right away not only that it's also better performance with better power efficiency.


RE: 939>>am2,f
By Xavian on 4/9/2007 7:54:54 PM , Rating: 3
Wait a sec...

Doesn't all Core2Duo motherboards use DDR2? So you would be upgrading your CPU, Mobo, RAM whichever way you go.


RE: 939>>am2,f
By coldpower27 on 4/9/2007 8:37:30 PM , Rating: 2
There are cheap motherboards that can handle DDR and AGP which support Core 2 Duo.


RE: 939>>am2,f
By Samus on 4/10/2007 5:09:09 AM , Rating: 2
Yep, VIA makes a dual memory chipset. I have an ECS board with it and run DDR400 and a Core2 E6300 overclocked to 2.53GHz.

Absolutely stable, near identical to the performance of my equivilently configured i975 DFI Infinity rig (same processor, DDR2-800 overclocked to 903MHz (don't ask, part of the multiplier puts it at this memory speed to run at 2.53GHz as well)

The board was $43 bucks at Fry's, but, mine has an AGP slot. I'm sure they have one's with PCI-e


RE: 939>>am2,f
By herrdoktor330 on 4/9/07, Rating: 0
RE: 939>>am2,f
By AlexWade on 4/9/2007 10:33:42 PM , Rating: 5
quote:
I hate to say it, since I've been a faithful AMD customer for a while, but it was a bad idea to put the memory controler on the chip.


WHAT! It is such a bad idea that Intel is putting it on their next generation of CPU's. It was a major reason AMD outperformed anything Intel for years. Putting the memory controller on the chip was the best thing AMD did!


RE: 939>>am2,f
By whickywhickyjim on 4/10/2007 12:50:13 AM , Rating: 2
agreed


RE: 939>>am2,f
By Master Kenobi (blog) on 4/10/2007 9:30:16 AM , Rating: 3
But as Intel has proven, it might have been a good idea, but it isn't the end all be all. Intel seems to have worked around it in the Core 2 lineup.


RE: 939>>am2,f
By edge929 on 4/13/2007 12:15:07 PM , Rating: 2
Now just imagine what your Core 2 could do with an integrated memory controller...


RE: 939>>am2,f
By Pryde on 4/9/2007 10:44:02 PM , Rating: 2
I have to agree sort of here.

People who were going to upgrade from 939->AM2 would have needed to buy Mobo, CPU, Ram and possibly GFX card if you were still using AGP.

Instead people took the path of Intel C2D 775. a E4300 or E6300 when over clocked are amazing value for money and all that is needed is a after market air cooler.

775 does cost a little extra than AM2 but you get better value for money with 775.


$500,000
By Mudvillager on 4/9/2007 6:17:04 PM , Rating: 2
Isn't that pennies to a company as big as AMD?




RE: $500,000
By osalcido on 4/9/2007 6:27:34 PM , Rating: 2
not when your revenue is 500 million dollars lower


RE: $500,000
By wrekd on 4/9/2007 6:27:36 PM , Rating: 2
It should read $500,000,000


By thepinkpanther on 4/10/2007 4:57:45 AM , Rating: 2
1. Lets say AMD and ATI goes down.

Likely Intel could go in and buy ATI for cheap money!
Or they could just let it die and continue with nvidia.
Intel knows that cpu always comes before gpu. So if a customer has to shell out big money for the cpu it just affects the gpu market and not the cpu market.

If Nvidia dies then Intel will go in and buy the company for the technology, workers etc.

The biggest threat to the computer world is if amd dont get a new processor in the k10 or barcelona, fusion chip and what they are called that can actually compete with intel also in the idle, workload areas. At present time the duo cores from amd just uses WAY to much watts compared to Intel.

NOBODY wants AMD to shut down. Fan boys without any economical sence or not aware of competition enhances developement are the only ones that would like it.

I would reall