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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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By whickywhickyjim on 4/9/2007 6:50:31 PM , Rating: 1
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 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
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

RE: 939>>am2,f
By Master Kenobi 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.

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 really like it if IBM stepped in and bought AMD.
They are the best tech company in the world, and proves it time after time. Intel is a dead fish then....and the other situation happends

By Master Kenobi on 4/10/2007 9:37:26 AM , Rating: 2
AMD could not possibly go under. Intel would pull a "Microsoft" and invest in AMD enough to keep them floating. If AMD were to go under, Intel would be slapped with so many Anti-Trust or Monopoly suits their head would spin.

No, AMD's best bet right now is to consolidate, and pick a market segment like the low/mid stream and market and sell for that. Let Intel have the high/top end. AMD lacks the manufacturing and R&D capability to compete with Intel on the high end and on the cutting edge right now.

Best bet is to carve out their segment of the market, make their money there, and once they grow themselves out a little more, then try and take a shot at the top dog. AMD needs to grow out its manufacturing capacity and it's R&D budget/capability before expecting to go toe to toe with Intel. Intel being much larger can adjust certain areas quickly and respond to AMD while maintaining current operations. AMD just doesn't have enough manufacturing capacity to adjust to demand without having to make cuts elsewhere. In time perhaps, but not right now.

By edge929 on 4/13/2007 12:22:23 PM , Rating: 2
AMD going down is the WORST thing that can happen for consumers. If it wasn't for AMD, we wouldn't of had C2D this early and if it wasn't for Intel, we wouldn't have seen K8 when we did.

For those of you who own C2D, make sure to postmark your thank-you letters to AMD before K10 comes out.

Path to Victory
By rupaniii on 4/10/2007 9:32:18 AM , Rating: 2
I'm sorry, but Intel announcing they will put graphics on a processor and call it a competitor to Fusion is a joke. Fusion is much bigger. Imagine Series 8 Opteron Fusion processors?
And, Socket F AMD PureStreaming Processors to boot. A processor blade of Fusion Opterons with Streaming Processors on blade in the same sockets, all with HT3 is a powerhouse for research. An Intel Xeon with Graphics in 4 way configurations is not as compelling.
On the workstation market, i'm sure Toms and Ars and others will power their Boinc servers with some Dual Socket Quad Core (2x K10 2xATi) as well. I'd be happy to contribute that kind of extra processing to the world. Also, my friend Jack (last name is Asian) is back in Taiwan now at NUOT and has a real budget, he wants these kinds of servers for his department's research.
Finally, I want to power my Shuttle X100h replacement with a single, lower power chip, that has real graphics horsepower, and have room for 4GB RAM and a bigger Hard Drive. One Quad Core Fusion Processor should do nicely. Oh, and it should give me room on the PCB for a SBXFi chip i hope as well (No Media Center should be without it).

RE: Path to Victory
By Master Kenobi on 4/10/2007 9:51:42 AM , Rating: 3
I do believe you need to sit yourself down and examine reality. AMD has right now concepts and ideas, nothing has been ironed out. The fact that your practically wetting yourself over a few words from AMD shows you aren't thinking with a level head. Think for a moment and recognize that until AMD has some prototypes of the technology in a working capacity, that it's just speculation. Also recognize that Intel advances quicker than AMD. If/When Fusion makes it to market, Intel could also be bringing a competing design to market as well. It's possible for either one of them to out-do the other as right now it is all theoretical. There is not even a prototype design at this point.

I suggest a "wait and see" approach.

AMD = Johnny Bench
By Ben on 4/9/2007 11:42:23 PM , Rating: 2
AMD needs to get off the bench, and soon. Until now, AMD has been cruising along on the highway that Jerry Sanders built for them. Hector has run out of road and he doesn't know what to do.

Say What?
By Hydrofirex on 4/11/2007 11:43:58 PM , Rating: 2
AMD's dip in revenue can almost certainly be attributed, at least in part, to the continuing price war between its largest competitor, Intel.

I'm well aware they dabble, but really? What other competitors does AMD really have? And, what do you mean by "in part"? Where else did AMD's business decline? As far as I'm aware they were hitting or surpassing earnings projections before Core 2. That is why AMD is loosing market share, and that is the entire story here.


(that and the fact that Intel really has not only delivered a better product, but a massively better one. Further, there has been no responce from AMD - and there is no certain time that one will arrive.)


The sky is falling, the sky is falling...
By cornfedone on 4/9/07, Rating: -1
By CrystalBay on 4/9/2007 6:46:50 PM , Rating: 2
Tell that to 3defects and Cyrix...

By threepac3 on 4/9/2007 6:47:52 PM , Rating: 1
Well the fact is Intel is pushing as hard as it can to hurt AMD. AMD will be releasing there new top of the line product the K10, amongst cheap Core 2's. And still may not have a decisive performance increase over them.

By Spartan Niner on 4/9/2007 7:33:45 PM , Rating: 2
The reality is the PC industry is struggling with lack of demand in most markets except emerging markets. Few people need a new PC every two years. This should not be rocket science when you have a saturated market. See the U.S. auto industry for an example of same problem.

If market saturation is indeed the problem, then there's a solution that's as old as the Ford Model T: create demand through marketing. In our post-Fordist consumer society marketing creates the demand for things we "don't need" but we certainly, certainly want.

In any case the U.S. auto industry faces quite a bit of import competition from Japanese, Korean, and European-made cars, so the market and its demands are quite a bit different than the microprocessor industry. Cars are what we would term "durable goods" and generally last many years if well-maintained. They do not simply become obsolete or worthless overnight. Microprocessors, on the other hand, have a brutally short life-span in comparison, and become obsolete rather quickly. Marketing departments are always quick to capitalize on the "new" capabilities of the next generation of processors, and thus create a demand for the new parts...

RE: The sky is falling, the sky is falling...
By DallasTexas on 4/9/2007 7:50:47 PM , Rating: 3
"..The fools on Wall Street and in most forums have no clue what is happening in the PC industry,.."

Seems to me the fool is you since you have no idea what is happening at Wall Street. They are securities "renters" not "owners". AMD screws up, they pay the price. Very simple.

"..The reality is the PC industry is struggling with lack of demand in most markets except emerging markets. .."

The PC industry is still growing at double-digit growth. Not bad for a industry that ships several hundred million units per year. The problem is AMD, not the PC industry.

"..When all the prognosticators are through with their B.S. AMD will still be kicking Intel in the balls, blah blah.."

AMD had their moment of fame, that was last year. They got cocky, put up billboards poking fun at Intel, challenged Intel to a street brawl late last year. perhaps things would have been a little different if they just stuck to their knitting, and stop pretending to be an Intel -- they're not, and they never will be.

By crystal clear on 4/10/2007 3:47:44 AM , Rating: 1
Gartner analysts expect Intel to re-capture losses in market share in 2007 with their new product offerings !

RE: The sky is falling, the sky is falling...
By SleepNoMore on 4/9/2007 11:25:39 PM , Rating: 2
Get the picture. The sky IS falling. And I've been AMD all the way since 1998. I've got 7 AMD PCs all through my house. I can adjust and show loyalty to keep competition alive - but only up to a point and then I feel like a fool. An Intel E6600 looks mighty good right now. I WANT AMD to survive, but not as a charity case. They need to either renegotiate their loan with Morgan Stanley or run to IBM or someone they can form an alliance with for survival while they bring something better to market. The sad part about this is, if Intel succeeds in running AMD out of business (more likely defaulting on financing - I think it'd take about 12 - 18 months), then Intel would do what it does best: get fat and lazy and let innovation freeze to a halt. I wouldn't be surprised to see exorbitant chip price increases if Intel had the place themselves. AMD has been the best thing that happened to this industry as far as scaring and motivating Intel's fat ass. Some companies do their best with their backs to the wall. I'm hoping for some kind of saavy miracle on AMD's part. The market needs real competition.

RE: The sky is falling, the sky is falling...
By Regs on 4/10/2007 10:36:43 AM , Rating: 2
It has not been any better with AMD either. The only thing they came up with was the A64 4 years ago and ever since then, the market was stagnant until the Core Duo arrived.

By Regs on 4/10/2007 12:57:07 PM , Rating: 2
Ok I'll eat my own words. I forgot about dual core. Which AMD beat Intel to the punch with. Unfortunately it didn't offer much in terms of performance with hard core gamers and most other single threaded x86 applications.

And it seems like a reversal today. How long would of AMD take to develop their new core if it wasn't for Intel? We would of ended up with entry-level performance parts from fusion and torenza for years.

Thank AMD today; thank Intel for tomorrow.

By cochy on 4/10/2007 1:08:37 AM , Rating: 2
See the U.S. auto industry for an example of same problem.

Umm no. The US auto industry is in the tank for much different reasons. If it was due to market saturation why would foreign automotive industries be doing so well globally and in the US?

GM and Ford are just poorly run businesses compared to Toyota for example.

"And boy have we patented it!" -- Steve Jobs, Macworld 2007
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