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The struggles for AMD continue, as Silicon Valley continues to receive punishment from a struggling economy

The sluggish global economy hit a number of markets before the tech industry, but now it's Silicon Valley's turn to go through financial turbulence.  Struggling CPU maker AMD has slashed its fourth-quarter revenue estimates 25 percent, claiming the current economic crisis continues to hurt the company more than expected.

Analysts indicate this latest AMD revenue forecast cut is due to the economy, and not so much because of Intel's superiority.  The company's third-quarter revenue of $1.59 billion, though its fourth-quarter revenue is expected to be flat compared to the previous quarter.  The 25 percent slide would be about $1.19 billion in the fourth quarter.  

"Not a surprise," Endpoint Technologies Associates analyst Roger Kay said in an interview.  "Times are tough.  Consumers are on the run, and AMD is proportionally more reliant on consumers than Intel.  It's not good for Intel.  How could it be good for AMD?"

In October, AMD received a multibillion-dollar cash deal with investors from Abu Dhabi, but just about everything else regarding the company has been somber.  AMD is now deep in debt and has suffered nine straight quarters of losses, while cutting more than 2,000 jobs since the spring.

AMD and Intel are the two largest microprocessor makers for PCs, and as the PC industry as a whole continues to get hammered, financial forecasts for both companies are expected to slide.

Sun Microsystems, eBay and other Silicon Valley companies have also started to feel the pinch from slowing demand tied to the sluggish global economy.  Companies such as SAP and Dell issued third-quarter results but do not plan to issue year-end forecasts because of the struggling economy.

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It is hard to say
By kontorotsui on 12/9/2008 7:17:34 AM , Rating: 2
... but in these times AMD and Intel should stop the price war and set reasonable prices for their products.
I'm a consumer too, so I welcome competition and research, and good prices, but both the CPU companies are crushed between increasing R&D costs and lowering sales also BECAUSE of the R&D.

Now most of the people that upgrade their PC do that only because it is terribly obsolete, there is really no point to upgrade from, say, a 2 years old CPU to a new one.
I have a BE Phenom 4x slightly overlocked, I see no reason to upgrade it for at least 2-3 years. And I'm a tech and computer enthusiast!

Problem is that low prices on CPU were based on huge sales, hundreds on millions pieces. If you cut those sales by 50% because people don't need a better CPU, with most of the costs being fixed, they have to double the prices to keep alive.

I hate to say that, but we cannot afford to ask for super star performance and pay that performance only 100$. Either we settle for a quite reasonable performance and good price, and R&D is cut and advancements in CPU performance are quite slowed, or we pay a much higher premium for new CPUs.

AMD and Intel cannot afford to keep this pace forever, maybe it is time we pour more money in Moore Law or either give up and settle for slower advancements, maybe more focused on energy saving, quieter/fanless PC and so on.




RE: It is hard to say
By wordsworm on 12/9/2008 7:52:46 AM , Rating: 3
quote:
I hate to say that, but we cannot afford to ask for super star performance and pay that performance only 100$. Either we settle for a quite reasonable performance and good price, and R&D is cut and advancements in CPU performance are quite slowed, or we pay a much higher premium for new CPUs.

AMD and Intel cannot afford to keep this pace forever, maybe it is time we pour more money in Moore Law or either give up and settle for slower advancements, maybe more focused on energy saving, quieter/fanless PC and so on.


Let me see if I understand what you're saying: you wouldn't pay money for a new, faster PC, but you would pay for a quieter, lower wattage PC?

My PIV 1.5 GHz did quite well for me for 5 years. My 1 year old Intel quad will keep me going for another 4 years. But, if in 4 years the only improvements they have are that they're quieter and take a few less watts to run, then I can tell you this machine will go until it's died. In short, they might be losing money now, but if they don't come out with a better product, compounding improvements every year, then they won't have much of a business. In short, they cannot afford to give up on R&D.


RE: It is hard to say
By bhieb on 12/9/2008 11:49:02 AM , Rating: 2
Think the bigger issue is not a "better product", but some creative ways to utilize the tremendous processing power. The vast majority of consumer PC's never see their potential.

Lets face it the main reason people upgrade is that their current PC is so stuffed with crap that they think it is "out of date" when in fact it is fine. And the problem for Intel and AMD is that the consumer is slowly learning this. Most are still oblivious but some are realizing (or are being helped by those in the know) that if they run good AV/malware, and keep the installs to a minimum their "old" box more than meets their needs.

Moore's law is stalled CPU speed has not increased, rather both teams are adding more and more cores. Now the question becomes how do you convince my Mom that she needs 4 CPU's (when she does not even know what that means), she doesn't and the people that do are the minority.

A paradigm shift in software needs to occur in order for there to be a need for more than 2 cores. Once you need 2 cores just to browse the web or check email smoothly, then you may be able to sale the idea that 4 is better. Problem is if MS tries to make an OS that is that feature rich we call it bloated and hang them for it.


RE: It is hard to say
By rudolphna on 12/9/2008 12:37:44 PM , Rating: 2
Moores law has NOT stalled. Moores law states that processing power, and the number of transistors will double every two years or so. This is definetely the case. In the almost 4 years since my Pentium 4 computer was built, (it has just under 200 million transistors) we are at 1 Billion. 200x2= 400, 400x2=800. 800x2= 1600. It is a little behind, but definetely not stalled. And then there is the fact that a modern Core i7 is at least 10 times faster than my pentium 4. Its not even close. And it is much easier to increase IPC than it is to increase clock speed. Remember the pentium 4? it had a low ipc, but it was supposed to make up for it by running at high clock speeds... What did we get? a Slow, power hungry, hot running, unimpressive piece of sh** (sorry intel, but its true)


RE: It is hard to say
By TheSpaniard on 12/9/2008 8:05:50 AM , Rating: 2
quote:
... but in these times AMD and Intel should stop the price war and set reasonable prices for their products.


too bad thats all kinds of illegal in the US... price fixing would just about bankrupt AMD and Intel would become the source of the financial bailout


RE: It is hard to say
By ChipDude on 12/9/2008 12:40:32 PM , Rating: 2
kontorotsui got it ALL wrong.

INTEL still makes a load of money doing bigtime R&D and marching to Moore's law. They still have a viable money making business, but one with miniscule growth but still VERY profitable.

AMD has had a broken business strategy for many years but limped along because people always like the undergod.

The mis-adventure in investing in ATI, broad frontal assault against INTEL on all fronts, and the economic downturn has cast their fate permanately!


By crystal clear on 12/9/2008 7:56:55 AM , Rating: 2

SUNNYVALE, Calif. -- December 8, 2008 --AMD (NYSE: AMD), the Advanced Technology Investment Company (ATIC) and Mubadala Development Company today announced amendments to the October 6, 2008 transaction agreements for the creation of a leading-edge semiconductor manufacturing joint venture, currently known as “The Foundry Company. The transactions covered by the amended agreements are expected to close at the beginning of 2009.

The amendments to the terms between AMD and Mubadala provide for the following:

Mubadala will purchase 58 million shares of AMD’s common stock at a revised purchase price per share equal to the lower of (i) the average closing price per share of AMD’s common stock on the NYSE during the 20 trading days immediately prior to and including December 12, 2008 or (ii) the average closing price per share of AMD’s common stock on the NYSE during the 20 trading days immediately prior to the closing date of the transaction.

AMD will issue to Mubadala an additional 5 million warrants to purchase AMD stock, for a total of 35 million warrants.

The amendments to the terms between AMD and ATIC provide for the following:

The enterprise value of the manufacturing assets to be contributed by AMD to “The Foundry Company” will be reduced from a multiplier of 1.13x to 0.85x of the net book value of the assets.

As a result, AMD will own approximately 34.2 percent and ATIC will own approximately 65.8 percent of “The Foundry Company’s” fully-converted common stock.

AMD and ATIC will each have equal voting rights at the close of the transaction.

The net asset valuation multiple on future capital calls of “The Foundry Company” will be reduced from 1.1x to 0.9x.

All other material economic terms of the transaction agreements remain unchanged. ATIC will still invest $2.1 billion to purchase its stake in “The Foundry Company”, of which it will invest $1.4 billion directly in the new entity and will pay $700 million to AMD.



http://www.amd.com/us-en/Corporate/VirtualPressRoo...

AMD shares now at USD 2.10 !




By OCedHrt on 12/9/2008 9:48:53 AM , Rating: 3
It might be a bit absurd considering how one of AMD's fab cost more to built than AMD's market cap right now.


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