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Q1 2007 performance is "disappointing and unacceptable" says AMD's chief financial officer

Ten days ago, AMD announced that it was planning to restructure its business due to a significant drop in quarterly revenue. At the time, the company was projecting its Q1 revenue to come in at $1.225 billion USD.

The official numbers are in and AMD has reported Q1 revenue of $1.233 billion USD and an net loss of $611 million USD. The numbers include a charge of $113 million USD due to the acquisition of ATI and $28 million USD for employee stock-based compensation expenses. AMD had revenue of $1.773 billion USD in Q4 2006.

The ongoing price war between AMD and Intel is partially to blame for the reduced earnings. Intel has been aggressively cutting prices on its current processors and AMD has been quick to respond. AMD as a result has witnessed lower average selling prices (ASPs) in addition to lower unit sales.

"After more than three years of successfully executing our customer expansion strategy and significantly growing our unit and revenue base, our first quarter performance is disappointing and unacceptable," said AMD CFO Robert J. Rivet. "We are aggressively addressing the issues that led to our significant revenue decline. We are aligning our business model, capital expenditures and cost structure with the goal of accelerating our return to profitability. Lastly, our customer relationships remain solid, reflecting their confidence in our strategic direction, current and new products, and technology roadmaps."

On a positive note, AMD reported $197 million USD in revenue from its graphics division in Q1 2007. This represented a 19 percent gain from Q4 2006. AMD's next generation DirectX 10-based R600 graphics processor is expected to launch within the next few weeks. The top of the line AMD ATI Radeon HD 2900 XT will feature 320 stream processors, 512-bit memory interface with eight channels, native CrossFire support, 128-bit HDR rendering, 24x anti-aliasing and HDMI output with 5.1 surround sound.

Looking to the near future, AMD plans to get its 65nm native quad-core Barcelona processors out the door during Q3. AMD has high hopes for the processors which will incorporate 2MB of L3 cache and AMD Virtualization (AMD-V) technology. "We expect across a wide variety of workloads for Barcelona to outperform Clovertown by 40 percent," said AMD's corporate vice president for server and workstation products, Randy Allen in January.

The company will not, however, begin production of 45nm processors until the first half of 2008. 45nm processors won’t actually ship until the second half of 2008.

Intel is well aware of AMD's plans and many have suggested that the company released early performance numbers for its quad-core Penryn processors to divert attention away from AMD's upcoming Barcelona. Intel's 45nm Penryn taped-out in January and will begin shipping in the latter half of 2007 -- roughly a year ahead of AMD's first 45nm processor.


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K10 is very important now
By OddTSi on 4/19/2007 9:42:09 PM , Rating: 5
When the price war started people were wondering if AMD would be able to keep up without going into the red. I guess this answers that.

The problem now is that AMD is HIGHLY reliant on K10 being a hit. If it's slower than Intel's top offering the price war will continue with AMD having to undercut Intel's prices and they won't be able to keep that up without doing some cost-cutting. If it's faster they'll be able to leave their prices slightly higher than Intel's and hope they can sell enough to get back in the black.




RE: K10 is very important now
By DrMrLordX on 4/19/2007 11:25:10 PM , Rating: 2
There's more to it than that. AMD has two trump cards up its sleeves with which Intel can not contend until they release Nehalem-based machines utilizing CSI:

1). Octal-core desktop systems. Remember QuadFX? What happens when you run two AgenaFX chips on a QuadFX board? That's right ,you get 8 cores on a desktop motherboard with unregistered DIMMs. In order for QuadFX to matter, AMD needs to make sure that QuadFX boards are released that are not buggy pieces of crap that cost $400.

2). HT 3.0 and HTX slots. This could make a huge difference depending on how much end-users benefit from buying and using HTX devices.

Performance-wise, we've heard all kinds of vague speculation about how well K10 will perform versus Conroe/Kentsfield and Penryn. Last I heard, overall performance of K10 could be as high as 40% higher per clock than Conroe/Kentsfield, though whether or not that proves to be true and how that data helps us to understand its relation to Penryn's performance remains to be seen. It could be anywhere from 10-20% faster than Penryn per clock, but again, that's just a guess.

K10 offerings will hit speeds as high as 2.9 ghz at launch fo what it's worth.


RE: K10 is very important now
By OddTSi on 4/20/2007 12:27:59 AM , Rating: 2
1) Look up Skulltrail (I believe that's what Intel's calling it now).
2) It could turn out to be a HUGE thing for AMD, but it's HIGHLY unlikely that it will do so just in this coming processor generation. That is more of a long-term thing.


RE: K10 is very important now
By Lakku on 4/20/2007 12:39:54 AM , Rating: 3
K10 offerings that are dual core will hit 2.9, but are probably going to stay there until the new year. The quad cores will supposedly launch at 2.5GHz or so. Already, Intel has trumped AMD. Penryn will launch around the time Barcelona does, and by Intels numbers released, looks to have a 5 to 10% advantage per clock over current C2D's and C2Q's. Add that to the fact they will launch in the low to mid 3GHz range, and AMD has a huge advantage to make up, though I think they may be able to. Also, that 40% increase number comes from ONE benchmark AMD has let no one actually see in person. I will wait to see, but AMD certainly isn't looking rosy at the moment.


RE: K10 is very important now
By deeznuts on 4/20/2007 3:19:05 PM , Rating: 2
I thought Anandtech said a few weeks ago K10 will launch at 2.0-2.2


RE: K10 is very important now
By defter on 4/20/2007 1:30:27 AM , Rating: 3
LOL, this is very funny.

quote:
1). Octal-core desktop systems.


A couple of questions:
1. How many users (percentage of total PC users) benefit now from quad core on the desktop?
2. How many users will benefit from choosing 8-core system instead of 4-core system for desktop?
3. How many users will pay now >$2000 (those Barcelona based quad core FXs won't be cheap, and then you need to have an expensive motherboard) for 8-core system?
4. How many users that answered yes to all above, don't have enough money to pay small (relatively to $2000) premium for FB-DIMM? Anybody can get 3GHz, 8-core desktop system now...

quote:
2). HT 3.0 and HTX slots. This could make a huge difference depending on how much end-users benefit from buying and using HTX devices.


These things will provide a zero benefit to the end users. End users don't put DSPs or FPGAs to their PCs. HTX/Torrenza is aimed for a small niche among server/workstation users.


RE: K10 is very important now
By leidegre on 4/21/2007 1:51:17 AM , Rating: 2
This reminds me on an old comment, which roughly can be summarized as:

"If you build it, they will come."

The idea of an 8-core desktop solution today is just odd, and probably expensive. But what happens when software develops to harness those cores? Obviously we'll never see a 800% increase in perfomance, over a singel-threaded application, but at one point the number of cores on your system, will eventually endup becoming a performance multiplier.

Anyway, I'll probably buy the K10 just for the sake of AMD, and as long as it aint a really poor bargin.


RE: K10 is very important now
By Axbattler on 4/21/2007 7:13:31 AM , Rating: 2
Timing and cost are crucial elements here. If the 8-core desktop solution can beat the competition without a huge cost premium, it will be a winner. People did not complain about the A64 not because they were thinking '64 bit applications will eventually get here', but because the A64 was often better than the competition even at the time even in 32bit app, and was priced at a level people could afford. In that sense, the 64bit element was gravy (that's not to say no one took advantage of it - but I am quite sure most were happy using it under 32bit WinXP).

If the 8-core system can't beat the competition the majority of the time and/or without a huge premium. I am sure that they will still sell - like the P4 Extreme, Athlon FX did. But such releases will only appeal to a fairly small amount of individuals, and if the AMD chip is still slower per core - then I suspect Intel will remain in a more attractive position for most. Personally I will go for the best within my budget. I have no issue going with AMD or Intel. Of course, I'd like AMD to stay in the market to provide competition. But it's up to their products to convince me.


RE: K10 is very important now
By osalcido on 4/22/2007 9:07:25 PM , Rating: 2
They already Built a QuadFx..... nobody came ;-)


By Laughing all the way 2220 on 4/23/2007 7:32:38 PM , Rating: 2
Yes Intel has deep pockets but that doesn't mean they always have the best technology. It goes back and forth, back and forth. Just because AMD posted a loss after integrating ATI- come on people that was like expected. This will not hurt AMD that much. What they have gained is something that will cost Intel a bundle to match- but I don't see Intel heading the integrated graphic-CPU core direction.

So AMD posted a loss big deal. Intel posted a loss last year as well.

It's so tiring and such a bore to hear the banter back and forth. Intel has always had and probably always will a powerful single chip solution. AMD has countered with an excellent chip but with incredible intercommunication between CPUs for multi-proc systems. Intel is the champ and AMD is the underdog challenger. If AMD could knock out Intel it would take years! Innovation will win the day and I don't see much of that in the Intel camp. Intead they've passed off Netburst as giving the user a better internet experience. Yes I've been to the Intel tradeshows. They need to come up with practical, unique ideas not just copy what AMD is doing.


RE: K10 is very important now
By Thorburn on 4/20/2007 7:24:55 AM , Rating: 2
quote:
K10 offerings will hit speeds as high as 2.9 ghz at launch fo what it's worth.


Where did you get this nugget of information from exactly?

From what I've heard K10 is going to 2.6GHz max, and thats by the end of the year with a launch speed of closer to 2.4GHz.


RE: K10 is very important now
By defter on 4/20/2007 1:23:50 AM , Rating: 2
quote:
If it's slower than Intel's top offering the price war will continue with AMD having to undercut Intel's prices and they won't be able to keep that up without doing some cost-cutting.


The problem isn't the performance, it's the volume. Intel will price it's E6700 at $183 in Q3, this chip will be faster than any K8-based CPU, including hypotethical 3.2GHz model. Even if Barcelona is clearly faster to Intel's CPUs, it won't help much in Q3 or Q4 2007 if >90% of AMD's dekstop shipments will be K8 based and thus sold below $180....


RE: K10 is very important now
By wrekd on 4/23/2007 10:57:06 AM , Rating: 2
quote:
The problem isn't the performance, it's the volume. Intel will price it's E6700 at $183 in Q3, this chip will be faster than any K8-based CPU, including hypotethical 3.2GHz model. Even if Barcelona is clearly faster to Intel's CPUs, it won't help much in Q3 or Q4 2007 if >90% of AMD's dekstop shipments will be K8 based and thus sold below $180....


Barcelona is a workstation/server chip ment to take on Xeon not an E6700. I don't think AMD expects this chip effect desktop shipments in the 2nd half of 2007.


RE: K10 is very important now
By Roland702 on 4/20/2007 10:43:24 AM , Rating: 2
I do agree with you. The only things that seem to be keeping AMD afloat atm is the deal with dell and people wanting to build cheaper computers consisting of say a X2 3600+ as they are still a bit cheaper ($90~ AUD here for me). However that's not to say that intel's recent price drops aren't so bad and that if you can afford the extra for a e4XXX chip then you mase well get one.

K10 and R600 are really important for AMD/ATI to regain market share and beat intel/nvidia. If anything AMD should have waited a bit longer to purchase ATI if they knew they were going to get their butts kicked performance wise from intel in the form of conroe/allendale.

Since I am getting some inheritance soon I am going to go get myself a new rig. I can't be bothered though for AMD/ATI to release their new parts, so for now I think I might get myself a E6600 and a 320MB 8800gts or a 7950gt (seeing as the G80 drivers have a variety of different problems here and there).


RE: K10 is very important now
By monkeyboy33 on 4/23/2007 5:29:48 PM , Rating: 2
I don't like intel's business practices, and I haven't purchased a PC based on their processors since 1995.
The intelligent consumer should look at the bigger picture rather than be a FPS fanboy with blinking LED fans and neon IDE cables who slavishly buys the processor with the higher MHz number.

Face facts, the Q6700 the Core2 and the P4 wouldn't even exist if not for competition from AMD. Without them, intel would continue to give us a souped up Pentium III at godawful prices and justify it by making commercials of dancing college students telling us intel is cool.

I will not buy intel, period. Maybe they will shape up and I might consider it in a few years.


Very nervous & concerned investors
By crystal clear on 4/20/2007 11:03:25 AM , Rating: 6
Some important comments that makes investors very nervous-

1) We have absolutely no prejudice or bias toward the source of capital as long as it makes sense for us. We are completely open toward any of those opportunities," Ruiz said when asked if AMD would consider private equity.

2)"We continue to see AMD's cash flow as a major issue, and we expect the company to be in the market for additional financing shortly," analyst Joe Osha said in a research note. (Merrill Lynch)

3) "What we're seeing here is a much more severe pricing environment than what even the most concerned had anticipated."
"The key things for investors is whether AMD is still attached to market-share goals or whether they are more focused on profitability," said JoAnne Feeney, managing director at FTN Midwest Securities.

http://www.reuters.com/article/idUSN19351756200704...




RE: Very nervous & concerned investors
By crystal clear on 4/21/2007 12:22:50 PM , Rating: 2
Updates to my comment-

1)AMD's purchase of graphics chipmaker ATI was funded with $2.5 billion in debt, which came loaded with restrictions that would force the company to prepay the loan if it obtains more debt, issues shares, sells assets or even reduces working capital.

2)Speculation that AMD could be bought in its entirety by private equity firms has swirled in recent weeks, though most industry analysts voice skepticism about that prospect.

3)Some say it is possible AMD could sell a stake, however, in exchange for a cash infusion.

4)"It doesn't make a lot of sense that this is a place where private equity will be attracted, because it's a high capital-intensity business and you have a huge competitor," Cody Acree, an analyst with Stifel Nicolaus, said on Thursday.

5)"We still foresee a meaningful degradation of AMD's cash balances," Citigroup analyst Glen Yeung wrote in a report.

6)The numbers are grim. Although AMD has nearly $1.2 billion in cash, it must fund a capacity expansion plan that will cost it $2 billion this year alone, even after a recent $500 million reduction aimed at keeping expenses in check.

http://www.reuters.com/article/mergersNews/idUSN20...

Note-

quote:
AMD could be bought in its entirety by private equity firms .


This is quite possible & the news of the year 07.

I personally predict such an outcome.


RE: Very nervous & concerned investors
By ybee on 4/22/2007 7:05:32 AM , Rating: 2
But it still ends on an optimistic note
quote:
Still, the rock-bottom interest rates available in today's debt market could still make that a good option for AMD


All this just means that AMD will most likely have to refinance the existing debt and the new debt will be more expensive. But given the current situation, paying an extra 1% or so extra interest p.a. on the prinicpal of $2.5B will not make much difference to AMD's survival chances.


RE: Very nervous & concerned investors
By crystal clear on 4/23/2007 3:04:08 AM , Rating: 2
Yes indeed this options is there,but simple logic says that you dont take on additional debt to finance the previous one.

Once you get stuck in that deadly spiral of debts means the begining of the end.

AMD shareholders will not sit back and watch AMD sink further into debts.

Only a massive cash infusion can save AMD.


RE: Very nervous & concerned investors
By ybee on 4/23/2007 3:45:17 AM , Rating: 2
No it is actually OK, it is called refinancing. The point of all those restrictions in the lending agreement is to make sure that if the credit risk increases, the lenders are protected. AMD may borrow again from the same banks, but at higher rate of interest. It can borrow for example $3.5B to reinance the existing debt and cover its future cash needs.

In fact other finacing options are worse, because issuing new shares will dilute the existing shareholders and anyway half of the proceeds will be used to repay the existing debt.


RE: Very nervous & concerned investors
By crystal clear on 4/23/2007 9:13:43 AM , Rating: 2
OK then lets wait & see -then we can continue from this point where you responded.Not for very long - AMD has scheduled a shareholders meeeting very soon.
Very interesting to discuss the subject with you.


RE: Very nervous & concerned investors
By ybee on 4/23/2007 11:01:50 AM , Rating: 2
OK. In the meanwhile, another possible option reported by the inquirer.

http://www.theinquirer.net/default.aspx?article=39...

Seems like shareholders may have a lot of options to choose from.


RE: Very nervous & concerned investors
By crystal clear on 4/24/2007 6:37:18 AM , Rating: 2
UPDATE 1-AMD offers up to $2.2 billion in notes

AMD would offer an initial amount of $1.8 billion in notes, with the interest rate, conversion price and other terms to be determined in negotiations. Initial purchasers will also have the option of buying an additional $400 million of notes.

AMD said it would enter into capped call transactions in connection with the offering, a move intended to reduce the potential dilution to common stockholders if the notes are converted into shares

Earlier on Monday, credit ratings agency Standard & Poor's downgraded AMD to "B", it's fifth-highest "junk" grade, citing "subpar" execution of its business and a tougher business environment.

http://www.reuters.com/article/bondsNews/idUSN2333...


RE: Very nervous & concerned investors
By ybee on 4/24/2007 6:58:23 AM , Rating: 2
Wonderful, so it is convertible debt. They apparently found a way to avoid full refinancing of the debt.

Without knowing details, it is hard to tell whether these notes are more like debt or equity, especially considering the fact that AMD also enters into an additional hedging deal.

Maybe from now on AMD will specialize in financial engineering, rather than electrical engineering.


By crystal clear on 4/25/2007 12:48:11 AM , Rating: 2
quote:
Maybe from now on AMD will specialize in financial engineering, rather than electrical engineering.


Thats a brilliant comment from you !

Very original indeed !

I wish to repost your comment in another DT article-

Intel Wipes Out AMD's 2006 Marketshare Gains in One Quarter - April 24, 2007

As for AMDs "financial engineering" benchmarks will keep you updated.


By defter on 4/20/2007 1:14:32 AM , Rating: 5
Come on, author should paid at least a little of attention.

Three month graphic revenues were 19% higher than two month revenues reported last quarter, thus graphic revenues per month decreased (ATI deal was finalized in the end of October, thus only sales from that point onward counted towards AMD's revenues in Q4). Graphic division made also $35M loss in this quarter.

Overall, ATI revenues also decreased sharply. In December 2005 - February 2006 quarter, ATI had revenues of $672M with $34M income: http://ir.ati.com/phoenix.zhtml?c=105421&p=irol-ne...

In Q1 2007, graphic + consumer divisions had a total income of only $315 and $39M loss: http://biz.yahoo.com/bw/070419/20070419006045.html... . In addition, there is chipset revenue that is included in CPU division, it's unknown but I think it's safe to estimate that it won't be higher than $100M. Thus total ATI revenues for this quarter were about $415 or lower, 38% decrease from previous year! And AMD paid $5.6B for this?????




By ybee on 4/20/2007 2:01:15 AM , Rating: 2
Considering R600 delay and loss of Intel chipset business, it could be worse.

You should keep in mind also that AMD could go for a much more agressive cost cutting (back in 2003 AMD could break even on $500M CPU sales), but it apparently decided to keep up R&D and marketing expenses. So lets just say that it is not so much a loss as a strategic investement.


By defter on 4/20/2007 2:52:08 AM , Rating: 2
The more costs AMD will cut, the further they will fall behind Intel/NVidia. Thus, cost cutting will not help in the long term, it will just prolong the agony.

AMD has already announced that they are cutting costs by delaying FAB30 conversion that was previously scheduled to begin in mid-2007. Thus in 2008 Intel will have several 45nm FABs online while AMD will keep producing CPUs using ancient 90nm process on 200mm wafers. This doesn't look like a very sustainable solution.

quote:
back in 2003 AMD could break even on $500M CPU sales


They also had profitable flash division then. Currently, execluding one time charges and other costs, AMD needs $1.6B revenue to just break even. Their gross margin was $347M while R&D+marketing costs were $767M, thus they would need to reduce their R&D+marketing spending less to a half in order to break even. Then, they have a large debt for which they have to pay interest. And they would still need to find few billions for future fab conversion and construction...


By ybee on 4/20/2007 3:27:54 AM , Rating: 3
A few figures for 3Q 2003

CPU sales $503M, operating income $19M
Flash sales $424M, operating loss $50M (so in 2003 flash was not profitable)

R&D expenses $214M, MG&A expenes $151M

In 1Q 2006 R&D expenses were $432M, MG&A expenes $335M.

Interest in 1Q is just $80M - not a major cost item.

So if you compare 2003 and 2007, there is a lot of room for maneuver for AMD. It could break even at a much lower level of sales, it can do it it now. And it has always been behind intel in terms of manufacturing so nothing new here either. I dont think though it will be 90nm CPUs vs 45nm CPUs. AMD will most likely use its 90nm capacity to manufacture chipsets.


By defter on 4/20/2007 3:48:31 AM , Rating: 1
Sorry, I forgot about flash losses.

quote:
It could break even at a much lower level of sales, it can do it it now.


You need to take into account that chips have become much more complex in these 3.5 years, requiring more development money. The same applies to process, developing 45nm process will cost much more money than developing 90nm one.

quote:
Interest in 1Q is just $80M - not a major cost item.


$80M is 6.5% of revenue, which is a significant amount. If one takes interest into account then in order to make it even, AMD must cut their R&D+marketing costs by about 2/3. That's not really feasible (unless AMD sells some divisions, but then again, that would decrease revenue).


By ybee on 4/20/2007 4:19:25 AM , Rating: 3
quote:
You need to take into account that chips have become much more complex in these 3.5 years, requiring more development money. The same applies to process, developing 45nm process will cost much more money than developing 90nm one.


These are valid points. But what's even more important is that R&D and marketing expenses are subject to the law of diminishinh returns - much of the money spent is marginally profitable or just wasted. As long as your company remains profitable it is OK because cutting budgets would hurt morale, and decent managers care more about employees than shareholders.

But there is nothing like a quarter like this to focus you mind on what you really need to do and what is optional.

My point about interest is that it is well below the variation of quarterly operating cashflow. No big deal. You also should keep in mind that debt is generally good, because it inreases rate of return for shareholders. If you need money you should borrow as much as you can (at least until you are in the deep junk territory)


People...
By eek2121 on 4/20/2007 12:26:40 PM , Rating: 3
A lot of people can speculate about AMD. However the fact is AMD themselves have driven away customers. AMD seems to have forgotten what made them so popular. Back in the days of the K6-2/3 they used the same socket as intel (socket 7). In theory i could plug a K6-2/3 into my intel socket 7 motherboard and it would work. Thereby extending my investment.

Once AMD switched to their own socket. I could do the same thing AGAIN with Athlon->Athlon XP. I could buy faster and better CPUs without upgrading the rest of my hardware. This allowed me to protect my investment, therefore i stayed with AMD. Even with the release of the athlon 64 i could do the same UNTIL recently. AMD butchered their customer base by forcing an upgrade upon us.

Rather than making DDR parts based on S939, they chose to kill it off. At the same time the transistion to PCI X was happening, as well as the transition to DDR2. Therefore they screwed with my investment. I resent that and I'm switching to intel for the first time in years. Because AMD doesn't want to support their customer base, i'm forced to purchase a new CPU, motherboard, RAM, and graphics card, all of which worked perfectly prior to this. If they would have continued to support my socket, all i would have done is bought the latest athlon64 x2, thereby generating a sale for them. At least 1 other friend of mine is in the same boat, and he went intel.

THIS is AMD's problem. They can have slower chips, thats NOT an issue. What IS an issue is when they alienate their customers.




RE: People...
By eek2121 on 4/20/2007 12:28:54 PM , Rating: 2
I forgot to add that, if the transition to PCIX had not been happening, as well as the transition to DDR2, i would have had no problems replacing my motherboard and CPU if necessary. It's the fact that i have to throw away about $1200 in computer hardware that makes me rather annoyed.


RE: People...
By Zoomer on 4/22/2007 9:05:49 AM , Rating: 2
I fail to see any consumer boards with PCI-X in them.

The change was necessary as they changed memory types. AMD isn't large enough to keep DDR prices from raising - blame intel for that.


RE: People...
By gus6464 on 4/20/2007 5:07:07 PM , Rating: 2
This is very true. I bought an Opteron 165 last January which I overclocked to 3.1GHz and now I have to replace my motherboard because it is giving me issues I do not want to deal with. But guess what, I have almost no choice in s939 mobos now because there are none. The games I play still run perfectly fine on my current rig which was top of the line last year but now I might have to scrap my CPU and ram. AM2 offered 0 increase in benefit over s939 but they still shoved it down our throats. Whereas if I would have bought an Intel chip instead last year LGA775 is still everywhere and doesnt look like it is going to die any time soon. Now my new rig at the end of this year is going to be an Intel quad core and doesnt look like I will be buying anything AMD any time soon since K10 will probably be more expensive than the intel quads once the projected drop to $266 comes. Most people go for best bang for your buck which is what made me a fan of AMD but now it seems as if they are trying to alienate the reason that made them so popular.

I am sorry but it doesnt matter if K10 is faster than C2D if Intel continues on with this price war.


RE: People...
By Zoomer on 4/22/2007 9:08:17 AM , Rating: 2
You can just RMA your board.


RE: People...
By werepossum on 4/20/2007 7:00:22 PM , Rating: 3
I totally agree. Forcing a change to motherboard and RAM along with a processor is immensely stupid when your competition is kicking your butt. There's a large installed base of socket 939 users, the only dual core 939 CPU available at decent prices are the 3800s, at almost every price point (at least counting the announced Intel price cuts this month) Intel wins, and the four or five fastest Intel processors have no AMD equals. Is this really a time to be forcing a platform change to loyal customers looking to upgrade? I've been using AMD since at least my 80287 co-processor, but I'm looking at Intel for my next rig.

That ATI acquisition did them no favors either with ATI DX10 parts so far behind NVIDIA’s. It's not easy to arrange doubling the number of core businesses in which your corporate butt is kicked, but AMD seems to have accomplished it nicely. And re-branding ATI as AMD - thus driving away potential customers who have heard nothing of the acquisition or AMD video cards - is just the icing on the cake. </sarcasm>Perhaps the AMD management should go for the trifecta and start making racist remarks? </sarcasm>


caught sleeping
By zaki on 4/19/2007 9:47:26 PM , Rating: 3
they have nobody to blame but themselves, they got caught sleeping on the job all throughout their reign of the athlon 64s on the 754 and the 939.

lets hope they've learned their lesson, for everybody's sake.




RE: caught sleeping
By Dactyl on 4/19/2007 10:39:29 PM , Rating: 5
When you say "sleeping on the job," you do you perhaps mean "frozen out of the market by Intel's anti-competitive monopoly pricing schemes"? Because that would be more accurate.

Intel sold its chips in a way that prevented major OEMs from selling almost any AMD chips. They had to buy 90% of their chips from Intel or pay much more per chip than the other OEMs (who were all selling 90%+ Intel).

For instance, Dell didn't sell any Opteron servers even while Intel only had Pentium 4-based Xeons. Dell wanted to serve that market, but Intel threatened to stop giving them such a good deal on Intel CPUs if Dell did that.

This froze AMD out of most of the OEM sector. That cost AMD a ton of revenue, which could have gone towards R&D and building new fabs. That's why Barcelona and 65nm have taken so long.

In the meantime, Intel was able to drop the P4 architecture and switch to Core Duo quickly because of their massive R&D budget.


RE: caught sleeping
By nerdye on 4/20/2007 9:17:16 PM , Rating: 2
I agree with all you said, its true that AMD64 should have been selling with major oems in 2003 with its introduction of the opteron64, yet it was Intel's bad ways that kept them from being able to sell their better technology. The 754's were good performers, but the 939 single core, and x2 variants simply embarrassed Intel's offerings at the time of P4 and Pentium D as far as performance, yet never sold a fraction of the amount of units. That was the time for AMD for live it up and soak up the bank, they had a superior platform from A64's release in 2003 all the way to core 2 duo in 2006, yet only gained major OEM support at the end of that reign.

Intel has been selling the crap out of Netburst for 5-6 years now, it was a better cpu than AMD's offerings from time to time with a northwood or two, or a few other cpu's, yet how could P4 reign so long without the business practices Intel has practiced?

Now A64 is the aging cpu architecture and the core2 duo is the performance king that A64 was to P4, perhaps if AMD profited properly from their ace architecture (A64) in the time of its greatness) things would be different now indeed.


What about other sources of revenue?
By Spacecomber on 4/20/2007 9:34:18 AM , Rating: 2
This DailyTech post mentions CPUs and GPUs, which are the best known chips to the average consumer that AMD manufacturers, but doesn't a rather significant portion of their total revenue come from the manufacture of other chips, such as certain kinds of memory chips?

Is AMD getting squeezed in these other areas of manufacturing as badly as they are in the more commonly known venues for chip making?




RE: What about other sources of revenue?
By coldpower27 on 4/20/2007 11:12:28 AM , Rating: 2
AMD spun off their flash division, so only the revenue from GPU, chipsets and CPU's count now.


By sunbiz3000 on 4/20/2007 12:47:16 PM , Rating: 4
AMD will make money from ATI in the next 3-4 quarters. I think it was a very good buy!! Cheap Dx10 GPUs will be able to fetch some money, but I think AMD is gonna make a lot of money from mobile GPUs and vector GPUs for mobile... I recently saw some very excited Ikivo and mobile manufacturer execs talk about AMD's mobile GPUs... So I think AMD did the good timing to buy AMD. This was the decision that'll hopefully help them survive in bad times!!


By Hoser McMoose on 4/20/2007 1:15:01 PM , Rating: 2
As others mentioned, AMD has spun off the flash business as a separate entity (Spansion). AMD currently has 3 product groups, CPUs + chipsets, Graphics and Consumer Electronics. The first two are pretty obvious (though I'm not sure if chipsets with integrated graphics fall under "chipsets" or "graphics"?). The consumer electronics division presumably includes the graphics chips in game consoles as well as AMD's embedded products.


Error
By perrywilson78 on 4/20/2007 8:04:32 AM , Rating: 3
Other websites are reporting the loss much lower at $501 million. I wonder if it is another typo on daily techs part or bad info.




RE: Error
By coldpower27 on 4/20/2007 11:11:30 AM , Rating: 2
RE: Error
By James Holden on 4/20/2007 12:21:10 PM , Rating: 2
It was $529 mil two quarters ago, $611 for this most recent quarter. Looks like the other sites have it wrong.


RE: Error
By Hoser McMoose on 4/20/2007 1:09:04 PM , Rating: 2
Both are correct (err, almost).

GAAP Operating loss: $504M
Net Loss: $611M

So you can either say that they lost $611M or $504M, depending on what numbers you're looking at. Not bad info or bad reporting, just accounting.


Intel is kicking the crap outta AMD
By 457R4LDR34DKN07 on 4/19/2007 9:30:29 PM , Rating: 2
This is bad news for AMD indeed. Intel is has definately learned thier lessons from past mistakes. If the penyn benchmarks are any indication it looks like next year is going to be more of the same. I'm sorry to say Barcelona is not going to give them the #1 slot. AMD will likely win thier lawsuit against Intel for unfair business practices but i doubt it will be significant with how much they are bleeding money now. A word of advice: Hurry up and release The Radeon X2900!!!




RE: Intel is kicking the crap outta AMD
By ScythedBlade on 4/19/2007 9:39:29 PM , Rating: 3
Won't work ... Barely anyone buys enthusiast products, remember? Only a small percentage of revenue comes from discrete products ... more people buy integrated graphics.

What they should do is release Barcelona numbers ... if they ARE good, then it'll help clot some of the bleeding.


By ProxyOne on 4/20/2007 9:21:20 AM , Rating: 3
And that's a huge problem because they probably aren't good enough to release to the public. So far there has only been ONE K10 benchmark, which just happened to be released by AMD themselves. Aside from that we have heard nothing else about K10 performance from AMD or rumors. And this is all happening while Intel continues to pump out Penryn benchmarks while it's still premature.

It's safe to say that K10 probably isn't performing as a lot of people expect it to. And I don't see why AMD would purposely hide performance numbers in attempt to catch Intel by surprise.


For all our sakes...
By Spartan Niner on 4/19/2007 9:48:28 PM , Rating: 2
For all our sakes I hope AMD gets back in the black soon. Red just doesn't go well with AMD.




RE: For all our sakes...
By JackPack on 4/20/2007 3:38:27 AM , Rating: 2
Why not? They picked up ATI - a red company.


Barcelona won't help
By hunter01 on 4/19/2007 11:28:11 PM , Rating: 3
Barcelona is a Quad core processor. The pricing for it is to compete with Quad core Xtreme which is at the highest end. AMD will be bleeding huge if they sell Barcelona in the mid-low end price. So Intel will still have a price advantage at the dual core level even if Barcelona does take away the "performance crown" for the quad core. The interesting question is Barcelona's Dual core brother's performance.




RE: Barcelona won't help
By AntDX316 on 4/20/2007 12:30:45 AM , Rating: 1
intel just did 37+ percent better on Lost Coast then their previous Quad Core :)

amds is like 23? :)


We all win, long term Maybe??
By jstchilln on 4/20/2007 10:40:33 AM , Rating: 2
For now we all win with lower prices and faster proc's. My fear is for AMD in the long term and how long they can operate at a loss. While I run Intel, AMD has been the best thing for a large fat company that was caught sitting on its ass.




Horrible Timing
By Parkerl75 on 4/20/2007 1:21:33 PM , Rating: 2
With the vast resources (cash and otherwise) Intel has, it was inevitable after all those years of being mismanaged without a clear strategic direction that Intel struck back. And the timing could not have been worse for AMD. AMD is selling all their product based on value now and no one will dispute that Intel wears the performance crown for now. The performance leader crown has gone back and forth between AMD and Intel for some time now but the timing of this blow could not have been worse for AMD.

Not only does AMD NOT have a competing product at this time, their next redesign is not due until next year. Compounding the problem is their recent acquisition of ATI. Product launches have been delayed by the transition chaos that resulted from the acquisition. Unfortunately, unlike Intel, AMD cannot afford to hemorrage cash as it has last quarter. Given the limited resources that AMD has, when AMD commits to any project, it is a "make or break" deal and in the midst of all this chaos in the processor market, AMD is trying to put in place a new strategy for a brand new CPU and GPU architecture? Timing could not have been worse.

AMD sat on its laurels too long and expected to stay there longer and eek out as much profit as possible from its position but Intel got its act together and ditched their other "distractions" and focused on their core business and got themselves back in the game.

I really hope K10 delivers on its promise but it is highly doubtful that Intel will be sitting still either. Peryn is looking like a great product and it's closer to being launched than K10.

K10 has to be able to deliver the type of performance that the original Athlon was able to do with its initial launch or AMD will not survive much longer. AMD and ATI merger was not a completely bad idea and the new architecture AMD proposes looks very promising but to take this "leap" of faith to a new architecture with so much on the line is risky at best.

It's win or go home situation for AMD and the future looks grim for AMD.




By Polynikes on 4/20/2007 1:46:48 PM , Rating: 2
quote:
"After more than three years of successfully executing our customer expansion strategy and significantly growing our unit and revenue base, our first quarter performance is disappointing and unacceptable," said AMD CFO Robert J. Rivet. "We are aggressively addressing the issues that led to our significant revenue decline. We are aligning our business model, capital expenditures and cost structure with the goal of accelerating our return to profitability. Lastly, our customer relationships remain solid, reflecting their confidence in our strategic direction, current and new products, and technology roadmaps."


In other words: Intel had an ace up their sleeve called Core 2 Duo. :P




This doesn't help me much
By Setsunayaki on 4/21/07, Rating: 0
Should never have bought ATi
By osalcido on 4/19/07, Rating: -1
RE: Should never have bought ATi
By ObscureCaucasian on 4/19/2007 9:28:38 PM , Rating: 1
I think in 5-10 years down the road it will definitely be worth it.


RE: Should never have bought ATi
By defter on 4/20/2007 1:17:00 AM , Rating: 2
The current question is: can AMD survive next 5 quarters, let alone years? AMD burned $400M of cast in Q1, now they have $1.1B left with $3.6B long term debt. AMD will need to get extra cash this year to survive until 2008...


RE: Should never have bought ATi
By ThisSpaceForRent on 4/20/2007 8:37:26 AM , Rating: 2
I imagine they could always issue more stock to raise capital. I don't think anyone would shy away from purchasing AMD stock. They may be the underdog now, but I think everyone can agree they do have a habit of besting Intel from time to time.


RE: Should never have bought ATi
By osalcido on 4/22/2007 9:08:18 PM , Rating: 2
people are already dumping the stock as the price tanks


RE: Should never have bought ATi
By Roy2001 on 4/23/2007 1:47:22 PM , Rating: 2
No, Intel would not let AMD die, HP/DELL/IBM won't either. This has happend times in 90's and early 2000's and AMD survived.


RE: Should never have bought ATi
By TomZ on 4/19/2007 9:29:31 PM , Rating: 2
I agree - the timing of that acquisition couldn't be worse. Not only does AMD have to fight the current price war with Intel where AMD is the underdog again, but they are still digesting and integrating the ATI acquisition. Looks like a pretty bad situation. A $600M loss on revenue of $1200M is quite painful.


RE: Should never have bought ATi
By RamarC on 4/19/2007 9:39:50 PM , Rating: 2
The ATI purchase is not the problem. It comprised only about $130M in charges and it performed well. AMD has done a lot of restructuring this year and is actively re-investing in FAB and manufacturing capability.

AMD will right the ship when its new CPU product line releases. That's when they'll see revenue from the investments they've been making.


RE: Should never have bought ATi
By TomZ on 4/20/2007 12:06:15 AM , Rating: 2
The ATI purchase is a problem because it distracts AMD from their "core" business (sorry for the pun).


RE: Should never have bought ATi
By CheesePoofs on 4/20/2007 12:39:35 AM , Rating: 2
Not really. AMD is going to be integrating many of the technologies that came with ATI into their "core" business, processors (Fusion). That and GPUs are really microprocessors designed for a very specific use. So it's not distracting them at all, more just expanding their abilities.


RE: Should never have bought ATi
By Oregonian2 on 4/20/2007 5:50:10 PM , Rating: 2
True, may be a good play, but it still is likely taking resources (money and people) who would otherwise working on the CPU development efforts.


RE: Should never have bought ATi
By defter on 4/20/2007 1:19:24 AM , Rating: 1
quote:
The ATI purchase is not the problem. It comprised only about $130M in charges and it performed well.


So >$39M losses means "performing well"? Well, I guess it performed very well compared to AMD computing divison that made >$300 in losses... However, last thing AMD needs now is another money losing division, I guess that AMD will sell its discrete graphic division to somebody like NVidia quite soon.


RE: Should never have bought ATi
By AnnihilatorX on 4/20/2007 8:07:56 AM , Rating: 2
Not true. It just happens to be that the next-gen products from both AMD and ATi have been late to market and that's the primary cause of the loss.

If ATi's offering of R600 really does shine then it would be a good thing several months from now.


RE: Should never have bought ATi
By TomZ on 4/20/2007 8:08:30 PM , Rating: 2
Being late to market is exactly the kind of "distraction" I'm talking about.


RE: Should never have bought ATi
By Tyler 86 on 4/22/2007 6:33:01 PM , Rating: 2
I think both companies were going to be late to market before the aquisition...


By crystal clear on 4/21/2007 11:54:11 AM , Rating: 2
Hi there,
I wish to add some spices to your comment-

1) "The execution of the ATI merger was just sort of a disaster," said Doug Freedman, an analyst with American Technology Research, adding: "The guys who wrote the debt saw this coming."

2)The usual fund-raising options are less attractive due to the debt terms AMD agreed to when it bought ATI. A regulatory filing from last October details conditions under which AMD must pay back the debt early:

--All net proceeds from any new debt

--All cash proceeds from asset sales over $30 million

--All cash proceeds from sales of AMD's stake in its former memory chip unit, Spansion Inc.

--Half of the net proceeds from issuing new shares

--Half of excess cash flow

http://www.reuters.com/article/mergersNews/idUSN20...

Your comment-

quote:
Looks like a pretty bad situation


is the conclusion of the AMD review


"I modded down, down, down, and the flames went higher." -- Sven Olsen

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