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Hardware AMD Reports Q2 Results
Jason Mick (Blog) - July 18, 2008 10:33 AM
Print E-mail del.icio.us 43 comment(s) - last by obiwankenobi.. on Jul 25 at 1:10 PM
AMD once again has a disappointing quarter

While Intel merrily report rising Q2 profits and revenue, Advanced Micro Devices Inc. (AMD) sang a far different tune.  The smaller major player in the microprocessor industry reported earnings which disappointed even investors expecting less than a stellar performance. 

Preceding the earnings report was news from AMD that it would be taking a charge of more than $900M USD for losses based on the bill for its acquisition of ATI, its flash endeavors, and its struggling ATI TV and consumer electronics subunits.  This news set predictions of losses rather high. 

Whereas Intel reported profits beating expectations, AMD reported losses beating expectations.  AMD bled $1.19B USD in Q2 2008, up from $600M USD a year ago and $358M USD last quarter.  The adjusted losses, which take one time events into account, totaled 60 cents a share, worse than analyst predictions of 52 cents a share.

Depending on the metric you view, AMD revenue was either up or down.  AMD announced Q2 2008 revenue of $1.349B USD, up 3 percent from Q2 2007, but down 7 percent from Q1 2008 (curiously AMD's press release chooses to assert this negative comparison before the positive one).  Analysts on Wall Street had been hoping that it would show revenues of $1.45B USD, but yet again AMD left them with disappointment.

Gross margin, an important indicator of profitability, again, was up compared to last year, but down compared to Q1 2008.  The margin was 37 percent, excluding the impact from the sales of portions of its 200mm infrastructure, compared to 41 percent in Q1 2008 and 34 percent in Q2 2007.

As far as good news from AMD, about the only clearly good news it could offer were in terms of technology, which was also a slightly mixed bag.  AMD strongly pushed out Opteron server technology, which was viewed as a success.

In terms of technology, AMD's greatest Q2 2008 victory came from acquisition in terms of the 4000 series of graphics cards -- the 4850 and 4870 blew away similarly priced offerings from NVIDIA.  The impending release of the 4870 X2 in August/September, which early reports show to compare favorably with NVIDIA's similarly priced high-end GTX 280, could erode into one of NVIDIA’s last realm of dominance despite attempts to stay competitive via pricing.

In coming months, AMD needs to look to the success of ATI and try to expand it into the processor market.  It needs to forge ahead on its design of Atom-competitor low wattage processors and its next generations of multi-core processors.  It will also need to adjust to having a new CEO as CEO Hector Ruiz stepped down amid the bad news, after six years, with current COO Dirk Meyer stepping up to replace him.

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Back in the day...
By Motoman on 7/18/2008 11:00:58 AM , Rating: 2
...say, around the K6 era, people bought AMD chips either because of the attractive price point, or perhaps because of a better price/performance ratio.

Then the Athlon happened, and AMD enjoyed a good run of people buying their chips as a result of having excellent technology...technology at least equal to and usually better than Intel.

...and then Intel woke up, rubbed it's eyes, and fired back. Then AMD was back to trying to sell chips because of aggressive pricing, and maybe not even compelling price/perfomance ratios, and in a lot of ways riding the wave of fandom it had garned with Athlon. But that wave is a decreasing one...

AMD desperately needs to address their problems with a technology solution...they need to at a very minimum get back to a point where price/performance ratios favor them, if not an all-out superior product again (a la the Athlon series vs. P3 & P4).

They've apparently got the ATI division firing on all cylinders again...they need to get a similar success for the CPU division. And soon.




RE: Back in the day...
By mikefarinha on 7/18/2008 11:11:34 AM , Rating: 3
quote:
AMD desperately needs to address their problems


Thank you Captain Obvious!!!


RE: Back in the day...
By ImSpartacus on 7/18/2008 11:46:09 AM , Rating: 5
No kidding, that comment was like watching a Dr. Phil episode...

"Well, in order to not be fat you need to lose weight."


RE: Back in the day...
By Alpha4 on 7/18/2008 12:56:03 PM , Rating: 5
If I may chime in, the full sentence in the beginning of that paragraph is a statement of how Motoman believes AMD should address their problems, indicating that AMD should focus on performance-oriented developments as a solution.


RE: Back in the day...
By mikefarinha on 7/18/08, Rating: -1
RE: Back in the day...
By Alpha4 on 7/18/2008 1:53:36 PM , Rating: 2
I think you missed the emphasis placed on how. The "how" is not very obvious as there are numerous ways a company like AMD can tackle their problems. New Marketing, Downsizing or Product Portfolio Expansion, to name a few.


RE: Back in the day...
By mikefarinha on 7/18/08, Rating: 0
RE: Back in the day...
By deeznuts on 7/18/2008 1:27:56 PM , Rating: 3
quote:
Thank you Captain Obvious!!!

You sir, are the perfect example of someone taking a quote out of context. He offered his thoughts and analysis on what AMD has to do in order to address their problems, yet you just quote the first part.

And you have the audacity to do so, with the full statement two inches above your quote! You are very bright there sir.


RE: Back in the day...
By mikefarinha on 7/18/2008 1:49:42 PM , Rating: 1
quote:
And you have the audacity to do so, with the full statement two inches above your quote!

Yes, yes I did.

I agree with everything motoman said, but it is so painfully obvious.

Here is his full quote
quote:
AMD desperately needs to address their problems with a technology solution...they need to at a very minimum get back to a point where price/performance ratios favor them, if not an all-out superior product again (a la the Athlon series vs. P3 & P4).

"AMD desperately needs to address their problems with a technology solution..." what other kind of solution would AMD use to address their problem? Make more cowbell?

"they need better price/performance"... who wouldn't that help, in any performance product based industry?

"if not an all-out superior product again" Ooohh that's it right there! Great analysis!

And this one is for you deeznuts

quote:
He offered his thoughts and analysis on what AMD has to do in order to address their problems, yet you just quote the first part.


Thank you Captain Obvious!!!


RE: Back in the day...
By Motoman on 7/18/2008 3:03:16 PM , Rating: 2
Oh my...

quote:
"AMD desperately needs to address their problems with a technology solution..." what other kind of solution would AMD use to address their problem? Make more cowbell?


...there are lots of other solutions they could try. They could try to cut costs more. They could try to expand their product portfolio to a new market they're not in right now. They could do the inverse and sell off the parts of the company that are in the worst shape. And there are other options...my view is that they need a "technology" solution as the optimal target, i.e. they have to put their CPUs back on the map with Intel's offerings, rather than pursue any other course of action. It is probably the most obvious course of action, but it's probably not the easiest and most definitely is not the only course of action available to them.

quote:
"they need better price/performance"... who wouldn't that help, in any performance product based industry?


Naturally that would help anyone...however my point here is that in lieu of gaining the all-out performance crown, which of course would be awesome if they could do it, a more realistic goal is to try to balance the performance they can give with an attractive price point. Currently, at least on the desktop, AMD's price points are generally not attractive in relation to the performance they give. In an ideal world, that would be fixed by improving the performace of each part at each price point, but in terms at least of cash flow you might want to consider dropping your price points for each part to align them more favorably with Intel's chips.

quote:
"if not an all-out superior product again" Ooohh that's it right there! Great analysis!


...this being present in the original post to underline the notion that actually putting out the "best" CPU is likely secondary to achieving a price-performance ratio that's attractive. Which is not necessarily the conlcusion that everyone would jump to first...fanbois are wont to just scream for the new uber-processor that conquors all, without regard for the rest of the market.

...but thanks anyway for your insight.


RE: Back in the day...
By wordsworm on 7/19/2008 8:00:19 AM , Rating: 2
quote:
this being present in the original post to underline the notion that actually putting out the "best" CPU is likely secondary to achieving a price-performance ratio that's attractive.


I don't entirely agree. The one with the best CPU has bragging rights. Those bragging rights translate into more sales.

AMD's mistakes have come from the engineers' inability to compete directly with Intel's high end, and their desire to use cutthroat pricing when they simply didn't have the financial or manufacturing capacity to outgun a much larger competitor. This is the kind of stunt that a company like Intel would have managed well, but AMD just isn't in the position to make it work.

I think that AMD has turned an awful lot around in the last year. I have the feeling that the worst is over. Not because of Ruiz's walking away, but just because the ATI acquisition is now behind them, they *are* coming out with solid products now, even if they're not outdoing Intel, they're still significantly superior products compared to what they had a year ago.

Personally, I don't know why they put through those graphics cards at such a low price point. They could have easily priced them 25% higher and still wowed the market. Perhaps, though, what they really want is for the double sale: GPUs and chipsets.

I wouldn't be surprised to see AMD turn things around at the start of 2009. If I was a gambling man and my bank dealt in AMD stocks, I'd probably throw some cash at some stocks. Anyways, to restate the obvious - we need AMD to be a strong competitor.


RE: Back in the day...
By Calin on 7/21/2008 3:05:09 AM , Rating: 2
quote:
I don't entirely agree. The one with the best CPU has bragging rights.


The one with the most money and the best marketing department has bragging rights. Remember the P4 Prescott versus AMD Athlon64? AMD had to move to the "3000+, 3200+" nomenclature for its processors even if they had better performance.


RE: Back in the day...
By wordsworm on 7/22/2008 8:21:31 AM , Rating: 2
quote:
The one with the most money and the best marketing department has bragging rights.


I don't agree at all. The shift from an Intel dominated world to a two horse race was well on its way to being established. AMD was quickly gobbling up market share. Unfortunately, or fortunately, depending on how you look at it, Intel got back its wind at the same time as AMD lost theirs, and it's clearly leading the pack once again with AMD barely hanging on to its 4 socket server business. I am sure, confidant in fact, that AMD will see fair wind once more.

With bragging rights clearly back in Intel's possession, AMD is feeling this major pinch which we've been reading about for quite some time now.


RE: Back in the day...
By Mr Alpha on 7/19/08, Rating: 0
RE: Back in the day...
By Chaser on 7/18/08, Rating: 0
RE: Back in the day...
By rudolphna on 7/18/2008 9:19:39 PM , Rating: 1
would you please stfu? Thanks. There was no call for you to be a complete prick.


RE: Back in the day...
By buzznut on 7/20/2008 12:49:20 PM , Rating: 2
Captain obvious? Was that supposed to be clever? Its as bad as those "1980 called, they want their hair back." jokes.

BTW, the year 2000 called and they want their "Captain Obvious" reference back.