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.

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