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AMD struggles in a number of markets

In the graphics world, Advanced Micro Devices (AMD) has managed a surprising turnaround with the release of its 4000 series of graphics cards, which dollar-for-dollar outperform NVIDIA's offerings. If early reviews are to be believed, AMD will soon negate the last victory that NVIDIA could claim -- highest performance, regardless of price -- with the release of the 4870 X2, which trounced NVIDIA's high-end 280 cards in early testing.

Despite this success and boosted sales, AMD is still struggling heavily financially. The acquisition of ATI, while finally becoming a success, was a costly one. This is reflected in its predictions for its second quarter financial results, which will be announced July 17. AMD is expected to take over $900M USD in charges to cover its deep debt.

The discovery came from an AMD filing with the U.S. Securities and Exchange Commission (SEC). Leading a variety of charges will be the big one -- an $880M USD related to the Consumer Electronics division of ATI. AMD complains that the division's handheld and TV units are performing very poorly.

It appears that ATI may be planning to spin off or sell its struggling Consumer Electronics division in response. The consumer electronics division makes the graphics chips for the Wii and formerly made chips for Microsoft's defunct HD DVD expansion.

Another $32M USD writedown will be taken based on the layoffs announced earlier in the year, to cover various severance packages and other expenses. AMD had announced plans to cut 10 percent of its workforce earlier this year, or about 1,650 employees. The cuts will target underperforming divisions to try to return them to profitability.

Finally, AMD is taking an additional $36M USD writedown based on various other investments, including its investment in Spansion, a flash memory company which AMD jointly co-owns with Fujitsu and private investors.

AMD hopes to control some of the costs by selling off some 200-millimeter wafer equipment from its fabs. The equipment is expected to total $190M USD. It is unclear, however, exactly what AMD plans to do with the fabs in question. It may elect to close them or try to develop more partnerships under its "asset smart" strategy.

Ross Seymore, an analyst with Deutsche Bank, said the numbers were noteworthy of some broader issues with AMD, but not game-changing by themselves. He stated, "AMD is taking several one-time charges, but we believe they do little to change the fundamentals of the company. AMD will take an additional $880 million impairment charge related to the ATI acquisition. This brings the total impairment charges related to ATI to approximately $2.2 billion or more than 40 percent of the original $5.4 billion acquisition price."

AMD is hard at work secretively designing a dual CPU/GPU, which it currently dubs "Accelerated Computing", its eventual goal in acquiring ATI. However the cost of developing this future-looking offering has been large, as the acquisition cost $5.4B USD at a time when AMD was already struggling financially.

It is the hope of AMD that its upcoming 45-nm processor, Shanghai, and its newly released Puma mobile platform for laptops will help return it to profitability. Meanwhile it will try to make its operations leaner by cutting jobs, taking writedowns, and possibly ditching its struggling consumer electronics division.



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AMD will be fine (I Hope)
By rhog on 7/15/2008 10:37:02 AM , Rating: 2
Dailytech has always been a Intel/Nvidia Fan site so I expected the "sky is falling" comments. I don't think AMD intends to compete with Intel in the High end as they have stated this many times in the past year. The interesting thing is, in my opinion, Intel/Nvidia cannot compete where AMD is going. Look at what AMD is doing with their chipsets and low power processors. The 780G is far better than anything Nvidia and Intel have in this target market. Rigs sporting a 780G and an X24850e (or a new low power 9150e/8350e) seem to be the way to go in this Greener economy. I also find it interesting that comparisons on power are done on the CPUs alone when the AMD has the Memory Controller built in and Intel does not. I believe it would be a better comparison of the power usage to take the processors AND the Chipsets combined as I believe this would show AMD in a better light(the 9850 and 9950 processors not withstanding). Also the Opteron processors are holding their own in the server market as they are competative in that arena. AMD is not gunning for the high end but is amining for the middle where most hardware is purchased. Hopefully it will just take a bit more time to get the Spider Platform in place and they will return to profitability. Give AMD time I think you will see good things in the future, just not in the very high end.




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