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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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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...


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