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

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...

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.

"Young lady, in this house we obey the laws of thermodynamics!" -- Homer Simpson
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