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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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By eek2121 on 4/20/2007 12:26:40 PM , Rating: 3
A lot of people can speculate about AMD. However the fact is AMD themselves have driven away customers. AMD seems to have forgotten what made them so popular. Back in the days of the K6-2/3 they used the same socket as intel (socket 7). In theory i could plug a K6-2/3 into my intel socket 7 motherboard and it would work. Thereby extending my investment.

Once AMD switched to their own socket. I could do the same thing AGAIN with Athlon->Athlon XP. I could buy faster and better CPUs without upgrading the rest of my hardware. This allowed me to protect my investment, therefore i stayed with AMD. Even with the release of the athlon 64 i could do the same UNTIL recently. AMD butchered their customer base by forcing an upgrade upon us.

Rather than making DDR parts based on S939, they chose to kill it off. At the same time the transistion to PCI X was happening, as well as the transition to DDR2. Therefore they screwed with my investment. I resent that and I'm switching to intel for the first time in years. Because AMD doesn't want to support their customer base, i'm forced to purchase a new CPU, motherboard, RAM, and graphics card, all of which worked perfectly prior to this. If they would have continued to support my socket, all i would have done is bought the latest athlon64 x2, thereby generating a sale for them. At least 1 other friend of mine is in the same boat, and he went intel.

THIS is AMD's problem. They can have slower chips, thats NOT an issue. What IS an issue is when they alienate their customers.

RE: People...
By eek2121 on 4/20/2007 12:28:54 PM , Rating: 2
I forgot to add that, if the transition to PCIX had not been happening, as well as the transition to DDR2, i would have had no problems replacing my motherboard and CPU if necessary. It's the fact that i have to throw away about $1200 in computer hardware that makes me rather annoyed.

RE: People...
By Zoomer on 4/22/2007 9:05:49 AM , Rating: 2
I fail to see any consumer boards with PCI-X in them.

The change was necessary as they changed memory types. AMD isn't large enough to keep DDR prices from raising - blame intel for that.

RE: People...
By gus6464 on 4/20/2007 5:07:07 PM , Rating: 2
This is very true. I bought an Opteron 165 last January which I overclocked to 3.1GHz and now I have to replace my motherboard because it is giving me issues I do not want to deal with. But guess what, I have almost no choice in s939 mobos now because there are none. The games I play still run perfectly fine on my current rig which was top of the line last year but now I might have to scrap my CPU and ram. AM2 offered 0 increase in benefit over s939 but they still shoved it down our throats. Whereas if I would have bought an Intel chip instead last year LGA775 is still everywhere and doesnt look like it is going to die any time soon. Now my new rig at the end of this year is going to be an Intel quad core and doesnt look like I will be buying anything AMD any time soon since K10 will probably be more expensive than the intel quads once the projected drop to $266 comes. Most people go for best bang for your buck which is what made me a fan of AMD but now it seems as if they are trying to alienate the reason that made them so popular.

I am sorry but it doesnt matter if K10 is faster than C2D if Intel continues on with this price war.

RE: People...
By Zoomer on 4/22/2007 9:08:17 AM , Rating: 2
You can just RMA your board.

RE: People...
By werepossum on 4/20/2007 7:00:22 PM , Rating: 3
I totally agree. Forcing a change to motherboard and RAM along with a processor is immensely stupid when your competition is kicking your butt. There's a large installed base of socket 939 users, the only dual core 939 CPU available at decent prices are the 3800s, at almost every price point (at least counting the announced Intel price cuts this month) Intel wins, and the four or five fastest Intel processors have no AMD equals. Is this really a time to be forcing a platform change to loyal customers looking to upgrade? I've been using AMD since at least my 80287 co-processor, but I'm looking at Intel for my next rig.

That ATI acquisition did them no favors either with ATI DX10 parts so far behind NVIDIA’s. It's not easy to arrange doubling the number of core businesses in which your corporate butt is kicked, but AMD seems to have accomplished it nicely. And re-branding ATI as AMD - thus driving away potential customers who have heard nothing of the acquisition or AMD video cards - is just the icing on the cake. </sarcasm>Perhaps the AMD management should go for the trifecta and start making racist remarks? </sarcasm>

"We shipped it on Saturday. Then on Sunday, we rested." -- Steve Jobs on the iPad launch
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