AMD expects much lower first-quarter revenue

Back in January, AMD posted revenue of $1.77 billion for the fourth quarter of 2006 and said it expected revenue of $1.6-1.7 billion for the first quarter of this year. Then, in March, the chipmaker issued a revenue warning saying it was “unlikely to meet” its first-quarter guidance. AMD has now revealed the extent of the damage, and its revenue warning seems like a bit of an understatement. For the first quarter of 2007, AMD expects revenue of just $1.225 billion—a staggering 30.8% drop from the previous quarter.

Furious price cuts and competition from Intel are the obvious culprits for the slip. “Revenues declined sharply quarter-over-quarter for the Computing Solutions segment, primarily due to lower overall average selling prices and significantly lower unit sales, especially in the resale channel,” AMD explains.

To counteract the drop, the chip maker says it plans to “restructure its business model to increase operational efficiencies and lower its operating cost structure.” Capital expenditures for 2007 should drop by $500 million, AMD notes, although that decrease shouldn’t materially hurt its capacity plans. AMD also intends to reduce discretionary expenses and hire new staff only for critical positions. More details will be revealed during AMD’s first-quarter financial results announcement conference call on April 19, the firm says.

Comments closed
    • flip-mode
    • 13 years ago

    I just have to elevate this nonsense:

    y[

      • Shintai
      • 13 years ago

      Oh great..you start to agree tho you still try and talk around the price and competition. And for the monoply you are still clueless. Intel IS already a monopoly. And you counterargue yourself on the prices. Since prices went up dramaticly due to competition.

      And while you dont want to talk about MS. It still shows what happens in the real world when a company got 95% marketshare or so.

      And DoJ? Please…they can be bought so easily as MS already showed. There is more trust that the EU can do something.

        • flip-mode
        • 13 years ago

        Please read the post again. I spoke of how the higher prices were due to a lack of competition at the high end – first Intel couldn’t compete with FX now AMD can’t compete with QX. I also addressed your question of why MS doesn’t charge $1000 for their OS – even monopolies have a demand curve. This gets back to a previous post I made about how companies try to find the best mix of profit margin and volume sales. Please read more carefully.

        y[

          • Shintai
          • 13 years ago

          y[

            • flip-mode
            • 13 years ago

            y[

            • Shintai
            • 13 years ago

            You should even read your own precious link again.

            And as you said. Intel is without competition and now price the XE product at 1200$.

    • cass
    • 13 years ago

    Well, not just looking at them inparticular, I don’t think AMD is experiencing anything abnormal. The housing industry, Trucking Industry, and automotive industry have all had bad sucking quarters lately.

    Absorbing costs of building fabs and buying ATI came at a very bad time, but getting into selling big numbers with oem’s, and having more resources in house is good if used properly. Besides, the lead intel enjoys is not that large, and I doubt AMD is doing nothing. The fact that AMD went from essentially leading the top performance stuff to not even sniffing for almost six months now is disconcerting, but it is only six months.

    The whole tech industry’s numbers look bleak for right now, and I can tell you its been tough selling used cars for about six months, but stuff is coming back some right now, and I won’t be worried till I see how the next six months pan out.

    The largest thing is power usage… AMD needs to compete quickly here. That has been my determining factor in my last few purchases that went intel.. I mean both the AMD and Intel had enough power, and were close on performance and price, but the Intel just used way less power to do the same job, and I have had all the screaming fans I can stand for this lifetime.

    • Mac_Bug
    • 13 years ago

    I think AMD shot themselves in the foot when they acquired ATI

      • blastdoor
      • 13 years ago

      I’d put is somewhat differently — I think AMD sawed its own foot off and sold it for money to buy a diamond studded shoe 🙂

    • Wintermane
    • 13 years ago

    How does amd earn rnough to dtay in the race?
    They domt.

    As for who wi;; buy it… the bank will sell off the biys when eventualu amd run ouy of revenue needed tokeep up with its huge dect payment.

    Mind you that wi;; take years.
    The real hammrtb;ow has nothing to do with amd even. In case you hadmt noticed an econo,icdownturn is nesr certain befotr amd can get out of HEAVY debt.

    • echo_seven
    • 13 years ago

    Man, if AMD folded, I’d have so much less motivation to read tech news…it’s so much less interesting watching a one-man race.

    • WaltC
    • 13 years ago

    My goodness, but the doomsters are out again and in force…;) I still haven’t figured out the appeal of being a “doomster”–but suffice it to say that AMD has weathered much, much worse than the the last two quarters (that’s a mere six months of time for the space-time challenged) in its decades-long past. Indeed, years ago AMD might’ve wished fervently to be in its present position, because the positions the company has experienced in its past literally make this present one seem like a Roman holiday by comparison…;) How unfortunately short are the memory spans of some people…

    Look, if it was supposed to be all smooth sailing for AMD–just where’s the fun, or the challenge, in that? Sorry to have to inform the gleeful and presumptuous doomsters: but AMD isn’t going anywhere. In fact, hang on to your seats and get ready for what the next six months of Q3 and Q4 ’07 are going to bring. I can absolutely and categorically guarantee you that AMD is going to be around to bring them…;)

    But, really, that’s obvious, isn’t it? It’s far more obvious to me than is the old, old saw that “nVidia’s going to buy AMD”…;) Heh…;) The fact that sentiment like that was /[

      • blastdoor
      • 13 years ago

      The difference now is that AMD has very little left in reserve. They don’t have a profitable flash business to make up for the weak CPU business. They also have a lot of debt, and relatively little cash (not enough to both absorb losses and make capital investments). Also, Intel is now on its game in a way that it hasn’t been for years.

      AMD need Barcelona to be a huge success, both in terms of performance and in terms of AMD’s ability to manufacture it in large volumes very quickly. It took a *long* time for AMD to transition from XPs to 64s — they’ll need to move much more quickly this time around. I think the chances of both of these are slim — I suspect Penryn will do pretty well against Barcelona, and I suspect AMD won’t hit crossover on Barcelona until 2008. That means it’s very hard to see when AMD will have a profitable quarter.

      I think doom is warranted here. I hope IBM buys them and saves us all from the strongest Intel monopoly that we’ve ever seen.

      • Proesterchen
      • 13 years ago

      q[

        • Anomymous Gerbil
        • 13 years ago

        I can’t figure out whether you are unintelligent, or just irrational.

        However much you hate a company (who cares what AMD’s net profit over the years is, unless you’re a shareholder?), AMD’s death would be a bad thing – surely even you can understand that.

          • Proesterchen
          • 13 years ago

          AMD’s end is the only logical conclusion to its history, bad it only is for its creditors, and the people relying on other’s incompetence to finance their cheap CPUs.

            • flip-mode
            • 13 years ago

            There really is something wrong with your brain. You show a lot of intelligence about a lot of things but then about certain other things you exhibit a gaping hole in you intellect.

    • Wintermane
    • 13 years ago

    What do you expect amd has reached its bitter end time.

    Without iys own chjpset and integrated gpu section it could compete in most of the o,portant market segments. And intel bought thelast cheap competent gpu company left and ati the ON;Y option left was 20 times the cost AND had serious imyrtnal issues.

    amd is dead and the corpse kust hasnt started to topple over.

    AMD cant sell enough things to afford even a small portion of a 450mm 32nm fab plant. INTEL can, with just 1 such fab inyel can floof the market with cheap chips AND at a HUGE profit margin.

    Amd gets whar intel doest wantandwill exist only to the point intel needs to keepaway from monoploy issues.

    • Tarx
    • 13 years ago

    Hello Dell!
    Hold on a sec, let’s screw the resale channel, kill the S939 upgrade path and try to force resale market (i.e. you & me) to go AM2. Hmmm… why go AM2 when we can just get a C2D? One less CPU sold for AMD!
    A competitively priced S939 X2-4600+ (2.4GHz) (priced like the C2D E6400) and X2-5000+ (2.6GHz) made availability (and kept available) (with an advertising campaign) when the AM2 came out would given a desirable upgrade path for many single core CPU owners. Yes, they aren’t quite as good as the C2D, but for a drop in CPU, would have been a great choice and would show that AMD “cares” about their existing customers.
    I’ve heard too many people in last 8 or so months wanting to upgrade their CPU to an X2 X939, couldn’t find one, and ended up going to a C2D 6300/6400. Good move AMD…

      • just brew it!
      • 13 years ago

      People who upgrade their CPU chip are a minuscule piece of the overall market. Probably barely a blip on the radar.

        • SPOOFE
        • 13 years ago

        Too true. It’s easy for enthusiasts to forget this fact when they’re communicating with similarly-viewed folk all day long.

      • packfan_dave
      • 13 years ago

      Despite what some posters on hardware enthusiast sites like to think, essentially killing socket 939 has had a minimal effect on their bottom line. Retail CPU sales are a trivial part of the market. What’s killing AMD right now is the price cuts they needed to make to be price-performance competitive with Core 2 Duo, and that they’ve essentially got no high-cost desktop part (or high-end UP/DP server part) that it makes sense to buy.

        • NIKOLAS
        • 13 years ago

        y[<#16, Despite what some posters on hardware enthusiast sites like to think, essentially killing socket 939 has had a minimal effect on their bottom line.<]y I wonder about that, I know that I act as a "computer advisor", for a circle of friends, and only this last week, I told two of my friends that as there is no Dual Core upgrade for their s939 system, they are better off sticking it out with what they have and upgrading to a C2D system later this year. So that is lost sales, and being able to upgrade your s939 system from single core to dual core probably has an unusual level of demand, that impacts far more on the retail market than is usually the case.

          • just brew it!
          • 13 years ago

          I think it is still a very small piece of the market.

          And for those who absolutely must have dual-core, there still seem to be plenty of the dual-core S939 Opterons in the channel.

          • Proesterchen
          • 13 years ago

          You do realize that during the same week two of your friends asked you for advise, another ~4.5-5 Million PCs were sold, world wide? See the difference?

            • blastdoor
            • 13 years ago

            Right, but the consumer chunk of that 4 million probably asked its tech geeky friends for advice.

            I agree that most people do not plan to upgrade their CPU. However, I also agree that the people who do tend to be the people that advise others on computer purchases. Irritating those “consumer advisors” is never a good idea. The geeks don’t have to say “don’t buy AMD because you won’t be able to upgrade your CPU” — all they have to say is “don’t buy AMD”, and the sixpacks will listen.

            Keep the geeks happy.

            • NIKOLAS
            • 13 years ago

            I am sure that a lot of Geeks were in my position as well, so it is not like it is me alone against 4-5 million sales.

    • blastdoor
    • 13 years ago

    It may be time to have a new poll:

    Will AMD be able to survive as an independent company through 2010? If not, what will happen to it:

    1. bought by IBM
    2. bought by Microsoft
    3. bought by somebody else [specify]

      • Proesterchen
      • 13 years ago

      Don’t forget the most important option of all:

      4. Toast.

      • UberGerbil
      • 13 years ago

      No way Microsoft would buy it. Makes no sense financially or strategically.

      Back when Sun was flush with dotcom cash I could see them sniffing around. IBM of course is already in bed with them, but they don’t seem to want to be in commodity businesses.

      Honestly, with all the debt and hard-to-liquidate assets like fabs, it has it’s hard to see it as an attractive target for anybody.

        • blastdoor
        • 13 years ago

        y[

          • Shintai
          • 13 years ago

          I would guess AMD is a somewhat bad buy. Atleast until stocks would get down to about 5$.

          There is a 65/90nm foundry (But that gets devaluated fast these days). Thats worth money, _atleast_ 2 billions or so. All x86 tech might be close to worthless the same time AMD is sold. Due to the Intel agreements etc.

          Then there is the ATI part, that would be a patent/tech sell if you want cash for it. I dont have a clue about what you could get for that.

          So looking on what you could gain in cash is a hmmhm…if we assume both GPU and CPU fails. 3-4 billion maybe?

          • Proesterchen
          • 13 years ago

          q[

            • blastdoor
            • 13 years ago

            Good point — I hadn’t been focused on that. Ouch.

            • echo_seven
            • 13 years ago

            REAL long shot, but since we’re talking about companies with ~10 bln burning a hole in their pockets….. Google ? ^_^

            • blastdoor
            • 13 years ago

            Heh — I think apple is more likely than google — at least apple makes computers.

            Note that I am in no way saying apple would buy amd — i think the chances of that are about 1 in a thousand. I’m just saying google is even less likely 🙂

            • flip-mode
            • 13 years ago

            Nvidia buys AMD, spins off ATI.

            • blastdoor
            • 13 years ago

            That one makes more sense than most, although NVDA is a little short on cash and market cap (and probably not as reckless as AMD when it comes to purchasing things they cannot afford).

            Another thought occurs to me. If AMD were to disappear, Intel would have the strongest lock on the market its ever had. Think of all the competitors that have faded — 68k, PPC, SPARC, Alpha — they’re all either dead or on life support. The only remaining competitor is Power at the high end. That would be a very bad situation for the PC vendors — I have to believe that Dell and HP would be willing to go an extra mile to prevent that from happening.

            This leads me back to IBM. With the PC division gone, IBM no longer has the conflict of interest in selling x86 cpus, so Dell and HP would now be willing to buy from them. In fact, I bet Dell and HP would be happy to buy from them since it would prevent Intel from becoming a monopolist, and since they know that IBM would have a more reliable roadmap than AMD. Owning AMD/ATI would put IBM in a strong position to win the Xbox3 contract, too. And, unlike most other potential purchasers, IBM can afford AMD with cash on hand.

            Yeah, despite the obviousness of it, I have to go with IBM.

            • Shintai
            • 13 years ago

            IBM wouldnt be allowed to make any AMD x86 CPU. So if they bought AMD, they would lose half its technology right away. They would end up having to do a software emulation like transmeta.

            The cross licensing agreements got alot of restrictions.

            Also IBM dont want to manufacture. They are moving more and more to being a service company.

            • blastdoor
            • 13 years ago

            I’m no lawyer, so I can’t speak to the cross licensing agreements.

            However, I think the reality is that an x86 monopoly will not be tolerated by regulators in either the US or the EU, and Intel knows it. So one way or another, IBM would get the rights to manufacture x86 CPUs if they buy AMD. Perhaps the way it would go down would be as part of a settlement of the antitrust lawsuit — Intel pays $500 million and grants a permanent license to IBM, something like that.

            As for manufacturing — IBM is interested in profitable businesses. If they can make a profit selling x86 CPUs, then they’ll do it.

            • Shintai
            • 13 years ago

            It would end like MS is today. Nothing you in reality can do about it. Via would be like Linux is to MS.

            And IBM and CPU development/manufactoring…thats a dead course. Just look on how PPC ended and Apple was forced to change. IBM doesnt care. Also remember, IBM dont earn money on Cell/Power. They earn money on servicing it.

            It would be just as likely for HP, Sun, Dell to buy AMD than IBM.

            • blastdoor
            • 13 years ago

            I have some friends who work as economists for both the FTC and the Justice Department. The interesting thing about anti-trust laws, at least in the US, is that they actually take into account what’s best for consumers. In some cases, a monpolist might be the best realistic outcome, in which case the government won’t break it up. But in others, it might not. The government has discretion to figure out which case is which, and act accordingly.

            Regarding MS, I think the government has concluded that there isn’t much that can be done, because it’s not clear that breaking MS up would be good for consumers. That is, we just don’t know whether two companies selling Windows would be worth the added confusion.

            But in the case of Intel, we don’t have to speculate as to whether having multiple x86 vendors would be good — we’ve experienced it, and it is good. This puts the government in a very different position. They can act to preserve competition.

            One thing to keep in mind is that anti-trust issues trump patent issues. That fact is something that Intel would most likely keep in mind, and would probably lead them to settle the anti-trust case with IBM in the way I suggested.

            • Shintai
            • 13 years ago

            Please…you do know that the EU is about to fix the mess the US goverment and courts couldn´t do with MS? In the US you just put up an army of lawyers and some lobbyists with alot of money and you rule the country.

            Gates and Ballmer thought they could do the same in the EU. But they ran into a wall.

            • Krogoth
            • 13 years ago

            The day that AMD files Chapter 11 bankrupacy.

            Intel will make up some “lame PR” nonsense that makes them delay their future projects. Their current price list for CPUs will change to promote greater profits for each segiment a.k.a back to $1200+ high-end chips and a slight speed bump = +$150-250.

            • Shintai
            • 13 years ago

            You do know Intel was a monopol before? And AMD was simply a foundry partner. History shows you are wrong. Also prices would have to be within reason. Else they would be goverment regulated. There is a reason MS “only” earn what they do.

            Back to 1200$ highend chips? It was basicly competition that pushed prices from the peaked 600-750$ range into 999$. Besides one P2 chip.

            • flip-mode
            • 13 years ago

            Um, high-end chips (QX6800) are $1200 right now. Rampant speculation: High end chips prices would probably climb far above that – $2000 to $3000 maybe? Low end chips would get the biggest price hikes. A budget chip would go for $300-400.

            • Proesterchen
            • 13 years ago

            Earth to flippy, Earth to flippy: Intel alone has the capacity to supply 4 million CPUs a week, and that capacity produces most economically when used to the max. At the prices you dreamed up, you couldn’t even sell the output of a single FAB.

            But hey, got to justify the green loser’s existence somehow, right?

            • echo_seven
            • 13 years ago

            What? At the very least, if AMD didn’t exist, how much would you be paying for your Core 2 Duos right now? If they existed? I don’t think Intel would need to slash prices to clear inventory in the absence of Athlons jammed in the mid to low end.

            edit: oops, didn’t read the mass of posts before mine that said the same thing…

            • flip-mode
            • 13 years ago

            Proest, if I was Intel and gained a complete monopoly due to AMD going out of business here’s what I’d do: maximize profits. I’d do this by lowering costs and raising prices. I’d lower costs by doing less R&D, lowering capital expenditures (building fewer fabs), and moving to smaller feature sizes more slowly. I’d raise prices by, uh, raising prices. Demand for my chips would surely drop, and as that happened I’d sell off my excess capacity either by selling the facility or by manufacturing for others or by expanding my own product line. I’d probably try to sell the facility and maybe layoff the staff because that would go a long way toward my goal of minimizing costs.

            Then, to make sure that sales didn’t completely drop, I’d probably do a new Itanium every 10 or so years so that people would _have to_ buy new chips from me cause their old chips won’t work with new software.

            That’s if the gov let me get away with all of that.

            These tactics are really old. They’re really simple. They’re just plain standard monopolistic behavior.

            Then again, since Intel is the greatest company there ever was or ever will be, I’m sure they would never think of taking advantage of a full monopoly and therefore we have nothing to fear. The demise of AMD could only be a good thing for us all.

            In a wierd way it could be good – tech’s progress might slow up and maybe I’d end up upgrading far less often? Hmm…

            • Shintai
            • 13 years ago

            You wont see so high prices. Volume pays better than a small profit. And if the price is too high you quickly end up with harsh competition.

            Look at MS, there is a reason we dont pay 1000$ for Vista Ultimate.
            MS is a completely monopoly in the same way Intel would be if AMD died. It wont be any different. You make it sound like a monopoly can do as it want. But you forget the monopoly are controlled by the consumers.

            Also a 50$ profit on 100million items is a darn lot better than a 500$ profit on 1 million items.

            And don´t underestimate the development if they became a monopoly. They would make sure there was a reason to keep upgrade. Else they would kill themselves. If CPU developement got stagnant. What would you sell?

            Again..look at MS!

            Nomatter how bad you want a company to look with a monopoly. It still wont change the fact its consumer bound.

            • flip-mode
            • 13 years ago

            Their prices would follow a supply/demand curve still, but it would be a supply/demand curve adjusted for a monopolistic situation. This is all econ101 Shin, I’m not creating my own definition of monopolistic behavior. What exact prices would be is completely impossible to say and that’s why I stated that my post was speculation. But one thing we can all be certain of is that prices would definitely increase. Actually they already have. Intel’s top-end CPU used to cost $1000. That’s now gone up to $1200 since there’s no competition from AMD in that performance sector.

            §[<http://en.wikipedia.org/wiki/Monopoly<]§ y[

            • Shintai
            • 13 years ago

            Seriously…íf you are so freaking smart with a monopoly. Tell me why on earth MS dont charge 1000$ for an OS and update it once each 10 years.

            And Intel is already today a socalled monopoly by the standards. Else it would change nothing if AMD died. There would still be Via.

            And for the price. You do realize its competition that gave us these insane prices? The chip prices went up from about 640$ to 999$ due to COMPETITION!

            Why do you think Intel would behave any different than MS? And a new ISA, again..seriously. Do you know a company called Apple? Works perfectly fine for them without a monopoly.

            And on the other hand. Competition is also what holds us back from any real development. Since we continuesly tries to patch the crappy x86. Not even to talk about the codework needed to deal with its issues.

            Imagine on software if MS didnt have a monopoly. We would with al respect to the *nix people. Stand in crap to our necks.

            • flip-mode
            • 13 years ago

            Chill out man. You don’t have to get upset just because I can talk about monopolies with more sophistication than you can.

            Edit: used sophistication in place of nuance.

      • Kreshna Aryaguna Nurzaman
      • 13 years ago

      After AMD fails to deliver its Rampage processor, Intel will buy AMD’s /[

    • Kopi
    • 13 years ago

    I dont seem to understand AMD’s biz strategy lately. First they do not have a competitor to C2D and 8800 series. What are they thinking? The one that freaks me out is the recent rumors that R600 has been ready for a while but AMD put the launch on hold so they can bring out a complete line if DX10 products. from a “wow” perspective that sounds good but from a business perspective, it’s bullshit. I mean each day these products are not in the market means lost revenues. If AMD wants to make money, they better roll out competitive products and not sit there wasting themselves.

    • Shintai
    • 13 years ago

    Ouch…good thing I aint AMD stockowner 😡

      • apkellogg
      • 13 years ago

      Oddly enough, their stock is up today.

        • just brew it!
        • 13 years ago

        Any cuts they make now will help their bottom line over the short term, but hurt them over the longer term. The stock market generally only looks as far ahead as the next quarter — maybe two — of financial results.

    • blastdoor
    • 13 years ago

    I’d like to know more about that drop in capital expenditures of $500 million. What, if any, consequences will that have for the full transition to 65 nm and the subsequent 45nm transition?

    • Sumache
    • 13 years ago

    And in other news more layoffs are expected at Markham, Ontario…

    • Krogoth
    • 13 years ago

    Captain Oblivious called. He wants his job back!

    On a serious note. I hope AMD doesn’t follow the same fate as DEC.

    • just brew it!
    • 13 years ago

    Wow, that’s pretty brutal.

    • flip-mode
    • 13 years ago

    Holy F-bomb it’s sounding cataclysmic.

    Heh, no R600 + no c2d competitor = no soup for you

    • alex666
    • 13 years ago

    Isn’t it ironic that this story is directly above a story about AMD cutting prices.

      • Peldor
      • 13 years ago

      No, not really ironic at all. The news on revenue is bad, but not unexpected. They slashed prices already, so you have to expect that revenues are going to be down. But the sharp decline in unit sales is especially bad. The only way to move those boxes is to lower prices even more.

      • snowdog
      • 13 years ago

      I don’t get that either, it is not like the remedy will make that much diffference. They need to get ASP and sales up. Those are steep cuts as well. They will kick the crap out of ASP.

      It is amazing the difference a generations makes. Do geeks really drive the market? I mean for a your average Jane sixpack, there is no real difference for web/email/word on amd vs intel.

      So are geeks looking for a few more FPS really that important.

        • Stijn
        • 13 years ago

        I’m convinced ‘geeks’ gain more influence on ‘regular’ people, but when you see everyone buying cheap Dell’s I don’t think it’s really a big difference

    • Jigar
    • 13 years ago

    I like toaster /Proesterchen 😉

      • Proesterchen
      • 13 years ago

      Indeed. 🙂

      Anyways, I have to admit that while I had expected a pretty dire quarter for AMD, I didn’t think it would be /[

        • leor
        • 13 years ago

        you sit around and calculate the projected earnings of tech companies?

        get out much?

          • SPOOFE
          • 13 years ago

          Does it usually take you more than five seconds’ of effort to make a guess?

          Sniff glue much?

          • Proesterchen
          • 13 years ago

          That’s weak even for you, leor. But given the dire news, I’m inclined to cut you some slack. 😉

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