AMD lost another $600 million last quarter

A day behind its arch-rival Intel, AMD has reported its financial results for the second quarter of this year. As expected, the numbers aren’t pretty. The world’s number two processor manufacturer managed to rake in revenue of $1.378 billion in Q2—up almost 12% compared to the first quarter—but it posted a net loss of $600 million. If you’ve been keeping track, AMD lost $574 million in the fourth quarter of last year and $611 million in the first quarter of this year, so the company has lost a cumulated $1.785 billion over the past three quarters.

Despite repeated losses, AMD says it managed to both increase its gross margin and win back market share from Intel last quarter. Gross margin for the second quarter was 34%, up three percentage points from the first quarter. On the market share side of things, research firm iSuppli tells us AMD stabilized its market share with 11.4% of worldwide microprocessor sales in the second quarter. In the first quarter, by contrast, AMD accounted for 10.9% of sales. Finally, AMD says initial sales of Radeon HD 2000 graphics processors have been “strong” in the distribution channel, although it doesn’t cite specific numbers.

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    • WaltC
    • 14 years ago

    Gross margins are up over last quarter, unit shipments are up, marketshare versus Intel was gained not lost, R600 sales had barely begun before the quarter ended, and even with all of the paper losses accumulated thus far AMD has 1.62 billion dollars in the bank and another 892 million in longer-term cash assets. Capping it all off, of course, is that all of this has been accomplished pre-Barcelona, which, btw, is still on track for Q3 shipping. Phenom, the desktop variant of Barcelona, will ship late in Q4, and achieve volume in Q1 ’08. AMD’s targets are the server, desktop, and mobile markets, in that specific order.

    It’s amusing how people see only “600 million net loss” and simply stop reading all of the other information contained in the report–as if the current loss is all she wrote…;) These people are the same people who never fathomed why AMD didn’t go broke years ago prior to shipping Opteron, the same people who don’t know why AMD stock is going up and not down, and they will be the same people who scratch their heads is confusion when in a couple of quarters or less AMD is back in the black and stronger than ever.

      • pluscard
      • 14 years ago

      Excellent post. Btw, they didn’t lose $600m as has been reported. Generally accepted accounting principles (gaap) allows for one time charges to be backed out, so investors can track trends, and project future directions. The GAAP loss was $459m – quite a bit less.

      One of the reasons they never seem to run out of cash is that the GAAP loss includes about $300M in a non-cash expense called depreciation. It’s basically a reserve to rebuild and re-tool fabs when necessary. AMD has enough resources that it could burn $159m/quarter for a very long time.

      Another reason they seem to continue to thrive despite gaap losses, is they seem to routinely get grants and other special financing each time they build a new fab. They got about $350M this week from the German gov’t to expand fab 38 and take it to 45nm process. While it’s not enough to do the whole job, it sure helps.

      Plus

    • SVB
    • 14 years ago

    The reason for the positive stock action was that the number wern’t bad at all:
    1. Sales in terms of dollars and units were up over the first quarter. Usuall second quarter is down.
    2. There were 100 megabucks of writeoffs added to the bottom line.
    3. The channel inventory was lower.
    4. Yields at fab 36 are good enough that AMD can slow down CAPEX at fab 38.
    and ……..
    5. AMD has 1 gigabuck of assets to be sold including Spansion stock and 200mm wafer equipment.

    With the delay of CAPEX they expect to make money in the 4th quarter. That’s not bad really.

    I don’t really know how much to believe and how much Hector and company are on the joy juice but its quite concevable without the $100 megabuck writeoff, the $295 megabuck CAPEX, and improving ASPs from Barcelona, AMD could make money by the end of the year.

      • Anomymous Gerbil
      • 14 years ago

      Looking at the big picture here – why do people capitalise every letter in “capex”? “Capex” or maybe “CapEx” is sort of understandable, but “CAPEX”?!!! It’s not an acronym!

        • flip-mode
        • 14 years ago

        Heh, I had no clue what CapEx meant until I read your post.

    • pluscard
    • 14 years ago

    Hey guys.

    The news is that AMD increased cpu unit’s shipped nearly 40% – that’s why the share price rocketed. They also increased gross margins at the same time. AMD got $350M from Dresden gov’t today to fund additional fab expansion, so whoever said they never seem to run out of money is dead on.

    AMD is loosely forecasting a sales increase to $2B/quarter by Q4, with margins in the 40% range. AMD is in this for the long haul, and the street believes they will pull it off.

    Looks like the competition is here to stay. Intel can’t be happy.

    • paulWTAMU
    • 14 years ago

    Holy crap. Them’s some biggish numbers; sounds like AMD may need to work on overhead and payroll cost to reduce those losses. All I can say is ouch.

    • Krogoth
    • 14 years ago

    I blame the aggressive price wars, R&D costs and K10’s delays for this quarter’s losses.

    C2D only has allow Intel to seize the enthusiast market which is small fries in the grant scheme of things.

    ICM-based Xeons only help Intel stop hemorrhaging its marketshare in the enterprise market. Where the Opterons were utterly humiliating the Netburst-based Xeons.

    • albundy
    • 14 years ago

    well, their loss is reminiscent of the processors in their showcase. The consumer thinking is “why would I buy this if intel makes a better one for about the same cost?” same concept on their graphics cards.

      • lex-ington
      • 14 years ago

      I think of it this way . . . . If I had a company of 500 employees and the difference between the AMD Dells and Intel Dells are $50-$75, and the difference in laptops is about $100 (I REFUSE to compare the Turions with a Celeron anything) . . then I know what I would be choosing when I have to replace machines 20-30 at a time.

    • Forge
    • 14 years ago

    I’ve always found it fascinating how AMD loses money year over year and never runs out.

    I remember they turned a profit once.

      • Krogoth
      • 14 years ago

      AMD has made profits in a few quarters, but most of their history they ether break even or had a losses.

        • just brew it!
        • 14 years ago

        IIRC as of last year they had actually turned a slight net profit, if you looked at the entire history of the company back to their inception in the late 1960s (yes, they really have been around that long). They may very well be in the red overall now though (not sure).

    • Wajo
    • 14 years ago

    I know it sounds unfair and quite capitalistic, but AMD needs to reduce it’s headcount. While the ATi acquisition means a lot of new people I do not think it justifies the ~6000 increase in headcount from the past year.

    • heruur
    • 14 years ago

    How can a smaller company like AMD fight off a giant like Intel, especially since its outresourced and financed. That K10 core better had deliver a “miracle” to the computing world or AMD may be no more. 🙁

      • _FAKE_
      • 14 years ago

      Umm, think about Mozilla Firefox and Internet Explorer. Internet Explorer is woned my a much more wealthier company than the company behind Mozilla Firefox, yet Mozilla Firefox beats Internet explorer in everything.

      Think about the P4 vs A64 days :-), I’m sure AMD will make a comeback

        • wierdo
        • 14 years ago

        Mozilla doesn’t cost a billion dollars a year in equipment to make, so I don’t really think it’s a good comparison.

    • Reputator
    • 14 years ago

    Poor AMD. 🙁

    I hope things turn up for them. Maybe IBM will merge with them and keep the market going.

      • 41.60l23
      • 14 years ago

      You have no idea how much I would love to have an IBM Phenom Power7 64 X4 processor.

        • SGWB
        • 14 years ago

        As exciting as this sounds, I have some apprehension about IBM buying out AMD.

        IBM has proven time and again that they can’t, or don’t care to, execute in the desktop market. They failed in the PC desktop manufacturing business. They failed in the x86 OS business with OS2. They failed in x86 CPU manufacturing (they used to make a 486-type CPU). They failed in producing competitive PPC chips for Apple.

        They have also divested themselves of their printer business and their laptop business. All of their recent moves have been to move further away from the small consumer. At this point, IBM is mostly service, IP, and mainframe oriented. They already have strong server processors and don’t have much interest in desktops or laptops, so I don’t think they are interested in buying AMD. If they did buy AMD, I’m afraid they would meddle with it just enough that AMD couldn’t make a competitive product.

    • Ardrid
    • 14 years ago

    Jesus Fuck Christ…$1.8 billion in the last 3 quarters. Barcelona better kick some serious ass or AMD is finished because they damn sure can’t count on the graphics division right now.

    • alex666
    • 14 years ago

    AMD managed to close up 32 cents, or 2.1 percent with today’s news.

      • orthogonal
      • 14 years ago

      Actually, it closed up 32 cents before any news. In after hour trading when the news was released, the stock is SOARING (currently up 0.80 or 5%)!

      Go ahead and explain that to me. Sure the gross revenue is up, but they still haven’t made any money… The stock market sure has a mind of it’s own. Intel dropped nearly 5% on the report of 44% Profit increase…

        • adampk17
        • 14 years ago

        Basically I guess you can assume that many people had thought AMD’s news would be worse and the stock price was already reflecting this assumption before the news was released. Once the news was released and it wasn’t as bad as those people thought it would be the stock price recovered slightly.

        In Intel’s case just the opposite happened. People thought they would do even better then they did.

          • orthogonal
          • 14 years ago

          Now I see it, right when they announced it the stock didn’t move much, but when they announced higher Q4 guidance that they would be breaking even, the stock took off.

            • just brew it!
            • 14 years ago

            That would help too.

            So… combination of slightly less bad than expected numbers for last quarter, and big improvements projected for this quarter.

          • just brew it!
          • 14 years ago

          Yup. In a properly functioning, liquid market, current stock price always reflects the general consensus of how a company is currently doing. If quarterly results come out and indicate that they are doing better than expected — even if they are still in horrible shape — the price will bounce.

            • Anomymous Gerbil
            • 14 years ago

            Not quite right.

            In a properly functioning, liquid market, the current stock price reflects the general consensus of how a company is expected to do b[

            • just brew it!
            • 14 years ago

            …and you are correct. My bad.

            Though one could interpret “how they are currently doing” to include their prospects for the future. 😉

            • SVB
            • 14 years ago

            Dunno, just have always seen it that way and for me it’s an old habit.

      • alex666
      • 14 years ago

      From where I read that report (yahoo/AP), it was implied that the AMD had closed up after release of the news. No matter I guess, though I hate to be incorrect. In any case, yeah, go figure. Part of their loss was expected, due to payment for ATI. So ya gotta wonder if AMD and investors are expecting losses and are relieved that the dropoff in market share has stopped and in fact they’re coming back.

      From a purely business perspective, I wonder how they are doing, all things considered. As grim as so many at this site and elsewhere portray AMD, I wonder if it’s as bad as it looks from a longer-term business perspective? I don’t know, and I doubt most people here really know.

      I remember before the a64s, AMD always seemed to be losing money yet somehow hung in there. They definitely are the Avis to Intel’s Hertz. Ya gotta love em.

    • FubbHead
    • 14 years ago

    Guess that means I will buy both AMD processor and graphics next time around.

      • sigher
      • 14 years ago

      harsh

    • pdjblum
    • 14 years ago

    It is not surprising that management, who are getting paid big bucks for what I don’t know, would find the positive in such horrendous cumulative losses, not to mention the decimation of the balance sheet. “Another Month’s Delay” shareholders should fire Ruiz already.

      • Ricardo Dawkins
      • 14 years ago

      those banned dudes were right….AMD so long.

        • Smurfer2
        • 14 years ago

        Maybe, but we need to keep hope up, hopefully AMD will only lose less than 500 million next quarter.

        • pdjblum
        • 14 years ago

        The classic Chinese treatise on health, the name of which has “Yellow Emperor” in it, though I cannot remember the complete title, cites arrogance as the worst sickness of all. Hector Ruiz suffers from this sickness and “Another Month’s Delay” has paid for it.

          • tempeteduson
          • 14 years ago

          Would you kindly stop using that “Another Month’s Delay” thing? It’s getting old… fast. And I know you’ve been asked before.

            • pdjblum
            • 14 years ago

            I have never been asked not to use it, but rather to stop suggesting that the company change its name. I decided to lovingly call it “Another Month’s Delay” just as other folks have given it their own creative pet names such as DAMIT. Sorry you do not like it, but I will continue to use it until it no longer applies. If you think I should be banned because of it. then so be it.

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