AMD Posts Another Loss After Sales Plunge
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AMD's comeback under Dirk Meyer came to a screeching halt as the company was socked with the same economic problems that ail the rest of the sector. The company reported a loss of $1.4 billion, or $2.34 a share, for the quarter ended December 27, 2008, compared with a loss of $1.77 billion, or $3.06 a share, in the same period last year.
Revenue fell 33 percent, to $1.16 billion, from $1.74 billion last year. For the 2008 fiscal year, AMD (NYSE: AMD) reported sales of $5.8 billion, just a hair below the $5.85 billion in fiscal 2007. Loss for the year was $3.1 billion, a slight improvement over the $3.8 billion loss in fiscal 2007.
That said, the company's piggy bank is a little lighter. AMD's Chief Financial Officer, Bob Rivet, said the company had $1.1 billion in cash, down $240 million from the prior quarter.
Analysts had expected a loss of 54 cents per share on sales of $1.23 billion, so AMD fell short on both accounts. The only positive in all of this is that much of the "losses" are paper, not cash.
Rivet told a conference call of financial analysts that of the $1.14 billion net loss from continuing operations, $996 million of that was in write-downs and impairment of goodwill, again related to the 2006 acquisition of ATI Technologies.
"The global economic environment led to a softening in demand for PCs in what is supposed to be the busiest quarter of the year," CEO Dirk Meyer said on the call. The climate continues to dampen demand and the company is unsure how long it will last.
"The reality of today's global economy require that we redouble our focus on cash management and cash flow control, and we will do so while protecting assets," said Meyer.
AMD announced last week it would cut 1,100 jobs, or nine percent of its workforce, and reduce employee pay.
The good news from Shanghai
The one bright spot in the quarter, according to Meyer is that reception to the new Quad Core Opteron, the "Shanghai" version released in the fourth quarter, was very good. Meyer said more than half of Opteron sales are Shanghai generation chips, a fast ramp for so new a chip, and three quarter of all sales are quad core chips.
For now, AMD is reducing its product output and giving the channel time to go through its inventory before it can determine its next moves. Meyer said the laptop market takes a little longer because construction and shipping is different in that segment.
Going into 2009, he said it's awfully hard to forecast where consumption will go across markets, and the real wildcard is the current economic climate and what effect it will have on spending patterns.
The company is reducing its break-even target from $1.5 billion to $1.3 billion, while maintaining a gross margin goal of 40 percent or more. R&D will be reduced $300 million without compromising its product roadmap for the next two years.
Beyond that, said Rivet, the company would offer no further guidance. "The current environment is pretty murky, visibility's pretty low," he said.
AMD remains on track to spin off its fabrication facilities under The Foundry Company in February. Even though the company is being spun off from AMD, its figures will be reported as part of a consolidated balance sheet with AMD in Q1.
The vote to spin off the Foundry Company will take place at the February 10 shareholder meeting, and is expected to pass. The company will close the transaction within 48 hours of an affirmative shareholder vote.
That will pour $700 million more into AMD's bank account, and it needs it, said Nathan Brookwood, research fellow with Insight 64, a semiconductor industry research firm. "If they didn't have the Foundry Company deal, people would be looking to do last rites," he told InternetNews.com.
"The fact the Foundry deal is in place and dramatically changes their business model and puts some cash into the assets will make all the difference [in the company's finances]."