AMD Stops Most of the Bleeding
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Advanced Micro Devices has managed to turn its gushing wounds into mere trickles, turning in a third quarter that saw a minor loss and hints of profitability in the future. The company lost $67 million in the third quarter, or 11 cents per share on sales of $1.78 billion.
That's a big improvement over the last few quarters. Analysts polled by Thomson Reuters had expected a loss of 40 cents per share on $1.48 billion in revenue.
The company has sure done worse. AMD (NYSE: AMD) lost $1.2 billion in the second quarter, although much of that was write-downs of goodwill and not actual money out the door. It saw a loss of $396 million during the third quarter of 2007.
Income from continuing operations was $41 million, a sum that grows to $170 million if factoring in revenue from discontinued units.
Thanks to new products across the line, from laptop to desktop to server processors, AMD's revenue increased 32 percent compared to the second quarter of 2008 and 14 percent compared to the third quarter of 2007.
"We reached our goal of achieving operating profit in the quarter," said CFO Robert Rivet during a conference call with analysts. "We continue to progress toward delivering consistent profitability based on a tightened focus and strong execution across our business."
Microprocessor revenues for the quarter were $1.39 billion, up 8 percent over the third quarter of 2007 and up 26 percent sequentially from Q2 2008, while graphics revenue rose to $385 million, up 40 percent over 3Q07 and 55 percent over 2Q08. Server revenue grew 9 percent thanks to a 50 percent increase in unit shipments from the previous quarter.
Rivet said he expects fourth quarter revenue to be flat compared to Q3, with amortization of $30 million and depreciation charges of $280 million.
"We made solid progress in the third quarter, gaining moment on the strength of impressive products in each of our core businesses while taking actions across the company toward lowering our break even point," Rivet said. "We remain on course to achieve $1.5 billion break even by next year, the result of continued activities and the result of our Asset Smart transaction."
CEO Dirk Meyer, in his first conference call since taking the helm from Hector Ruiz, added, "This past quarter was a good one for us in a number of ways. Certainly, not satisfactory -- we won't be satisfied until we deliver consistent profitability, but [the quarter is] one I would characterize as directionally correct."
"We are on a path to becoming the company we aspire to be," he added.
Meyer heaped praise on the Asset Smart strategy announced earlier this month, which is aimed at spinning off the AMD fabrication facilities as a semi-separate company that will be able to take on customers from semiconductor companies besides AMD.
He also said that the new Quad-Core Opteron, codenamed Shanghai, is shipping now and will be available in a few weeks.
AMD gave flat guidance for the next quarter, roughly mirroring Intel's own concerns about how hard the quarter was to gauge during its conference call.
Rivet said it was hard to handicap the market in terms of giving guidance for the future quarters.
"While new products give you better expansion into the marketplace... the market is the part where we're struggling with what to handicap," he said.
Meyer said the company saw September as "softer than a typical September" in the U.S. and Europe, and a little softer in China, where the consumer "seemed not to wake up as quickly as we expected after the Olympics."
The enterprise side "hasn't been strong all year," he added.
Meyer did say that notebook revenue outpaces desktop revenues by better than two to one, but also added that "We think we have untapped potential in the Puma platform."
The two indicated they were a little reluctant to talk about additional financial details because they plan to host an analyst conference in November at AMD's Sunnyvale, Calif. office.
Separately, and on a sadder note, AMD also said that Ed Turney, one of the company's eight co-founders, died yesterday from brain cancer at the age of 79.