AMD’s Earnings: We Have Not Peaked

AMD reported strong fourth quarter earnings today that even company chairman Hector Ruiz said were “even a bit more than we expected.”

Driven by strong corporate sales of its Opteron processor for servers, AMD reported quarterly earnings of 45 cents a share — 19 cents above estimates — and sales of $1.84 billion topped $1.65 billion forecasts. AMD’s chip microprocessor revenues of $1.35 billion beat estimates by 10%, and while the company predicted “flat to slightly down” sales for the March quarter, that would still be well above $1.39 billion expectations.

In a conference call with analysts AMD declined to break out percentages but said its growth was headed by server chip sales, followed by mobile and desktop systems.

It was clear AMD took some satisfaction in following market leader Intel’s relatively gloomy earnings report Tuesday. Ruiz said “there is no doubt there is a production struggle at our competitor,” and later said AMD’s recent results and forecasts were impressive considering it’s “brutal and opportunistic competitor.”

Commenting on AMD’s gains, Merrill Lynch’s semiconductor analyst Joe Osha said “I don’t think I’ve ever seen competitive momentum swing like this.”

On the customer front, AMD reported systems based on its 64-bit processors were being used by 90 percent of the top 100 and more than 45 percent of the top 500 in the Forbes list of Global 2000 companies or their subsidiaries. Recent additions included American International Group (AIG), Albertson’s Clear Channel Communications and Nisan Motor Co. Ruiz also said that eBay had purchased hundreds of Sun’s latest Sunfire servers based on Opteron to bolster its search capabilities.

“We have not peaked,” declared Ruiz. “We are poised and ready to gain more market share and grow at twice the rate of the rest of the industry.”

For the coming year Ruiz said AMD expects to double the number of processors sold to corporate customers versus in 2005. He said sales of Opteron for the enterprise have been widely underestimated, and that AMD plans to broaden the number of Opteron-based solutions for corporate customers in the coming year.

“We’ve always said our strategy is to penetrate the enterprise with strong server products and that’s been happening. Now the focus for 2006 is winning in the commercial space with clients.”

AMD had earlier set a goal of gaining as much as 30 percent of the overall market by 2008 or 2009. Ruiz said AMD is moving methodically forward to reaching that quarter by quarter.

AMD noted that part of its financial results based on the operations of Spansion as a subsidiary go only through December 20, 2005. The flash memory joint venture with Fujitsu had a successful IPO in December.