AMD Reports $611 Million Loss

mpfife writes "Toms Hardware reports that declining microprocessor sales have pushed AMD deeply into the red. 'The company reported a net loss of $611 million on revenues of $1.233 billion, which is more than 20% below the guidance the company expected at the end of Q4 2006. The loss includes charges related to the ATI acquisition in the amount of $113 million, but is mainly a result of the increasing competition with Intel in the microprocessor market.'"

Comments

Big AMD Fan here

[rolfwind]

But I have to ask, while AMD were on top with the Athlon for several years - were they just sitting on their laurels?

Re:Big AMD Fan here

[supabeast!]

But I have to ask, while AMD were on top with the Athlon for several years - were they just sitting on their laurels? Maybe. I think that it's a little more likely that intel finally realized there weren't enough marketing gimmicks in the world to beat a better product at a better price, and shifted some dollars back over to killer engineering. Then along came Core Duo...

Re:Big AMD Fan here

[Timesprout]

No they were just not sufficiently on top to be able to generate the capital required to upgrade their fabs to the level where they could match Intels volume of production. This has largely precluded them from being able to clinch the big money deals with Dell,HP etc. AMD's chips were excellent, there just weren't enough of them.

Re:Big AMD Fan here

[TheRaven64]

AMD haven't been able to compete with Intel for a long time. Building a new-process fab is an incredibly expensive undertaking. Intel can afford to do it because they own the majority of the desktop and laptop markets. AMD can't. Fortunately for AMD, neither can IBM. The reason I say fortunately is because, while AMD or IBM could not easily make the capital investment required, AMD and IBM can between them, and have for some years. IBM don't make x86 chips, and don't really compete in the same space as AMD (except a small part of the server market that could go Opteron or POWER), so they make a good partner.

IBM have some very high volumes parts (some mobile chips, the CPU in every new console, etc), but they can't compete with Intel in terms of investment in the semiconductor market. If anything happened to AMD, then IBM would have some serious problems. The only way out would be to dramatically increase the sales of PowerPC chips. They might be able to do this using open source - sell appliance-type systems where the user doesn't need to know what OS or CPU is running - but it's a gamble.

Let's hope they recover

[thanatos_x]

Regardless of your feelings on the Intel/AMD processors, I don't think any one of us wants to envision a world with only Intel making x86 processors. Don't get me wrong, they're doing an excellent job, but just how much of this recent surge was a result of the increased competition from AMD?

Re:Let's hope they recover

[whoever57]

If Intel is making good processors at an affordable price, why would I not want that? Monopolies aren't inherently bad.

Because if Intel does establish a monopoly, prices will increase and innovation will decrease. There is no monopoly today, so Intel's behavior today is not relevant to how Intel might behave if AMD went out of business.

Re:Let's hope they recover

[Embedded2004]

The barrier to entry into the x86 processor market is *extremely* high.

If AMD folds, Intel could pretty much do anything they want to with prices.

It would be bad for everyone other than Intel employees and Intel share holders.

Re:Let's hope they recover

[whoever57]

You don't know that's true. Intel would raise prices as far as it wouldn't decrease sales. If they rose prices too high, a competitor could undercut them.

The cost of entry for developing processors is huge. Undercutting them is not so simple. A logical approach would be for Intel to raise prices, but be prepared to drop them if it looked like a competitor were about to enter the market (the lead time, investment and people required are such that any competitor in x86 could not keep a market entry secret for very long). Rational behavior from Intel would be to raise prices and spend less on R&D. Exactly how much that would impact processor prices is hard to gauge (but see my last comment). Price rises would be inevitable, the only question is how much.

If they did anything illegal, the government would go after them.

Based on what we have seen from the current administration, a slap on the wrist would be applied -- but probably insufficient to wipe out excessive monopoly profits, thus a rational company would attempt to create and leverage a monopoly. In any case, given reasonable increase in prices (say 50%), it would be difficult to prove an illegal monopoly at work.

It's not my job to worry what someone might do in some hypothetical situation just because AMD is floundering around right now.

Your job: no. Might you suffer (by paying more) if AMD stops making processors: probably.

Re:Will this lead to Inte monopoly again?

[Anonymous Coward]

>I wonder if AMD will loose the competition to Intel all together.
They already have: They talked to the competition and said "Fly, be free!"

Re:Will this lead to Inte monopoly again?

[Tablizer]

I wonder if AMD will loose the competition to Intel all together.
Do we risk going back to having only one big CPU producer?

Not if investers are smart. Duopolies are the next best thing to having a monopoly, meaning it has fat profit margins. However, if it is truely a business that requires economies of scale, then if AMD shrinks down past a certain size, it could risk being left out in the cold. I think this is just a temporary blurp. No need to worry yet. Tech is cyclical, including chips.

However, stock in AMD is rising

[WillAffleckUW]

While it is true that they are in a world of hurt right now, they have taken concrete actions that should deliver another round of highly profitable quarters, and their new quad core processors and power consumption ratings should result in their usage in a lot of boxen.

That plus the breakdown of the MSFT monopoly and the Wintel dictatorship (disclosure - I have owned MSFT before, and own I think 400 shares of Intel) with the low cost push and power push for PCs and laptops using processor chips, should mean they will return to profit in short order.

The market always projects 4-6 months ahead, except in Japan and Europe where it tends to project 6-18 months ahead.

AMD: Try listening to your customers

[BillGatesLoveChild]

AMD was founded by Jerry Sanders, a high-flying salesman originally from Intel who never quite fitted in. In Andy's Grove's Bio of Intel, he describes Sanders as fast and loose and the AMD corporate culture akin to a Las Vegas Casino: Very extravagant and over the top. Nevertheless, AMD did produce some killer products which at the time made life hard for Intel.

AMD successfully played the market well, offering very fast CPUs for cheaper than Intel could muster. But recently they dropped the ball. Not only have they not come up with an answer to Intel's Core Duo, but AMD have been doing some bizarre stuff like taking over ATI, then announcing they would build DRM into ATI graphics cards. http://www.infoworld.com/article/07/03/28/14OPcurv e_1.html How is that going to reverse a declining market share? AMD should learn from the disaster Intel faced a few years ago when it wanted to build a CPUID into their chips that would allow tracking of customers. There was a backlash. Now here AMD are doing the same thing, at the same time their market share is declining?

Maybe they (and SONY) should fire their board and create a Slashdot forum to run the company. We could hardly do a worse job!

On the bright side Intel are turning out nice stuff these days and have said they intend to get into the 3D market again. Declining PC sales will hopefully keep their prices down. Even if AMD go down the tubes, we'll be ok... I hope.

Re:Only made 2/3rds their costs

[fiendy]

You just made the most incredibly generalized financial analysis I've ever read. 2/3 their costs? Do you have any idea about fixed vs. variable costs?

I can't believe you got modded up, since its clear that you didn't even bother to take a look at their financials. Impressive though, if you can come to any kind of understanding of a business with two lines of information - profit and revenue. I just hope you're only investing your money.

AMD/Intel is about controlling the hardware future

[dtjohnson]

The AMD/Intel dogfight is about way more than x86 market share...it's about the future of the hardware platform. Intel has always been restrained by competitors who will offer us a user-friendly alternative to whatever Intel and Microsoft are dreaming up. When Intel and Microsoft were pushing the CPUID, AMD refused to go along and Microsoft had to make do with a hardware profile they whip up from the onboard devices and serial numbers. If it was not for AMD, every web site you visit today would be able to read your cpu serial number and log your machine in as a unique visitor. Instead of the RIAA grabbing IP addresses and attempting to identify the user with some cumbersome legal process, they would just log your cpuid and subpoena the corresponding machine. Microsoft is still working to that end with whatever tools they can and they know that they need amd and intel completely and irrevocably in bed with them which they know cannot happen when amd and intel are still bitter competitors. So Microsoft has never done anything to help AMD and hopes that AMD is finally sinking for good.