As price competition takes its toll, Advanced Micro Devices Inc. (AMD) Thursday posted its third consecutive quarterly loss, saying that although revenue was relatively solid, it suffered a sharp second-quarter drop in income.
Revenue for the quarter was USUS$1.38 billion, an improvement from US$1.22 billion a year earlier. But the company reported a net loss of US$600 million, or a loss of US$1.09 per share, a big drop from net income of US$89 million, or US$0.18 per share, a year earlier.
A big part of the loss was due to restructuring costs and a US$130 million, or US$0.24 per share, charge related to the acquisition of graphics-chip maker ATI last year.
One piece of good news was that in the face of stiff price competition from Intel Corp., AMD said its second quarter gross margin was 34 per cent, excluding one-time charges, an improvement over its 31 per cent margin in the first quarter of 2007.
“We achieved a 12 per cent sequential revenue increase, improved the gross margin and won back microprocessor unit and revenue market share,” said Robert J. Rivet, AMD’s chief financial officer, in a statement accompanying the company results.
Looking ahead, AMD forecast that third-quarter revenue would increase in line with traditional seasonal growth rates.
Though that does not point to a big increase in profit in the near future, traders reacted positively to the upbeat news on revenue and margins, driving up company shares by US$0.32 to US$15.78 in after-hours trading.
Nevertheless, the second-quarter gross margin, for example, was still a far cry from AMD’s 57 per cent gross margin in the second quarter of 2006.
Rivet acknowledged that to instill confidence in the company, “we must improve our financial results.”
AMD faces an uphill battle. After gaining ground, in terms of market share and technology, on Intel two years ago by coming out with dual-core processors, AMD suffered last year as Intel battled back with its own line of multicore chips.
In the longer term, AMD is pinning its hopes to a great degree on its “Barcelona” quad-core Opteron server chip, due out in August. That chip will compete with Intel’s dual-core “Woodcrest” and quad-core “Clovertown” Xeon processors launched last year.
AMD also needs to stay on track and hit its 2009 goal to bring its new Fusion chip — made with ATI technology — to market.
