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As the losses mount AMD replaces its CEO

The chip maker will divest its handheld and digital TV businesses after reporting a US$1.19 billion Q2 loss

Advanced Micro Devices (NYSE: AMD) has replaced Hector Ruiz with Dirk Meyer as its CEO, as the company reported its seventh consecutive quarterly net loss on Thursday.

AMD’s board has elected Meyer to the CEO spot effective immediately, AMD said. He was previously president and COO and has been with AMD 12 years. Ruiz will become executive chairman and chair of AMD’s board of directors.

The chip maker also announced that it has decided to divest its handheld and digital TV businesses. The company had merged the businesses into its consumer electronics group after the 2006 acquisition of ATI. Last week, AMD announced it would take a charge of US$880 million related to impaired assets of those businesses.

AMD’s revenue from continuing operations for the second quarter rose three per cent from a year earlier, to US$1.35 billion. But the company still posted a net loss of US$1.19 billion, or US$1.96 per share.

Second-quarter revenue fell seven per cent compared with the previous quarter. Unit shipments declined a little and average selling prices fell more, the company said.

“We have a company rich with great people, great products, great spirit and a lot of great potential,” Meyer said on a conference call following the financial announcement. “Looking at the recent past, we have not been living up to that potential. Looking forward, we will.”

Ruiz, who remains chairman, will continue to oversee the “asset smart” strategy initiated under his watch to make AMD less capital-intensive. The company would not provide more details on what sort of deals the company will make to carry that out.

Meyer, who is also taking on the title of president, said he plans to focus AMD more narrowly on large-volume “sweet spots,” namely PCs and volume servers, and increase its focus on execution, including dependable delivery of products and efficiency.

AMD has suffered from product delays as it struggles against a much bigger competitor in Intel.

The company expects to achieve sustained profitability beginning in the second half of this calendar year on the strength of new products and lower costs, executives said.

Chips based on AMD’s long-awaited 45-nanometer process are already in production and are on track to go into volume production early in the fourth quarter, the executives said. The 45nm process will allow the company to pack more processing power into smaller chips and should lower costs as well, the company said. Intel has had 45nm chips in volume production since last October.

The company’s Fusion architecture, bringing together processing and graphics, is making progress as well, AMD said. Its Puma chipset for notebooks, which combines the two on a platform level, has 100 design wins from PC makers, they said. A chip with both on one processor will begin sampling in 2009.

AMD has put the discontinued handheld and digital TV units up for sale, believing they will be more successful in the hands of a company that is more focused on those areas, the executives said. Additional asset sales will take place around the end of this year or early next year, they added.

The company expects a normal season trend in its fiscal third quarter, Meyer said. “The market on a global basis is healthy,” he said. “Some of the more developed areas are weaker, but the emerging markets are still strong.”