Ruiz blames production for AMD revenue shortfall

AMD chief Hector Ruiz said the company will miss its first quarter revenue goal because of a production shortfall

Advanced Micro Devices (AMD) will miss its revenue goal for the first quarter of 2007 because the chip maker grew so fast that it couldn't keep up with demand from its customers, company CEO Hector Ruiz said Monday.

The company is unlikely to meet its estimated revenue target of US$1.6 billion to US$1.7 billion for the quarter, the company said. For the same period last year, AMD brought in US$1.33 billion, or US$780 million excluding revenue from its Spansion memory products unit, which AMD spun off in an IPO (initial public offering) in December 2005.

Although the company has gained market share for 10 consecutive quarters -- principally from rival Intel -- that trend is both good news and bad news, Ruiz told an audience of financial investors at the Morgan Stanley Technology Conference in San Francisco.

"We went from being a player whose majority of sales were in the distribution channel as opposed to OEMs, to one that has changed in a very short time to having a majority of sales going to OEM buyers," he said in a reference to original equipment manufacturers. "That transition happened probably faster than we had planned. A larger number of OEMs wanted our products faster than we were prepared to meet, so we were not able to feed the channel."

Despite AMD's success in gaining market share, even Ruiz admitted that it may be too late to retain some disgruntled customers.

"A channel partner needs a commitment for a 30 to 60-day supply of products. I couldn't give it to them, so they decided to get it somewhere else. We let down our channel partners by not being able to support them as much as they needed us. We need to get our distribution business back on track."

Ruiz was contrite about the "glitch," but promised the company would quickly spring back by increasing production, particularly of its "Barcelona" quad-core Opteron chip due out in the second half of 2007. The chip will compete against Intel's "Clovertown" quad-core Xeon chip, which launched at the end of 2006.

AMD has been aggressive in boosting its market share in the processor industry to nearly 25 percent and by acquiring graphics chip maker ATI Technology in 2006. But investors have begun to grow wary since the company has not yet been able to turn those moves into profits. AMD posted a loss of US$574 million in its fourth quarter, ended Dec. 31, 2006.

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Ben Ames

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