AMD widens loss during the quarter

AMD takes charges relating to spinning off manufacturing assets to a separate company

Advanced Micro Devices on Tuesday reported a wider loss for the quarter compared to last year as it tries to recover from the recession.

The company reported a net loss of US$416 million, or $0.66 per share, for the first quarter of 2009, compared to a loss of $364 million in the first quarter of 2008. Analysts polled by Thomson Reuters predicted a net loss of $439.2 million, or $0.66 per share.

The loss includes charges related to AMD's spinning off of its manufacturing assets into a separate company.

AMD also reported revenue of $1.18 billion in the first quarter ending on March 28, a 21 percent fall compared to the first quarter of 2008 and flat compared to the fourth quarter of 2008. The revenue beat analysts' expectations of $978 million.

During the quarter, AMD closed a deal to spin off its manufacturing assets to a separate company called GlobalFoundries, a move that unloaded close to $1.1 billion in debt off AMD's books. GlobalFoundries is a joint venture with investment firm Advanced Technology Investment Company, which is owned by the Abu Dhabi government.

AMD last year said it would spin off its manufacturing operations in an effort to cut manufacturing costs and to focus on chip design. AMD owns a 34.2 percent share of GlobalFoundries, with the rest owned by ATIC.

AMD has recorded consecutive quarterly losses for more than two fiscal years now, but the company's CEO, Dirk Meyer, said it had launched new products during the quarter and cut costs in an effort to deal with the negative effects of the recession.

"AMD's sequential microprocessor unit and revenue growth in difficult economic conditions demonstrate [that] we can grow in an environment where customers are looking for maximum value," Meyer said.

Though microprocessor revenue grew sequentially during the first quarter, it fell year-over-year, though AMD did not provide exact numbers.

The global economic contraction continued in the first quarter, and future quarters look "murky at best," Meyer said during a conference call. Consumers have become more discerning about purchases, making it hard to predict shipments or microprocessor revenue. Typically, there is a seasonal decline in chip purchases during the second quarter.

Meyer's comments come a few days after Intel CEO Paul Otellini said PC sales had bottomed out during the first quarter, and that demand was returning to normal seasonal patterns. Intel still didn't provide a forecast for the coming quarters, however, citing the economic uncertainty.

But there are signs that user demand for PCs stabilized during the quarter, said Bob Rivet, AMD's chief operations and administrative officer, during the call. AMD's desktop inventory was not excessive and cleared out faster than the laptop inventory, which saw a larger backlog of chips that took longer to clear.

AMD built up a larger inventory of microprocessors last year because of poor visibility, the executives said. It affected AMD financially, but the inventory correction is now complete and the company will adjust its chip inventory based on demand for its products in the coming quarters.

In addition to maintaining stable inventory levels, the company will continue to reduce discretionary spending while maintaining product development. During the first quarter AMD launched new products including the Yukon platform, which includes Neo chips that are designed to deliver full PC functionality at affordable prices.

The Neo chips could face competition during the second quarter from Intel's upcoming low-power processors - also called CULV processors - which could be launched later this quarter.

AMD saw server revenue slow down year-over-year as a result of tighter budgets and slower corporate expenditure. The company has accelerated plans to ship its six-core Istanbul chips, an upgrade over its quad-core Shanghai chips for servers.

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Agam Shah

IDG News Service
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