Finally profitable, AMD must embrace new markets, analysts say

AMD needs to move out from under Intel's shadow and forge own path to stay in the black

With Advanced Micro Devices back on its financial feet after 13 grueling quarters in the red, industry watchers are looking for the chip maker to dust itself off and plot a course for the next few years.

Advanced Micro Devices late yesterday reported a profit for the first time in three years during the fourth quarter of 2009. Executives credited a hefty legal settlement with rival Intel and a change in AMD's business model for the improved results.

Fourth quarter revenue totaled $US1.65 billion, up 42 percent from the year-earlier period and $US150 million more than analyst estimates.

Over the last several years, the chip maker has been rocked by product delays, a lack of profits and slips in market and mind share. And adding salt to the wound, archrival Intel has been mostly firing on all cylinders during that time, constantly releasing new chips with more cores. Intel's developers have helped keep it on top by sliding from 65-nanometer chips to 45nm and more recently to 32nm .

AMD has continued to lag behind those development efforts through the years.

However, AMD's latest results indicate that it may be righting its ship, analysts said.

"This is huge," said Rob Enderle, an analyst with the Enderle Group. "This removes a significant cloud from AMD's future, making vendors more willing to depend on them for products and investors more willing to invest in the company. Success breeds success and this should, if sustained, help AMD attract talented employees" and generate more funds to invest in its own R&D efforts.

Analysts point to a number of factors that have helped to pull AMD from the financial mire. The chip maker has lately been executing on chip release plans and has been able to take advantage of its decision to spin off its manufacturing operations into a separate company, called Global Foundries , as part of an effort to cut costs and get an infusion of capital.

"AMD took a number of steps that will help them do a better job over the coming year," said Dan Olds, an analyst at Gabriel Consulting Group. "First, the spinoff of their foundry operations helped them get rid of a lot of debt and capital spending load. The settlement with Intel also was used to pay down debt and that gives them much more flexibility to spend money developing and marketing products. On the technology side, their ATI operation is spinning out some great chips and is highly competitive with Nvidia again."

Jim McGregor, an analyst with In-Stat, cautioned that one solid quarter doesn't change the fact that AMD still has to work hard to stay out of the weeds.

"AMD is still facing increased competition from Intel and a new graphics architecture from Nvidia that will be out this year," noted McGregor. "AMD has gotten much better about execution, but we have not and will not see a new architecture from AMD for some time."

McGregor and Enderle agreed that AMD needs to chart its own path and get out from underneath Intel's technical shadow.

"[AMD] needs to step out from Intel's shadow and find their own way," said Enderle. "Currently the market is moving away from PCs and towards something else, like smart phones and tablets. This may provide AMD an opportunity, before that market is set or the ideal form factor identified, to create a market where it can thrive. They need to imagine a future where they can be very successful and build a market bridge to that future."

Olds added that if AMD can maintain its profitability, the whole technology industry would benefit. "We need a strong AMD to keep Intel and Nvidia honest and working hard," he said.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Sharon Gaudin

Computerworld (US)
Show Comments



Victorinox Werks Professional Executive 17 Laptop Case

Learn more >



Back To Business Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?