A tough slog ahead for AMD
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| AMD needs to improve its mobile processor lineup if it's going to grab share from Intel. Photo: AMD. |
Advanced Micro Devices (AMD) server chief Randy Allen was upbeat when we sat down with him at the beginning of the year. Despite the disappointing earnings report the company had issued the day before, he was confident that AMD's upcoming Barcelona chip would deliver a 40 percent performance boost over the fastest chip available at the time, and that archrival Intel (INTC) would be left in the dust.
Allen was full of confidence. Too full, it turns out. The 2.5-gigahertz version of AMD's wonder-chip will arrive a little later than the company hoped, and although the company says its performance will improve soon, it's delivering speeds that are slower than promised.
Meanwhile, Intel's sales have surged ahead.
It's against that backdrop that AMD today reported a loss of $396 million, or 71 cents per share, on revenues of $1.63 billion. (Of the loss, $120 million was attributed to charges from the acquisition of ATI.) Shares were up slighly in after-hours trading after rising 3 percent for the day, likely a reaction to AMD's improved gross margins.
A financial edge from edgy PC design (Photos 1-7)
The earnings results are a sharp contrast from a year earlier, when the company was profitable; in some ways they also fall short of Wall Street's expectations. Analysts had expected AMD to report a loss of 62 cents per share on revenue of $1.52 billion, according to Thomson Financial.
AMD's gloomy report also stands in contrast to the results Intel reported Tuesday. Intel's sales were stronger than expected and its profit margins were healthy, which suggests it feels less pressure to cut prices to keep business from competitors such as AMD.
Not all of AMD's news was bad. Revenues were 18 percent higher than last quarter and 23 percent higher than a year ago. The company also said gross margins came in at 41 percent. That number was better than the 33 percent AMD reported last quarter, but far below the 51 percent AMD posted in the year-ago quarter.
But the losses suggest AMD is still feeling the pain from its competition with Intel. The best way for a chip company to maintain healthy profit margins is to deliver innovative products that competitors can't match, and at the moment AMD doesn't have an exceptionally strong product lineup. It's likely to remain a tough slog for AMD; a Merrill Lynch report last month estimated that even if prices remain stable, the company would need to pick up three or four points of market share before it will reach profitability again.
AMD needs aspiration to strategically leverage a position in a turn-key and future-proof global marketplace, thereby utilizing the synergistic funtionalities inherent to a skills ecosystem that orchestrates and proceduralizes mission-critical marketecture. By incentivizing team players during deep dive endeavors and pathfinder projects, AMD also needs to frequently invoke a tactical paradigm shift that focuses on promulgating leading-edge methodologies. Although rallying the troops is often outsourced, a strong disintermediator can empower such a matrixed skill set, and can ramp-up the human capital, allowing the team to catch the moving train as it traverses the value stream. By garnering low-hanging fruit, AMD will ultimately break through the glass ceiling, and capitalize on recontextualization of robust enterprise key reinforcement areas such as recognizing the criticality of monetizing scalable fiscal metrics. Also, by mitigating show-stoppers, and focusing on the long pole in the tent, AMD will keep from getting behind the 8 ball. Finally, AMD should plan to hypertask, rack and stack responsibilities, and propagate enablers who can drill down into core competencies and bird dog soft money opportunities; all while simultaneously weaving myself a golden parachute and avoiding being surplussed.
ATI was a key aquisition. When ATI was trading it was a 25-30$ stock. Integration sometimes takes a little time, i believe the worst of it is over and it should get better from here. Wait until next quarter, they beat expectations this quarter but next quarter they should really blow past earnings.
To think AMD can quickly turn things around is absurd. Their management and people are not the best or brightest. They succeed if Intel gives them an opening to get into, otherwise, they are a 2nd-rate company that struggles most of the time. Their success is not of their own doing – it's dependent upon others' failure.
AMD, where is it going, how will it get there? How is ATI being incorporated into the core AMD? Any new ground breaking products on the horizon?
Great potential, lots of opportunities, must hurry and cross pollinate else the flower will dry on the vine, or auctioned off for pennies on the dollar!
ANEALM
The post below sounds like a summary of all the terms in my senior year marketing class…..just like then, my reply is "Huh?"