It is six in a row for the Advanced Micro Devices (AMD)! The Sunny vale, California-based chip maker, known more for its rivalry with the industry leader Intel than a slew of products it makes that include the hugely successful Athlon 64 X2, the dual-core processor, recently announced its disappointing first quarter results for the FY 2008. This makes it AMD's sixth consecutive quarter of losses. The company reported a net loss of $358 mn, or $0.59 per share, and an operating loss of $264 mn on the revenue of $1.505 bn, which too declined by 15% on a sequential basis, during the quarter ended March 31, 2008. "A seasonally weak first quarter was amplified by a challenging economic environment for consumers and lower than expected revenues of previous generation products, resulting in lower than expected revenues in all business segments," said Robert J Rivet, AMD's Chief Financial Officer. The company, which also witnessed a fall in operating margin during the quarter, shipped less microprocessor units as compared to the previous quarter. The company said that the losses were also aggravated on account of charges related to its 2006 acquisition of the graphics-card maker, ATI. The acquisition-related charges amounted to $50 mn, or $0.08 per share, during the Q1'08. Less than a fortnight ago, before releasing its first quarter results on April 17, 2008, the chip major had said that it would lay off 10% of its total workforce or about 1,680 jobs this year.
AMD, after living in the shadow of the leader Intel for long, was able to establish itself as a serious rival to the market leader, thanks to the great successes of x86-64 chips launched in 2003 and dual-core processor Athlon 64 X2 introduced in 2005. However, after enjoying a good run during 2001-2006, the company has been unable to hold on to the growth momentum. The company reported a dull fourth quarter result in 2006, blaming it on the acquisition-related charges and lower ASPs (Average Selling Prices). The company's gross margin has crashed from the high of 58% in 1Q06 to 28% by 1QFY07, though it has recovered now to 42% (still 200 bps lower than reported in the fourth quarter of 2007). Analysts say that the new product offerings from AMD have not matched up to consumers' expectations. Further, its much-hyped acquisition of ATI too has failed to deliver the goods. AMD viewed the acquisition as a key to attack Intel, as the Sunnyvale-based chip giant thought that its combination with ATI would create a processing powerhouse by bringing AMD's technology leadership in microprocessors together with ATI's strengths in graphics, chipsets and consumer electronics to tap into the lucrative commercial and mobile computing segments and the rapidly-growing consumer electronics market. However, post the acquisition, while AMD struggled to integrate ATI into it, competitors like NVIDIA were snapping up market share away from ATI; and AMD was losing ground to Intel. AMD recently said that ATI is worth about 30% less than when it was acquired; AMD had acquired ATI for $5.6 bn in October 2006. Towards the beginning of 2007, Intel began to step up the gas after losing market share to AMD for the last three years. "As 2006 began, Intel's Xeon was in a tailspin, while AMD's Opteron could do no wrong. In the robust market for workstations, the roles have since reversed, with first quarter results reported from Jon Peddie Research showing (Intel's) Xeon has grabbed back much of the share it had lost to Opteron," commented a June 2007 report by the research firm, Jon Peddie Research. The report findings highlighted that Opteron after touching a market share of 13.6% in 2Q06 began to lose the market share to Xeon. |
