AMD did OK last quarter. They went from a slight loss to a slight profit.
Again, like last quarter, AMD’s flash memory served as an anchor on earnings. It lost $90 million this quarter, which was better than the $110 million loss last quarter, but still pretty bad. AMD plans to spin off the flash memory division fairly shortly as a separate entity, so this anchor will go away shortly.
On the CPU front, AMD got slightly more revenues from slightly fewer CPUs. Revenues went up 2%, while total units sold dropped 4%. The second quarter is usually a slightly slower quarter than the first, so the 4% drop is perfectly normal.
Mobile and server revenues went up a lot, but AMD has below-desktop market share in these two fields, and to use the server market as an example, even a 100% increase of a 3-4% market share in a niche that is only about 5% the size of the desktop market doesn’t amount to a whole lot of units or dollars.
Sure, you have to start somewhere, but this is not world conquest.
As we’ve said many times before, these segments, especially the server section, are small compared to the desktop market overall, and AMD has only a small share of those relative small markets (though notebooks are becoming pretty significant).
These markets don’t improve revenues a lot, but they do help profits quite a bit, simply because they cost more and are more profitable than desktop chips. That combined with better profits from the desktop segment as Hammers are phased in and Athlon XPs are phased out, increased profits from CPUs from $78 to $110 million.
Remember, desktop CPUs pay the bills, other niches add to the profits.
A lot of people confuse revenues and profits. Revenues are the amount of money you get paid for a product. Profits are what you make from selling your product after you subtract all your expenses from the amount you get.
It should be kept in mind, though, that so long as AMD can keep selling increasing numbers of Hammer at higher average prices than they got for XPs, profits will naturally continue to increase substantially, probably for the next couple quarters.
Indeed, the most noteworthy statistic from the quarter is that AMD’s gross profit levels for CPUs hit 59% last quarter, which is definitely in Intel profitability territory. This is what has skyrocketed the last year or so, and that is mostly due to higher Hammer prices.
Obviously, all this is good, but it’s hardly miraculous. Had AMD been able to ramp Hammers quickly, profits would be much higher than they are now.
So, in summary, it was an OK quarter, with a couple small highlights.