AMD Last Quarter

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AMD released its financial results yesterday, and, well, to quote Marketwatch, “the results were muddled by a confusing press statement that failed to break out any per-share figures that could be used to compare with Wall Street’s own estimates.”

The AMD spin is that they basically broke even in Q4. This is not so.

Rather than glaze your eyes over with accountingese, and since most of you just want to know if they’re going to be able to keep making stuff, this is all you need to know:

  • They essentially conceded that they paid about $1.5 billion too much for ATI, and made some accounting adjustments.
  • If you cut out this adjustment, ignore the accounting games they played, and strip out what are likely to be one-time events, the core business had a net loss of about $175 million, compared to $396 million last quarter. Yes, an improvement, but Q4 is supposed to be the best quarter of the year, and for-profit companies are supposed to make money, not lose it.
  • Next quarter will be worse, it’s very safe to say they’ll “really” lose at least $225 million. Q2 will be an improvement over that, but it will still be a net loss.
  • If recession starts in the United States, the numbers will be worse, but even if you’re pessimistic, any recession will probably start in the U.S. and only slowly become global. It’s also true that relatively little of AMD’s (or for that matter, Intel’s) business comes from the U.S. these days (about 20-25%).
  • Unless things get really bad really fast, AMD should have enough money to take care of itself the first half of 2008.

    To get a bit more concrete, the CPU market improved a bit for the Christmas quarter, but Christmas wasn’t terribly good to either AMD or Intel, unit sales for AMD only went up 7%.

    ASPs went up a bit for both AMD and Intel, but, as we’ll explain tomorrow, that is becoming a bit of a mirage for both parties.

    ATI’s results were rather underwhelming. Despite their new products, video card sales stayed flat. When you consider all the interest AMD is paying from the debt it incurred buying and other-ATI related expenses, ATI is now the prime money-loser, and must do much better to even break even in 2008.

    I wish I could go on to talk about future AMD products in general and 45nm products specifically, but they said virtually nothing about those. They got some 45nm chips back for testing, but made no claims about them.

    As we’ve said previously, now and the next few months are going to be a quiet time for AMD. Things won’t get seriously exciting, good or bad, again until around May, when we’ll know what the 65nm K10s will end up doing, have a clue as to what 45nm K10s are likely to do, and most importantly, know where the economy is going.

    Ed


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