Floating

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AMD announced that they expected their revenues to be about 30% lower than they had expected.

Not unreasonably, the questions being asked at the conference call centered on the details of this decline.

And AMD basically took the Fifth.

There’s basically two elements to CPU revenue: how many did you sell and how much did you get for them?

The analysts asked, and AMD wouldn’t tell.

They admitted a few things. They admitted that they lost desktop market share. They admitted their CPU sales dropped more than 10%.

Well, last quarter, AMD got about $700 million in revenue from CPU, and about $200 million from flash. Flash probably went up a bit, but let’s assume flash provided $200 million again.

AMD said they expected between $620-700 million in total revenue for the quarter. Subtract $200 million, and you get $420-500 million from CPUs, or somewhere between a 28-40% drop in revenues.

Apparently, AMD’s fiscal forecast presumed a pretty robust June for back-to-school sales (takes time to build those computers). This apparently isn’t happening. So it’s probably safe to say the final figures will be towards the low end of that $420-500 million figure.

If you look at Pricewatch prices, you can see the prices on AMD processors are lower than they were last quarter, when they got $90 a CPU, but not as bad as during the closing Thunderbird days, when they were getting $60.

A good guesstimate of AMD’s results will probably be a bit over six million processors selling for an average price of $70-something each.

This contrasts to the 7.8 million processors AMD sold for about $90 each last quarter. Sales of a bit over six million brings AMD back to K6-2 days.

Profit/loss? Figure a loss somewhere between $100-$150 million dollars.

How Does It Get Better?

One bad quarter is one thing. What was really troubling was AMD not really promising any good news until Hammer, which they said wouldn’t shift into high gear until the beginning of 2003.

They did say they expected the last .18 micron production run at Dresden at the end of June, and that AMD would be all .13 micron production in 3Q.

But that was about it when it came to Thoroughbred. They said nothing else about it even when handed opportunities to do so on a silver platter. They seemed to concede being behind in the performance race, and essentially said, “Wait for Hammer.”

Talk about damning with faint praise.

I’m sorry, but when you’re on the back of your heels, and talking to a bunch of people who think short-term, you don’t have to be P.T. Barnum to realize you need to talk up what you’re going to be serving up now, not next year.

Not talking about it is a pretty strong indicator to me that they can’t talk about it.

The AMD strategy seems to be to float, and hope the tide raises all boats, including theirs, over the next six months.

Bizarrely, they spoke several times about their great, excellent, etc. “customer relations.” Pretty odd comment to emphasize when customers aren’t doing the one thing they should be doing in such a relationship: buying your product.

I also thought good relationships were supposed to have good communications, not have everything be a big secret.

Well, the big secret is that AMD has nothing to seriously counter what Intel has doing and more importantly will be doing after summer vacation.

Ed

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