AMD lost another six hundred million dollars last quarter. The specific numbers were a little better than the previous, but that’s like saying disastrous is better than catastrophic.
What’s the problem? If you crunched all the financial data and variables into one factoid, AMD needs to be getting at least 50% more money for what it makes than it’s getting right now.
Promises of cost cutting or layoffs or selling fab equipment and other properties are only temporary patches to the holes in the sinking ship. The real fix is having at least twe billion dollars in revenue rather than just 1.3 billion, or, to be a bit more accurate about it, around a 50% gross margin rather than last quarter’s 33%.
There is zero prospect of that happening the rest of this year. AMD can and will make the losses look less bad the next six months with some cost cutting and selling its interest in Spansion and its Fab 30 equipment; if they time the latter right, they might even be able to claim a “profit” one quarter, but that’s just financial gimmickry.
They’ll get a few bucks from Barcelona the last quarter, but hardly enough to turn the situation around (and Intel’s planned Xeon pricing will probably force AMD to cut its planned Barcelona pricing sooner rather than later, unless, of course, they can’t make many of them initially).
No, it will take a lot of competitive product early in 2008 to get this ship floating right, and tomorrow, we’ll talk about the prospects of that happening.
Tags: Systems & Components