A Terrible Quarter . . .

The AMD price cuts are official, you can see them here.

AMD this morning indicated that its revenues for the first quarter will be, well, let them tell you:

“AMD (NYSE: AMD) today announced it expects to report revenue of approximately $1.225 billion in the quarter ending March 31, 2007. Revenues declined sharply quarter-over-quarter for the Computing Solutions segment, primarily due to lower overall average selling prices and significantly lower unit sales, especially in the resale channel.

“AMD plans to restructure its business model to increase operational efficiencies and lower its operating cost structure. AMD will reduce 2007 capital expenditures by approximately $500 million, which the company believes will not materially impact capacity plans for the year. AMD will also significantly reduce discretionary expenses and limit hiring to critical positions. The company will provide more details during its conference call to report first quarter 2007 financial results on April 19.”

This is really, really bad, and much worse than expected.

Normally, you’d expect about a 10% dropoff from the fourth quarter to first quarter. This is over 30%.

Put another way, AMD’s revenues with ATI in 1Q 2007 are about $100 million less than its revenues without ATI in 1Q 2006.

Revenues from processors went from about $1.3 billion to probably somewhere between $900-$1 billion (and that’s true both quarter-to-quarter and year-to-year).

Operating losses will almost certainly be greater than $300 million for the quarter.

Looks like they lost marketshare, too.

What’s scary is that the numbers will probably be worse next quarter.

Believe it or not, the price of AMD stock is actually up a bit after all this wonderful news. Why? It’s because AMD said, no doubt to save a few execs’ jobs, that it would reduce its capital expenditures a half-billion dollars this year.

That means less fab renovations, and either more higher-priced CPUs from Chartered, or less 65nm capacity. The stock market may cheer this today; it won’t in the weeks and months ahead. How long can you sell 90nm chips from Fab30 when 45s start showing up?

More on this tomorrow.


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