Confusing times at computer chip specialist AMD. Despite an 18 per cent boost in revenues, the chip builder has posted yet another catastrophic quarterly loss. What exactly is going on?
For the record, AMD has reported a net loss of $396 million for the third quarter of 2007 on total revenues of $1.6 billion. It's the fourth straight quarterly loss for AMD and it follows a $600 million haemorrhaging of cash back in Q2 this year.
Bad as these numbers are, tech analysts had been expecting even worse following the recent release of impressive profit and sales growth figures from AMD's chief rival. Intel reported record takings of $10.1 billion for Q3 '07 and a net income of $1.9 billion. It makes scary reading for AMD.
AMD's current woes can be traced back to its 2006 acquisition of Canadian graphics outfit ATI for $5.4 billion. A year later and ATI is still costing AMD dearly - around two thirds of the $396 million loss come as a result of the buyout.
"Perfect storm"
Add in a major technological resurgence from Intel in the form of the Core 2 processor, the brutal price war that followed, and some channel supply problems. It all adds up to what AMD itself described in April this year as a "perfect storm".
So, just how bad is the situation for AMD? The good news is that both analysts and AMD itself agree that its Computing Solutions group (the one responsible for its CPUs) is well on the way back to profitability. And while the outlook for the ATI subsidiary is less rosy in the short term, most of the costs of the acquisition have now been absorbed.
On the other hand, early reviews and benchmark results suggest AMD's new Barcelona quad-core CPU architecture is going to struggle to match the Intel competition. AMD is also at a clear disadvantage in terms of silicon process tech. With the roll out of Intel's 45nm node imminent, AMD finds itself a full generation behind its rival.
Still, here's hoping that AMD can ride out the current storm. Competition improves the breed, so it's in the interests of the PC industry in general that AMD survives to keep Intel honest. After all, if it wasn't for the plucky little Athlon 64, we'd no doubt all be running 2.8GHz single-core Pentium 4s in our PCs and marvelling at how wonderful life is.
