Another Quarter, Another Loss For AMD

Advanced Micro Devices opened 2008 much the same way it closed out 2007, reporting a net loss of $358 million and an operating loss of $264 million for the first quarter in its earnings call Tuesday. It was the sixth straight quarterly loss for the struggling Sunnyvale, Calif.-based chip maker.

An AMD spokesperson confirmed that the company has laid off 420 employees as part of a plan to downsize its 16,420-member work force by 10 percent through the end of Q3. Some 215 of the jobs lost were in Austin, Tex., AMD's largest non-manufacturing site.

In addition to the downsizing, AMD CEO Hector Ruiz said the company was "embarking on a significant restructuring of our company," providing no specific details but noting that AMD would "intensely scrutinize" both its core x86 and graphics businesses and its non-core businesses.

"We will exit these [non-core] businesses if they fail to meet the company's strategic goals," Ruiz said.

AMD CFO Bob Rivet blamed a number of factors for AMD's "difficult start to the year."

"A seasonally weak first quarter was amplified by a challenging economic environment for consumers and lower than expected revenues of previous generation products, resulting in lower than expected revenues in all business segments," Rivet said.

AMD's losses for the quarter included $50 million in charges related to its ATI acquisition. Revenue for the quarter was $1.505 billion, down 15 percent compared to Q4 2007 but up 22 percent from Q1 2007. AMD reported Q1 gross margin of 42 percent, down a few ticks sequentially from 44 percent but well north of the devastating quarter that kicked off 2007, when AMD tanked to the tune of 28 percent gross margins.

Ruiz stuck by a pledge made last December to return AMD to profitability by the conclusion of the third quarter of this year. He and Rivet pointed to the volume shipment of the glitch-corrected B3 version of AMD's quad-cores, a new mobile PC platform codenamed Puma and the "gaining traction" of the chip maker's unique triple-core product as drivers of that return to profitability.

Quad-core Opteron shipments represented about a quarter of AMD's server product mix in Q1, but should ramp to about 50 percent of that mix "pretty quickly" in Q2, noted Dirk Meyer, president and COO. Meyer said AMD had shipped in "excess of half a million" quad-core parts in the first quarter.

AMD announced Wednesday that Dell is now offering five servers based on AMD's long-delayed quad-core Opteron processors and that virtualization developer VMware has qualified the quad-core server chips for ESX and ESXi hypervisor deployments. AMD CFO Robert Rivet promised a "third Tier 1 OEM coming on board" with quad-core Opteron servers in Q2, joining Dell and Hewlett-Packard, which recently unveiled new HP Proliant servers built on the processors.

Past signals from AMD suggest that the next OEM to serve up Opteron products could be Sun Microsystems.

AMD's main x86 rival Intel reported better-than-expected earnings Tuesday, with profit margin outlook and revenue growth that boosted the stock, according to analysts.