AMD Cuts Losses, Addresses Quad-Core Shortages
AMD posted a $121 million profit in Q3 2006. The Sunnyvale, Calif.-based company increased its overall Q3 revenue year-on-year to $1.63 billion, a 23 percent increase and well above analysts' projections. AMD reported a Q3 gross margin of 41 percent, up from 33 percent in Q2 2007, but still behind the 51 percent figure of Q3 2006.
The chip maker credited its revenue gains on "record microprocessor unit shipments" and the growth of its relatively new graphics business with ATI. AMD also denied media reports that its transition to the 45nm process might be pushed back to 2009, saying the ramp up of 45nm processors would happen in the "first half of next year," as scheduled.
The company downplayed prospects of a new round of price warring between itself and leading chip maker Intel.
"We didn't see a qualitative change from Q2 to Q3 in the pricing environment. We don't expect it from Q3 to Q4. But we continue to describe the pricing environment as 'always competitive'," said Dirk Meyer, president and COO.
Meanwhile, AMD executives addressed reports that channel partners are upset with the availability of the company's new quad-core Opteron server chips following last month's highly publicized launch of the product codenamed Barcelona.
"The basic silicon yields on Barcelona are right where we expected them to be," said Meyer, confronting speculation that channel shortages might be due to manufacturing issues.
"The issue has been simply one of tuning the design to the technology. The minor issue we have been experiencing has nothing to do with manufacturing. It's about wedding the designs to the technology before our full-on ramp-up in the middle of Q4."
AMD will have "the flexibility to toggle up" manufacture of quad-core Opterons to meet a high rate of demand in the market, added CFO Robert Rivet.
But system builder partners were under the impression that the ramping and toggling up was going to happen a whole lot faster with Barcelona following its Sept. 10 launch.
"We've got two major orders now," said John Samborski, vice president of Ace Computers in Arlington Heights, Ill. Those orders include one where "we put the order in like 10 minutes after we got the job. They said it would be about a month. Well, it's a month. I can't even go to the broker channel, because there are none there, either."
Brian Corn, VP of marketing and development at Waltham, Mass.-based Source Code, is frustrated by the lack of product, but even more so by the lack of answers from AMD.
"Tell me it's on a boat, tell me it's in the air, tell me it's in customs. Tell me something. Don't answer me with silence," he said.
"When a company like Avnet, which has been [AMD's] premier distributor, says they're getting no answers, that's signs of a problem."
Corn said demand from Source Code's customers is for AMD's higher gigahertz products. Rivet said Thursday that AMD would begin shipping 2.4GHz and 2.5GHz Barcelona chips "in the middle of this quarter." But it appears the 2.0GHz chips, the fastest in the current stable, aren't finding their way to the channel despite strong demand.
"Our big demand is for the 2350. We got our hands on some 2347s, which clock at 1.9GHz. The 2350 goes up to 2.0GHz. We got a couple orders out the door, but now we can't get any more of the 2347s. We can't get any 2350s. On the 8300 series, we go a small quantity of those initially, some 8347s. With the 8350, we've received none and we have outstanding back orders," Corn said.
"We can work with the typical one- or two-week delay of delivery after a 'paper launch.' But in this case it looks like they don't have a product ready, and we're all out here hanging in the wind."
- With additional reporting by Edward F. Moltzen