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AMD Begs Market To See Forest For The Quads

Executives say chipmaker did a lot right in 2007 and 'one thing very poorly,' while CEO Hector Ruiz expects a return to profitability in Q3 of next year.

Advanced Micro Devices lined up top executives to apologize for the chipmaker's quad-core ramp failures over the past year, but urged the market to look at successes in other parts of its business during an uncomfortable meeting with financial analysts Thursday in New York.

Beginning with president and COO Dirk Meyer and finishing with CEO Hector Ruiz, AMD executives prefaced their presentations at the company's annual Financial Analyst Day with concessions to the swarm of negative press over delays in the production of a quad-core product to compete with rival Intel's, and more recently the news that a glitch on AMD's quad-core Opteron devices has delayed volume shipments until the first quarter of 2008.

Both of AMD's new quad-core products, the Opteron, or Barcelona server-workstation chip and the Phenom desktop chip, are affected by the glitch. Those devices are currently available with a workaround, but performance can suffer as a result, particularly on the Opterons.

There will be a design fix for Opteron and Phenom that takes care of the problem, with the first samples of the new products available in January, according to AMD. At the analyst conference, AMD stated for the first time publicly that OEM partners will begin to roll out their first volume Barcelona-based servers "in late Q1 or early Q2." That's in line with a statement from a Hewlett-Packard spokesperson, who told ChannelWeb last week that HP would have "rack-based servers and blade servers built on quad-core Opterons that we plan to support in early calendar Q2."

Meyer was almost plaintive in his opening remarks: "There's times in your life where you feel that the perspective of those around you is quite a bit a different than the perspective that you have yourself. You sit back and you think about it and you observe that maybe some of the folks around you aren't taking the time to see everything you see or maybe aren't motivated to see everything you see.

"And I tell you, now is one of those times for me, for Hector and for the 16,000 employees that we have around the world at AMD. We've done a lot of things very well at AMD since Q1 and we've done one thing very poorly. Namely we haven't delivered our quad-core products according to our plan.

"Are we disappointed? You bet. Are we determined to do better? Absolutely. But I tell we feel like the quad-core issues really overshadowed some of the positive achievements that we as a company have made since Q1."

AMD attempted to steer the conversation to those "positive achievements," focusing heavily on its ATI graphics division. The Sunnyvale, Calif.-based chipmaker talked up its transition to 55nm chipsets and the development of more CPU-GPU platforms such as the recently unveiled Spider desktop rig, as well as plans for its first server platform, codenamed Piranha, to debut in 2009 in tandem with the release of an octal-core processor called Montreal.

But despite AMD's best efforts, attendees were still full of questions about how the company could expect to return to profitability -- by the third quarter of 2008, according to guidance from Ruiz -- when so many issues have come to light with regards to the Barcelona debacle.

At one point, an analyst asked the unusually blunt question of how "pissed off" AMD's customers are about the chipmaker's failure to deliver quad-core Opteron following its now-infamous September launch.

"Customers are disappointed, which actually hurts more than being pissed off. I'd rather be screamed at than have people tell me how disappointed they are. I'm disappointed too. Because I let them down. That's not going to happen again," said Mario Rivas, EVP of AMD's Computing Products Group.

Executives were reluctant to talk much about other areas of concern to analysts. AMD disclosed Wednesday that it will be hit with a "material" impairment charge due to its over-evaluation of the "goodwill" or intangible value added by its ATI acquisition, made at the time the chipmaker acquired the graphics company late last year. But despite analyst curiosity, CFO Bob Rivet did not have a solid number to offer as to what that charge would be.

Another area of concern was the progress of AMD's proposed "asset-light" strategy, which many have taken to mean that AMD may be looking to reduce its manufacturing holdings. But Ruiz put the kibosh on a deeper look into AMD's plans for "incremental outsourcing," saying that to discuss the details "wouldn't be prudent" and could even be "harmful" to the chipmaker's plans.

Meanwhile, contrary to a recent report from a leading technology research firm, Rivet seemed to think the CPU price wars between AMD and Intel would remain as hot as ever.

"The competition's tough. And we expect it will still be a fairly aggressive price environment they're not going to back off and we're not going to back off on winning the appropriate business at the right price. To some degree it won't be that much different this year versus next in price competition from that perspective," Rivet said.

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