Massive Q1 Loses Makes AMD Throw in the Towel

Here’s the link directly from AMD’s press release.
http://www.amd.com/us-en/Corporate/VirtualPressRoom/0,,51_104_543~116842,00.html

Since AMD pretty much made an announcement a couple of weeks ago, I’m not going to attempt to repeat what was announced back then. Instead I will try and focus on some of the key items that caught my attention during the conference call.
After reporting a net loss of a staggering $611M, poor sales and low ASP’s AMD seemed to be in a generally humble mood. AMD Executives headed by Hector apologized for a “perfect storm” of a quarter and congratulated Intel, although with a slight remark of sarcasm, for a job well done. What I found amazing was the fact that for an hour’s session, the word “monopoly” was only uttered once.

The key talking point for the evening was “Asset lite”. AMD’s new restructuring strategy going forward. It appears to be a clamp on Fab/Capital expenditures as they look for alternative ways to increase needed capacity without the associated start up and running costs. What isn’t said is equally important. It appears that AMD has thrown in the towel with regards to its previous strategy of ‘breaking the monopoly’ by acquiring 30% market share. They never said this directly but it doesn’t require much common sense that they’re mainly focusing on surviving at the moment. All capacity plans are capped while it plans to clear its backlog. It is quite obvious that Intel has driven AMD into a corner where their current business model no longer work. AMD is backing off. I'm not so sure about Intel.

Other key highlights:
Fab38 300mm transition slowed down.
31% Gross Margins!
Headcount reductions and selling of Fab planned for 2007
Barcelona sampling in Q1, Q2 start production/shipping and should be out by Q3’07.
Desktop Barcelona Q3’07
$900M worth inventory (equal to intel) with 40% 65nm!
45nm starts 2H08

“We are at the inflection point of our business” – Hector Ruiz at Q1’07 CC
It appears that Hector has finally started reading Andy Grove’s book “Only the Paranoid Survive”. It appears there is hope after all for AMD.