SUNNYVALE, Calif.--(BUSINESS WIRE)--AMD (NYSE:AMD - News) today reported financial results for the quarter ended June 30, 2007(1). AMD reported second quarter 2007 revenue of $1.378 billion, an operating loss of $457 million, and a net loss of $600 million, or $1.09 per share... continue here.
AMD's results shows a good rebound from the previous quarter. None of this comes as a surprise as I've mentioned several times how AMD played with its Q4-Q1 numbers. Stuffed channel, bad product mix and cancelled ordered often gives you such awful results that going back in line with seasonality can appear like significant gains. Only when you compare the numbers to Q2 2006 will you have a better perspective and see the cracks in AMD's business model.
But the good news indeed is that AMD is back within seasonal trends. The desktop market did rebound this quarter but the big gain for AMD is in the mobile market. Design wins in the mobile commercial space is a positive sign for AMD. AMD's strategy going forward is to increase mobile mix and scale down desktop shipment (and not a single word about DTX, imagine that). This furher clarifies why Intel plans to focus all marketing efforts towards the mobile segment. As AMD is looking at this segment as fertile ground to increase margins, Intel is definitely not happy with this development.
As AMD recommits itself to gaining unit share focusing on the mobile segment, this should send shivers down the spine of the margin-oriented investors out there. The good news for Intel is that AMD seemed to be focused on the value segment. I can't imagine how many times Hector mentioned the word VALUE in his mini speech. AMD suggests that nobody cares about the size of the die, the process node nor the raw performance of the processor. The customers only care about choice, how the product will respond to their needs and whether it is a "native quad core" or not. And since AMD said that they are in the "forefront" of this shift in consumer attitude, this should allow Intel to maintain the useless performance leadership throughout the remainder of the year.
While I find it facinating that there was no mention of the word MONOPOLY during this earnings report, AMD did say that the litigation againts Intel is going very well. Subpoenaed customers who lost all their rebates from Intel are delighted about how free the market has become. Maybe they meant "free" literally.
With regards to Barcelona, AMD mentioned that it wasn't the yield that was causing the low speeds but instead it was the complexity of the design and are working on fixing the problem soon. For a Q3 product shipment, saying such things this late is alarming. I definitely prefer to have yield problems over design problems when you're this close to launch. But this shouldn't be a problem as AMD is planning a scaled introduction of Barcelona. Luckily they're expecting a scaled acceptance of its eco-friendly processors anyway. AMD confirms that their non-performance focused customers like SUN and CRAY who are planning to build supercomputers are quite happy with what they see.
When asked about its asset-lite strategy, AMD declined to comment on future plans which hints to a big announcement sometime in the future. Looking at the scaling down of CAPEX for the Fab30 upgrade, I am inclined to think that Fab38 may skip a process node or two as AMD will try to minimize expense while increasing reliance on foundries. AMD's major cash problems continues with a negative flow in the region of $900M for the last quarter. It is obvious how this is limiting AMD's choices in expanding capacity and other long term investments.
Other notable items include how AMD was forced to write-off $30M worth of inventory simply because the CPU's are with DDR1 integrated memory controllers. For the 32nm node, AMD is considering using BULK silicon instead of SOI. That should be the final word in that silicon wafer argument.
Overall, a bit of a good news as AMD shows signs that its business is back in line with seasonality. That should create stability in its financials and improve guidance. But at the same time, AMD's problems are starting to show some degree of permanency. AMD cannot continue to do the same things and expect different results. So while its insistence on gaining unit share is making some investors a bit nervous, its silence on the asset-lite strategy, coupled with a solid line up of consumer OEMs, are giving the impression that there is hope after all. And since AMD and Intel are measured with a different set of standards, sometimes for AMD, doing bad can sometimes be good enough.