I may have given the wrong impression in my last post. The mixed reception of AMD’s last conference points to a well crafted report from the company’s top dogs with stories of small gains and promises yet come. It if wasn’t for AMD’s analyst meeting just around the corner, I’m quite sure the “asset-lite” teaser wouldn’t go down well for the investors who are anxious for to hear about that major shake up.
AMD’s Qtr-Qtr gain also played a big role in creating a sense of recover. Nobody (except for a few anonymous posters here) seems to be realising that Q1’07 numbers were irregular. Q1’06 numbers were so artificially deflated that any kind of performance from AMD, however poor it may be, is guaranteed to show some kind of improvement. AMD's earnings report from Q4’06 until Q1’07 cannot be used as a meaningful comparison for assessing trends in revenue growth or market share. The numbers from the two quarters are completely muddled up that it is impossible to determine the true run-rate on a quarterly basis. How AMD truly performed is anybody’s guess. And since I’m anybody, I would like to make a first guess.
I think AMD had a very strong motive to make Q4’06 pretty along with the rest of 2006. AMD was applying for a loan around the same time they were feeling the heat from Intel’s Core2. Seeing sharp decline in customer demand is the quite easy to hide within a quarter. It’s possible to imagine that AMD stuffed its customers with around $200M worth of sales with a loose return policy just to hide the ugly truth from potential creditors. Now if we try an normalise the true decline of AMD’s revenue and move the $200M revenue over to Q1’07, here's how AMD’s numbers would look like:
If you look at the alternative numbers, it shows how AMD's Q2'07 gains turn into another decline by moving revenue to where it should be. The point is not whether the alternative numbers are correct, but to illustrate how AMD’s small improvement last quarter is completely meaningless by comparing it to an excessively deflated Q1'07.