AMD loses 1/3 of its marketshare in Q1

From TG Daily:
"Prices for AMD’s desktop processors fell by an average of about 50%, according to a recent TG Daily analysis . iSuppli told us today that these price cuts were not enough to maintain market shares for AMD. Based on preliminary findings, iSuppli vice president Dale Ford estimates that AMD’s overall market share in the microprocessor industry may have declined 4.7 percentage points from 15.7% in Q4 2006 to 11.0% in Q1 2007. The analyst believes that Intel was able to regain market shares in the same time frame: “On a preliminary basis, I would estimate that Intel increased its market share in microprocessors from 75.7% in Q4 to 79.5% in Q1,” Ford told TG Daily. He described the exchange of market shares as “a big swing” and said that the market share shift was bigger than the firm initially had estimated. "

I've known very well that it is going to be bad for AMD. But losing 4% market share in one quarter is just something that surprises me. I am not so sure now that AMD's cost cutting plans is enough to get them over this problem. That's because AMD's capacity today is designed to meet at least 25% of the market. And under-utilized fab as AMD tries and clears inventory is money down the drain. We should see AMD scale back to pre-2003 levels just to return to profitability. Maybe even less than that just because ATI is adding to the loses.

UPDATE: April 25
Mercury confirms Intel gain a massive 6% market share overall to increase from 75% to 81% leaving AMD a measly 18%. VIA which now doesn't appear to look that bad whilst sharing the gutter with AMD, took 1% share.
AMD blames the channel for the huge sales decline while the channel rejoices in its revenge.

Penryn 15-40% Better than the Best Core2

At Intel's Q1 2007 Conference Call, when Paul was asked what level of performance they are seeing with the Penryn core, Paul replied by saying that they expect it to be "15 to 40% faster depending on the application than the current best processor, the Core2".

When asked if they expect to retain the technology leadership in spite of the launch of AMD's Barcelona, Paul said, and allow me to quote loosely, that they haven't seen any benchmark from AMD which makes it difficult to make a comparision. But based on what AMD is claiming, Intel expects to hold the performance leadership on the entire Desktop and Server segments for the entire year (2007).

After what's been shown at the IDF, Intel has more credibility in making performance claims at this moment compared to AMD's K10 powerpoint slides.

Solid Q1 2007 for Intel

Quote of the day:
"Congratulations to an excellent quarter... you've manage to reduce your competition into rubble". - Joe Osha, Merrill Lynch's semiconductor analyst at Intel's Q1'2007 earnings report.


"Intel Corporation today announced first-quarter revenue of $8.9 billion, operating income of $1.7 billion, net income of $1.6 billion and earnings per share (EPS) of 27 cents. The results included the effect of a $300-million reversal of previously accrued taxes that increased EPS by approximately 5 cents."

http://www.businessweek.com/ap/tech/D8OIJ1R83.htm

Key to note is that Intel's margins is up at 50.1% beating previous quarters and Q1 forecasts. Historically this sort of news is typical of Intel's performance but market analysts are expecting some level of fall out after AMD's recent warnings. It appears that Intel is unaffected by the price war (or skirmish from Intel's perspective) with AMD after driving units costs improvements and better price mix.

Kicking the Dead AMD Horse - Intel's QX6800

Watching Intel release one product after another is like watching Tiger Woods play golf, or Michael Schumacher in Formula One. It's fun and awe inspiring in the beginning, but it can get boring very quickly.

Intel released last week its fastest Quad Core Extreme edition yet. The QX6800 is priced above $999 just to keep demand in control.

What about the boring stuff, its performance? Just take a look at the graph on the right. The gap between Intel and AMD is getting too big that we may need to stop benchmarking all together.

"You may have gathered that the Core 2 Extreme QX6800 is the fastest desktop processor that money can buy. No nuance is required to discuss this one. The QX6800 nearly swept our entire benchmark suite, and in many cases, it crushed its main rival, the Athlon 64 FX-74." the TechReport.

AMD Warns... Again!

It appears that AMD is looking at such a massive loss for Q1 that they had to do it twice. Warning once shows that a company is going through a difficult time. Warning twice points to a much serious condition and shows that the company's problems are growing uncontrollably.

AMD also announced capital expediture cut backs and restructuring in 2007. So like the rosy 2007 prediction Scientia wrote in his early blog, AMD once again proves him incorrect in his claim that AMD is to catch up with Intel at 45nm. Other news also points out how AMD is letting go most of ATI employees. I think its fair to say that AMD has lost the price war. Unfortunately this time, Intel isn't done yet.

AMD WARNS! ... AGAIN! - Financtial Times

"Advanced Micro Devices Inc. says it expects to report revenue of approximately $1.225 billion (US) in the quarter ending March 31, 2007 (1Q07). The chipmaker says its' revenues declined sharply quarter-over-quarter for the computing solutions segment, primarily due to lower overall average selling prices (ASPs) and significantly lower unit sales, especially in the re-sale channel. " http://www.echannelline.com/usa/story.cfm?item=21876

..."But Intel is in such a good position right now even when Barcelona comes on stream, Intel is opening up such a big process/manufacturing advantage that AMD is always going to be behind," he said. "That it can decide to do enough damage to peg AMD at a certain portion of the market for years to come, by hitting AMD so bad that it has to compromise R&D, product development and process/manufacturing investment.
"If the AMD announcements changes from reducing discretionary expenditures and freezing hiring to cutting back on capital investment to cutting R&D and product development teams, then you'll know this is happening."

AMD needs $1B by Q3'07 or it's BK

For once maybe AMD will be correct in warning people that it can go bankcrupt this year. Don't tak my word for it:

Barron Online

Advanced Micro Devices will need to raise about $1 billion in equity by the end of the third quarter in order to meet its cash needs for the current year, Merill Lynch semiconductor analyst Joe Osha asserted in a research note this morning.

Why?

"...AMD is in the midst of a competitive crisis caused by a hole in its product roadmap, and worsened by several recent poor decisions.” Osha says the company has “made things worse in two ways.”
1) “Buying ATI has left AMD saddled with expensive debt and contributed to the liquidity challenges that the company now faces,”
2) "the company screwed up by its “refusal to acknowledge Intel’s product advantage that came with the launch of the Core microarchitecture during the second half of 2006.”

"...he also warns that AMD faces another technology battle next year, as Intel launches chips at 45nm".

Now before anyone refutes Osha's research on AMD, please state your name and what type of work you do.

An Advanced Micro Devices (AMD) Bankruptcy?

Scary post from Mr Douglas McIntyre. If you don't know who he is, I suggest you google his name. Volume share gains by AMD brought about by its Fab ramp brings with it greater risk. AMD can no longer perform as badly as it did in the past years as a lot more money is involved this time around.

For those who thought that AMD is in a much better position than it was several years ago, you now have to bear in mind that AMD will make bigger loses when it performs badly. There's a monetary limit as to how much creditors are willing to take part and share the risk.

An AMD Bankcruptcy?
http://www.247wallst.com/2007/04/an_advanced_mic.html

"We cannot assure you that we will be able to refinance our debt, sell assets or equity or borrow more funds on terms acceptable to us, if at all." --From Advanced Micro Devices (AMD) 10-K.

Investors often don't pay any attention to the "risks" section of 10-Ks, which may be smart. Who wants to know all of the bad things that could happen to a company? They are even less useful when it is apparent that most of them have a 1% chance, or less, of ever occurring.

AMD currently has $3.6 billion in debt. That would not be so bad, but its business appears to be falling apart as its continues its price war with Intel (INTC). AMD has indicated that it won't make its first quarter numbers, and a number of observers on Wall St. and in the press believe the company will have to raise money quickly. The instrument could be be an offering of convertible preferred shares.

AMD can probably get a private equity firm to put up the capital. Current shareholders might take a hit. The company's stock is now below $12, against a 52-week high of $35.75. AMD currently trades at less than 1.3x sales. Intel trades at over 3.1x.

And, maybe the risk factor about refinancing debt or borrowing money should not even be in the 10-K. It just scares people.
Douglas A. McIntyre