AMD Reports Fourth Quarter and Annual Results

[SlowSpyder]

If AMD goes under, the game would get very interesting if Samsung or IBM gobbled up what's left of AMD. Intel isn't afraid of AMD, but if Samsung or IBM bought AMD, then I think you'd see Intel a bit more worried.

 

[Idontcare]

Originally posted by: Martimus
I wouldn't really expect a viable #2 to emerge anytime soon at least. I mean who is the viable #2 in the software industry for Operating Systems? That is a market that doesn't have the huge overhead costs that the Semiconductor industry has as well.

Apple, but they stick to an intentionally small market-share of what they know will be a profitable market-share. Same as Via wisely chose.

SUN can be viewed as having a competitive OS for their business segment, but profits avoid SUN's balance sheet with just as much prejudice as they avoid AMD's.

It is AMD that has to decide whether they want Intel's market share and thus have to beat Intel on Intel's terms or maybe they decide to become an intentionally smaller company going after a smaller market-share but one in which they can be profitable.

Originally posted by: SlowSpyder
If AMD goes under, the game would get very interesting if Samsung or IBM gobbled up what's left of AMD. Intel isn't afraid of AMD, but if Samsung or IBM bought AMD, then I think you'd see Intel a bit more worried.

Yes, the idiom is better the devil you know than the devil you don't...

I'm assuming Intel is less worried about what replaces AMD from the existing pool of big-named contenders (IBM, Samsung) but rather are slightly more worried about what happens to themselves at the hands of government activity (DOJ, anti-trust, etc) once they meet all public and legal definitions of being a monopoly.

There's no devil that can trump the potential damage of government regulation. Intel's next competitor may be themselves after being forced to split into two competing entities.

 

[FAHgamer]

Originally posted by: gammaray

Originally posted by: batmang
Ugh, this saddens me. If AMD goes under, Intel is going to do what any top dog company would do, rake in the dollars. Competition is needed! Everyone in this thread, go sell your Intel rigs and buy a Dragon setup. Give AMD your money! 🙂

you know what is the irony about what you said?

AMD isn't profitable making processors or video cards.
It's like General Motors, even if they build a lot of cars, not only they do not make money building and selling them but, they LOSE money just by operating.

Sad.

This is true about CPUs but I don't think that their video cards don't bring them profits...

 

[Wreckage]

Originally posted by: FAHgamer

Originally posted by: gammaray

Originally posted by: batmang
Ugh, this saddens me. If AMD goes under, Intel is going to do what any top dog company would do, rake in the dollars. Competition is needed! Everyone in this thread, go sell your Intel rigs and buy a Dragon setup. Give AMD your money! 🙂

you know what is the irony about what you said?

AMD isn't profitable making processors or video cards.
It's like General Motors, even if they build a lot of cars, not only they do not make money building and selling them but, they LOSE money just by operating.

Sad.

This is true about CPUs but I don't think that their video cards don't bring them profits...

Their video card division only had 1 profitable quarter in the last 2 years. This recent quarter they took a loss.

 

[Martimus]

Originally posted by: Idontcare

Originally posted by: Martimus
I wouldn't really expect a viable #2 to emerge anytime soon at least. I mean who is the viable #2 in the software industry for Operating Systems? That is a market that doesn't have the huge overhead costs that the Semiconductor industry has as well.

Apple, but they stick to an intentionally small market-share of what they know will be a profitable market-share. Same as Via wisely chose.

SUN can be viewed as having a competitive OS for their business segment, but profits avoid SUN's balance sheet with just as much prejudice as they avoid AMD's.

It is AMD that has to decide whether they want Intel's market share and thus have to beat Intel on Intel's terms or maybe they decide to become an intentionally smaller company going after a smaller market-share but one in which they can be profitable.

I don't consider Apple or Sun to be mainstream OS makers, since both are hardware companies that only make Operating Systems to run their hardware. The OS is just part of the whole package of the Apple or Sun computer. (I have never seen Solaris run on a non Sun computer, and I know that Apple does not support the OS on non-Apple computers.)

OS2 was the last major x86 mainstream operating system not made by Microsoft that I can think of. Google may be in the throws of making a competing OS, but that is just conjecture based on their recent activities.

I also have a hard time imagining another player in the x86 CPU market if AMD does not survive. It is possible nVidia could expand into that market, but it would be quite a leap for them. IBM left the market of creating CPU's a few years back and I doubt they would want to delve back in so soon after leaving it.

 

[nonameo]

Originally posted by: Martimus

Originally posted by: Idontcare

Originally posted by: Martimus
I wouldn't really expect a viable #2 to emerge anytime soon at least. I mean who is the viable #2 in the software industry for Operating Systems? That is a market that doesn't have the huge overhead costs that the Semiconductor industry has as well.

Apple, but they stick to an intentionally small market-share of what they know will be a profitable market-share. Same as Via wisely chose.

SUN can be viewed as having a competitive OS for their business segment, but profits avoid SUN's balance sheet with just as much prejudice as they avoid AMD's.

It is AMD that has to decide whether they want Intel's market share and thus have to beat Intel on Intel's terms or maybe they decide to become an intentionally smaller company going after a smaller market-share but one in which they can be profitable.

I don't consider Apple or Sun to be mainstream OS makers, since both are hardware companies that only make Operating Systems to run their hardware. The OS is just part of the whole package of the Apple or Sun computer. (I have never seen Solaris run on a non Sun computer, and I know that Apple does not support the OS on non-Apple computers.)

OS2 was the last major x86 mainstream operating system not made by Microsoft that I can think of. Google may be in the throws of making a competing OS, but that is just conjecture based on their recent activities.

I also have a hard time imagining another player in the x86 CPU market if AMD does not survive. It is possible nVidia could expand into that market, but it would be quite a leap for them. IBM left the market of creating CPU's a few years back and I doubt they would want to delve back in so soon after leaving it.

Sun has an x86 version of solaris. er... "open" solaris, or something like that.

Google already has an OS. gOS or "good" OS. It's a linux distro. From what I understand, it's average.

 

[Viditor]

To reiterate, I think there is a tendancy to overreach on AMD's prospects being espoused here...
Beginning Q1 09:

1. AMD's Capital Expenditures will be dropping to $180 Million a year...which is down from their previous average of $1,685 Million per year.
2. Almost $1 Billion of this quarter's loss was a write down. For those who don't know what this means, a good example is that they revalued their ATI purchase from several years ago and decided that it wasn't worth as much as they had thought. For accounting purposes, they corrected the value of their purchase by taking a "write down" loss this quarter. No actual money was lost, though the value of the company on paper did indeed decrease.
3. AMD had a cash burn of $245 million, however this will drop dramatically next quarter. Not only will their Capex drop, but the expense of running a Fab will go away and their interest expense will be cut by ~40%.

At the end of the day, both Intel and AMD are due for some very ugly Q1 numbers, but there isn't a chance in Hell that AMD will go bankrupt this year...

 

[Idontcare]

That's good to know and hear Vditor. $0.25B/quarter burn rate of cash on hand doesn't sound nearly as dire as the headlines were implying.

 

[Viditor]

Originally posted by: Idontcare
That's good to know and hear Vditor. $0.25B/quarter burn rate of cash on hand doesn't sound nearly as dire as the headlines were implying.

Exactly...and that rate is far higher than what it will be going forward (I'm expecting it to hit a max of $100 Million from here on out).

Edit: Of course the down side is that their capacity for profit will be diminished as well...

 

[Idontcare]

I see AMD has stopped reporting cash and equivalents as of this most recent quarterly earnings report.

Care to guestimate how much cash in hand AMD has remaining to buffer continued burn-rate? <2yrs? Basically if Bulldozer doesn't smash Sandy Bridge then what? GPU becomes the primary IC for revenue?

 

[Sonokamome]

As a first-time builder, and a cautious one due to these tough times, am debating of either sticking with AMD (waiting for next month for an AM3 board with a Nvidia chipset hopefully) but I'm seeing that Intel just might have the higher probability of surviving this time of general economic lag. I'm just thinking to myself that, if say, AMD should go under. What happens to the AMD build I've made? Would I continue to use the computer as long as I would if I had gone with Intel ? Would I have to just simply buy a new CPU and motherboard?

To anyone that has gone through similar scenario. Please share. Because if it's possible to build an AMD system, again hypothetically speaking that it does tank, and keep it for a long time before making the switch to Intel.

I don't say this out of fanboydom but more out of personal economic concern as I find Intel solutions to being too expensive.

 

[Viditor]

Originally posted by: Idontcare
I see AMD has stopped reporting cash and equivalents as of this most recent quarterly earnings report.

Care to guestimate how much cash in hand AMD has remaining to buffer continued burn-rate? <2yrs? Basically if Bulldozer doesn't smash Sandy Bridge then what? GPU becomes the primary IC for revenue?

It was in the Analyst meeting...
They have $1.1 Billion in cash, and will be receiving another ~$700 Million this quarter for the final payment on the Abu Dhabi deal...

 

[VirtualLarry]

Well, FWIW, I plan on purchasing an AM3 PhII chip, if only to help keep AMD afloat. Waiting for the lower TDP chips, cannot use a 125Watter in my current boards.

(After all, why not have a quad-core in your HTPC rig? 🙂 🙂 🙂 )

 

[soccerballtux]

Originally posted by: ViRGE

Originally posted by: Idontcare

AMD executives acknowledged Thursday that they plan to let existing inventories in the reseller channel deplete, and then manufacture fewer processors than its customers demand, so as to not be stuck with excess inventory.

http://www.extremetech.com/art.../0,2845,2339449,00.asp

That strikes me as newsworthy. AMD publicly stating they intend to under-supply the markets with their CPU's. Restrict the supply, keep APS's elevated. It's like a reverse price-war.

That doesn't sound like a price war; they're not doing it to prop up prices. They're getting burnt with excess inventory that they're struggling to get rid of, this is a move to stop having excess inventory eating away at the company's financials every quarter.

Originally posted by: soccerballtux

Originally posted by: heyheybooboo
As part of the fab deal (IIRC) a $700mil payment is due in Q109, 40% of debt assumed and ground broken at Malta for the 32nm Fab in Q209.

payment to AMD, AMD's debt assumed right?

Yes. Basically they're buying a chunk of AMD's fabs and assuming a similar fraction of the debt those fabs carry. AMD's about to get a good chunk of change (albeit one that involves selling a lung, a kidney, a leg, etc), so they're going to have plenty of cash to stay solvent.

AMD sounds like a buy to me then. Why are they laying off so many people? Maximizing shareholder returns, to me, would be continuing to employ all the R&D guys that they can to ensure bulldozer wins.

About the Intel monopoly stuff, could they continue to exist if they didn't jack prices up? IE, didn't abuse their monopoly? Bell wasn't that bad of a monopoly, they had cash coming out their ears and were able to research a lot of new products in a way no other company has been able to afford since then.

 

[Idontcare]

Originally posted by: soccerballtux
About the Intel monopoly stuff, could they continue to exist if they didn't jack prices up? IE, didn't abuse their monopoly? Bell wasn't that bad of a monopoly, they had cash coming out their ears and were able to research a lot of new products in a way no other company has been able to afford since then.

Everyone tolerates being on the receiving end of money and happiness...so provided Intel is making sure there is plenty of that going around (to the people who need it so as to not feel like certain decisions need be made anytime soon) then they will remain unmolested by the DOJ.

I didn't follow how the BELL situation to know why it went so badly for them, but clearly they did a piss poor job of ensuring people had as little reason as possible for wanting to see them broken up. That can range from being less jerky with your customers (keep the buyers remorse low) to being sure the regulators and such are motivated to find in your favor when the proceedings of an investigation are concluded...

 

[nyker96]

anyone care to make a donation to the much beleaguered AMD?

 

[DrMrLordX]

Originally posted by: Sonokamome
I'm just thinking to myself that, if say, AMD should go under. What happens to the AMD build I've made? Would I continue to use the computer as long as I would if I had gone with Intel ? Would I have to just simply buy a new CPU and motherboard?

The simple answer to your question is that nothing would happen to you if AMD went under. Most CPUs and motherboard chipsets will require very little in support from the manufacturer unless it's a buggy mess in need of a recall. In other words, as long as the chip is solid and the chipset solid, it should last you as long as the performance warrants. With the economy going the way it is, an AM3 Phenom II should last longer than systems purchased in the past 5-10 years at a similar price point.

Only problem I could see is if you bought a low-volume production motherboard with issues in need of BIOS patches that went unpatched due to the board manufacturer discontinuing the product soon after release (if AMD products disappeared from the channel). Not likely to happen. Many motherboards out there can be used without a BIOS update of any kind.

Just find a good board and you'll be fine. The other components in your system (other than your AMD CPU) will, more likely than not, plug right into an Intel system if you need a new CPU and motherboard later (provided that you don't wait so long that the industry has moved on to new standards . . . if that's the case, no big whoop, you got your money's worth and then some).

Oh yeah, you might run into some issues if you buy a high-end Crossfire setup now. It should work out for the life of the system, but if AMD products left the channel, you might not be able to find new boards to properly implement Crossfire.

 

[Martimus]

Originally posted by: Viditor
To reiterate, I think there is a tendancy to overreach on AMD's prospects being espoused here...
Beginning Q1 09:

1. AMD's Capital Expenditures will be dropping to $180 Million a year...which is down from their previous average of $1,685 Million per year.
2. Almost $1 Billion of this quarter's loss was a write down. For those who don't know what this means, a good example is that they revalued their ATI purchase from several years ago and decided that it wasn't worth as much as they had thought. For accounting purposes, they corrected the value of their purchase by taking a "write down" loss this quarter. No actual money was lost, though the value of the company on paper did indeed decrease.
3. AMD had a cash burn of $245 million, however this will drop dramatically next quarter. Not only will their Capex drop, but the expense of running a Fab will go away and their interest expense will be cut by ~40%.

At the end of the day, both Intel and AMD are due for some very ugly Q1 numbers, but there isn't a chance in Hell that AMD will go bankrupt this year...

There is something that you are not taking into account here though. AMD must use TFC to produce their x86 CPU's per their license agreement. So if TFC goes under, they are forced to A) leave the x86 business; B) negotiate a new license agreement; or C) buy a majority share of another foundry so that they meet the rule that they have at least a 50% vote in the new foundry company.

Of course, this is just my take on it. AMD is likely to survive such an event, but their x86 license may not. This is good news for AMD shareholders, but not such great news for those of us who only care about having more competition in the x86 arena.

 

[Meph3961]

Originally posted by: SlowSpyder
If AMD goes under, the game would get very interesting if Samsung or IBM gobbled up what's left of AMD. Intel isn't afraid of AMD, but if Samsung or IBM bought AMD, then I think you'd see Intel a bit more worried.

The problem with IBM or Samsung (or really anyone buying AMD) is that most of the cross-licensing agreements between AMD and Intel do not allow for the transfer of ownership of either company. This means that IBM or Samsung would lose access to all of Intel's IP that AMD currently uses in it's chips. And I seriously doubt that Intel would be that eager to sign new deals with a large competitor like IBM of Samsung.

 

[VirtualLarry]

Originally posted by: Meph3961
And I seriously doubt that Intel would be that eager to sign new deals with a large competitor like IBM of Samsung.

What if the DOJ forced them?

 

[ViRGE]

Originally posted by: VirtualLarry

Originally posted by: Meph3961
And I seriously doubt that Intel would be that eager to sign new deals with a large competitor like IBM of Samsung.

What if the DOJ forced them?

I suppose it could happen (I mean really, the Feds can ultimately do whatever they want to) but I'm not immediately aware of any precedence on such an action.

 

[Viditor]

Originally posted by: Martimus

Originally posted by: Viditor
To reiterate, I think there is a tendancy to overreach on AMD's prospects being espoused here...
Beginning Q1 09:

1. AMD's Capital Expenditures will be dropping to $180 Million a year...which is down from their previous average of $1,685 Million per year.
2. Almost $1 Billion of this quarter's loss was a write down. For those who don't know what this means, a good example is that they revalued their ATI purchase from several years ago and decided that it wasn't worth as much as they had thought. For accounting purposes, they corrected the value of their purchase by taking a "write down" loss this quarter. No actual money was lost, though the value of the company on paper did indeed decrease.
3. AMD had a cash burn of $245 million, however this will drop dramatically next quarter. Not only will their Capex drop, but the expense of running a Fab will go away and their interest expense will be cut by ~40%.

At the end of the day, both Intel and AMD are due for some very ugly Q1 numbers, but there isn't a chance in Hell that AMD will go bankrupt this year...

There is something that you are not taking into account here though. AMD must use TFC to produce their x86 CPU's per their license agreement. So if TFC goes under, they are forced to A) leave the x86 business; B) negotiate a new license agreement; or C) buy a majority share of another foundry so that they meet the rule that they have at least a 50% vote in the new foundry company.

Of course, this is just my take on it. AMD is likely to survive such an event, but their x86 license may not. This is good news for AMD shareholders, but not such great news for those of us who only care about having more competition in the x86 arena.

A good point...
However, I'm of the opinion that the leverage AMD has over Intel (because of the huge amount of IP involved) will keep Intel very amenable if a renegotiation is required.
Remember that Intel uses as much AMD IP as AMD uses of Intel...
If AMD went out of business, it would cost Intel an absolute FORTUNE! The reason is that they would need to spend cash for their licensing instead of just using a cross-license agreement.

 

[Leyawiin]

Originally posted by: Ocguy31

Originally posted by: batmang
Ugh, this saddens me. If AMD goes under, Intel is going to do what any top dog company would do, rake in the dollars. Competition is needed! Everyone in this thread, go sell your Intel rigs and buy a Dragon setup. Give AMD your money! 🙂

It is not the consumer's job to give charity. If AMD cannot figure out a way to be profitable selling chips, then that is how the world works. A new #2 will have to emerge to keep Intel honest.

We cant let this "bail-out" mentality that has plauged this country the last 12 months continue.

Yeah, like "unknown company" did with Microsoft!

Get ready for monopoly guys. With no incentive to keep prices down and innovation up the design cycle is going to slow waaay down.

 

[ArizonaSteve]

...and then no-one will buy processors because the one they have will be "good enough" compared to the current top-of-the-line.

Innovation and design will need to keep moving along, as Intel would effectively be competing with itself.

 

[sonoran]

Originally posted by: Martimus

Originally posted by: Viditor
To reiterate, I think there is a tendancy to overreach on AMD's prospects being espoused here...
Beginning Q1 09:

1. AMD's Capital Expenditures will be dropping to $180 Million a year...which is down from their previous average of $1,685 Million per year.
2. Almost $1 Billion of this quarter's loss was a write down. For those who don't know what this means, a good example is that they revalued their ATI purchase from several years ago and decided that it wasn't worth as much as they had thought. For accounting purposes, they corrected the value of their purchase by taking a "write down" loss this quarter. No actual money was lost, though the value of the company on paper did indeed decrease.
3. AMD had a cash burn of $245 million, however this will drop dramatically next quarter. Not only will their Capex drop, but the expense of running a Fab will go away and their interest expense will be cut by ~40%.

At the end of the day, both Intel and AMD are due for some very ugly Q1 numbers, but there isn't a chance in Hell that AMD will go bankrupt this year...

There is something that you are not taking into account here though. AMD must use TFC to produce their x86 CPU's per their license agreement. So if TFC goes under, they are forced to A) leave the x86 business; B) negotiate a new license agreement; or C) buy a majority share of another foundry so that they meet the rule that they have at least a 50% vote in the new foundry company.

Of course, this is just my take on it. AMD is likely to survive such an event, but their x86 license may not. This is good news for AMD shareholders, but not such great news for those of us who only care about having more competition in the x86 arena.

The other elephant in the room that Viditor is overlooking - TFC cannot produce AMD's chips for free. To remain a viable company, TFC will have to charge a price sufficient to remain in the black. Until TFC gets additional customers (spreading the cost of technology development and FAB construction and maintenance), that price is going to be higher than AMD would have paid by having the chips produced in-house.