AMD still losing money

[Pariah]

AMD (NYSE:AMD) today reported sales of $1.227 billion and an operating loss of $46 million for the quarter ended March 27, 2005. The first quarter net loss of $17 million amounted to $0.04 per share.

AMD Reports First Quarter Results

Doesn't seem like AMD can ever get it quite right. Record CPU sales and yet manages to get dragged down by the memory division into a loss.



Meanwhile, looks like the eternal rumors that Apple was about to die can finally be laid to rest permanently.

Revenue Increases 70 Percent and Net Income Increases Over 500 Percent Year-Over-Year

"Apple shipped 1,070,000 Macintosh® units and 5,311,000 iPods during the quarter, representing a 43 percent increase in CPU units and a 558 percent increase in iPods over the year-ago quarter."

That's a lot of iPods. Ironically, I don't know a single person who owns one, though most of my friends own an MP3 player.

 

[imported_llama]

thats a lot of GB's in ipods

 

[minofifa]

man, i don't understand economics at all...

i thought AMD would be doing well, considering all of the good stuff ye hear about it here. I never expected it to be ahead of intel or anything, but i never predicted a loss. is this a huge blow to AMD? should AMD users be worried?

I say good for mac, some competition for microsoft is probably a good thing.

 

[crisscross]

 

[DAPUNISHER]

AMD's long-term debt is the largest financial issue IMO, and bleeding more cash just exacerbates it.

Spansion began volume shipments of the only single-die 512-megabit NOR Flash memory device in production for the embedded market.

That could help turn things around for the flash divison, we'll see. Very encouraging news from CPG divison though, maybe they can spin-off the memory divison if it keeps sagging?

 

[dullard]

Originally posted by: minofifa
is this a huge blow to AMD?

In my AMD loss post yesterday, I breifly discussed this. AMD has had many quarterly losses, some of which were much bigger than the most recent loss. So no, it is not a huge blow to AMD. Instead, it is business as usual. You should not be worried.

AMD is in a buisness that requires a huge R&D budget as well as huge facility costs. AMD barely makes enough sales to cover these costs. Some quarters it is covered, other quarters it isn't. Being the 'low-cost' seller in this market certainly doesn't help the bottom line. Performance is roughly equivalent with Intel. Sure there are differences. But in the grand scheme of things, the performance difference is quite minimal. It isn't like we are comparing AMD to the VIA chips... Thus there is no major reason for the public to switch to AMD. Sure on a typical computer you could save 5%-10%. However, have you ever been swayed to make a purchase for a brand that you normally avoid just due to a 5% sale?

 

[DAPUNISHER]

So they are spinning off flash; I read they intended to do this from the start so given the present situation the timing seems good.

 

[corkyg]

And today Apple got hammered and has dragged the entire market down with it - even as oil prices dropped. They may have money from past earnings, but their forecasted earnings make investors unhappy. Tech hardware is a brutally competitive business, and the ROI has not been that great. AMD's debt load is huge - and their profits are marginal because they literally have bought market share from Intel.

 

[DaveyTN]

Man, that is a shame. Its too bad things aren't going AMDs way considering their processors are far superior to Intels when it comes to gaming.

 

[FlyLice]

Originally posted by: minofifa
man, i don't understand economics at all...

i thought AMD would be doing well, considering all of the good stuff ye hear about it here. I never expected it to be ahead of intel or anything, but i never predicted a loss. is this a huge blow to AMD? should AMD users be worried?

I say good for mac, some competition for microsoft is probably a good thing.

AMD Sales: 4.99 Billion
Intel Sales: 34.21 Billion

What's so hard to understand here? Do you think just bc AT people make AMD machines means that AMD has 90% market share of the chip market?

 

[Pariah]

n my AMD loss post yesterday, I breifly discussed this. AMD has had many quarterly losses, some of which were much bigger than the most recent loss. So no, it is not a huge blow to AMD. Instead, it is business as usual. You should not be worried.

Kind of goofy to imply that they are doing OK, and there is no need for concern, because they are losing money at a slower pace than they have recently. Losing money no matter how little is never a good thing especially when they are doing it quarter after quarter. There is only so much losing a company can do before the end comes. AMD is in no immiment danger of going under, but clearly they need to change the way they have been doing things. Spinning off the flash business my be the start (ironically, the division that was keeping them alive for years), but that alone probably isn't going to turn them into a consistent money maker.

 

[DAPUNISHER]

Originally posted by: corkyg
And today Apple got hammered and has dragged the entire market down with it - even as oil prices dropped. They may have money from past earnings, but their forecasted earnings make investors unhappy. Tech hardware is a brutally competitive business, and the ROI has not been that great. AMD's debt load is huge - and their profits are marginal because they literally have bought market share from Intel.

That is the one scares the investors off in hordes, high long-term debt ratio.

 

[Insomniak]

AMD has a lot of work to do, but right now I think it's obvious that they're about as well managed as a company can be. They're operating in a much more financially precarious position, and still managing to out-engineer Intel. K8 vs. Prescott shows that quite clearly.

They're fighters. The turn around from K6-2 to the Athlon and then Athlon XP series shows that quite clearly. If they keep persisting and producing great products like they have been, the investors, consumers, and marketshare will come.

 

[grant2]

Originally posted by: corkygAMD's debt load is huge - and their profits are marginal because they literally have bought market share from Intel.

AMD's market share is the same ~20% it's been for 5 years now.

 

[Matthias99]

Originally posted by: grant2

Originally posted by: corkygAMD's debt load is huge - and their profits are marginal because they literally have bought market share from Intel.

AMD's market share is the same ~20% it's been for 5 years now.

Yes, but:

1) The CPU market is a LOT bigger than it was five years ago. It's not like they're standing still; they've basically been pacing Intel.

2) They've gotten a significantly bigger cut of the server market then they used to have. High-end Opterons pummel Xeons pretty badly in some benchmarks, especially in 4-way setups.

3) They seem to have a pretty good lock on the enthusiast gaming/performance market at the moment. P4EE chips are *way* overpriced and still often lose to even a 3500+ in gaming benches. At an equivalent price, it's rarely even a contest. recent THG bench

Intel's beating them in volume and has more desktop OEM contracts, but is losing ground in a lot of areas. The fact that Dell even considered selling AMD-based systems (although it may have all just been a negotiating ploy) is telling.

 

[Fike]

Apple compared to AMD is like ......

........


.........comparing apples and oranges...........


sorry.


But really. It is more appropriate to compare apple to HP or Dell than AMD. Chips are a way different business than equipment R&d and assembly.

If I recall correctly, Apple still uses Motorola processors for the computers.

 

[Pariah]

Yes, but:

1) Their marketing still sucks as much as ever.

2) Despite all their market gains, they're still losing money.

3) Oh yea, and AMD's marketing sucks.

4) For most potential customers, both home and corporate, benchmarks aren't the primary factor, especially if they are relatively close for most tasks.

5) Did I mention their marketing sucks?

If a company makes a great product and nobody knows about, does it really exist?

Edit:

Where did I compare AMD to Apple? Didn't see the point in creating 2 threads on the same topic, so I combined them. A very large chunk of Apple's recovery can be attributed to the iPod, which has nothing to do with CPU's, or AMD.

 

[Matthias99]

Originally posted by: Pariah
Yes, but:

2) Despite all their market gains, they're still losing money.

From the article you linked:

Record Computation Products Group (CPG) (note -- this is the CPU production arm of AMD) sales of $750 million were up 31 percent from the first quarter of 2004 and increased three percent from $730 million in the fourth quarter of 2004. CPG generated record operating income of $92 million in the first quarter, up from $89 million in the fourth quarter of 2004. CPG?s first quarter sales growth was driven by record server and mobile processor sales, and strong overall penetration in high-growth regions, particularly greater China. AMD64 processor sales grew a record 30 percent sequentially and represented 63 percent of CPG sales.

(emphasis added)

They're making money on their CPUs and gaining sales. They lost $110 million on the flash memory division last quarter, which is why they posted a net loss.

4) For most potential customers, both home and corporate, benchmarks aren't the primary factor, especially if they are relatively close for most tasks.

Home users will buy whatever sounds good and is put in front of them, unless the prices are way lower on something else (they're not different enough to make a difference at the low end). Like I said, Intel has a lot more desktop OEM contracts (and is still Dell's only CPU supplier), but is making inroads to some extent.

Corporate desktop buyers just want cheap, reliable machines. If AMD keeps beating them on price, they'll make progress here as well. People buying servers certainly do care about performance, and that's where AMD has actually started hurting Intel.

Enthusiast desktop buyers seem to care an awful lot about benchmarks, and price/performance on AMD is much better in this range as well. It's a smaller market, but with higher profit per chip, and AMD seems to have a big edge here at the moment.

1) Their marketing still sucks as much as ever.
3) Oh yea, and AMD's marketing sucks.
5) Did I mention they're marketing sucks?

If a company makes a great product and nobody knows about, does it really exist?

The only place they're being outmarketed is in the desktop OEM market, because most consumers know "Intel/Pentium/Celeron/Centrino" but not "AMD/Athlon". They just don't have the kind of advertising and marketing budget that Intel does, although I agree they could do a lot better.

Where did I compare AMD to Apple? Didn't see the point in creating 2 threads on the same topic, so I combined them. A very large chunk of Apple's recovery can be attributed to the iPod, which has nothing to do with CPU's, or AMD.

Some would argue that putting it in the same post as how AMD is losing money is at least indirectly comparing/contrasting them.

It's tough to blame AMD management for a sucky flash memory market. Apple picked a good time to get into consumer electronics; whether this was brilliant foresight or just dumb luck is hard to say.

 

[Pocatello]

Price of flash memory is really low now.

 

[jhu]

Originally posted by: dullard

Originally posted by: minofifa
is this a huge blow to AMD?

In my AMD loss post yesterday, I breifly discussed this. AMD has had many quarterly losses, some of which were much bigger than the most recent loss. So no, it is not a huge blow to AMD. Instead, it is business as usual. You should not be worried.

AMD is in a buisness that requires a huge R&D budget as well as huge facility costs. AMD barely makes enough sales to cover these costs. Some quarters it is covered, other quarters it isn't. Being the 'low-cost' seller in this market certainly doesn't help the bottom line. Performance is roughly equivalent with Intel. Sure there are differences. But in the grand scheme of things, the performance difference is quite minimal. It isn't like we are comparing AMD to the VIA chips... Thus there is no major reason for the public to switch to AMD. Sure on a typical computer you could save 5%-10%. However, have you ever been swayed to make a purchase for a brand that you normally avoid just due to a 5% sale?

if they keep posting quarterly losses, how can they continue being solvent? how much cash do they have in the bank and where did it come from?

 

[dullard]

Originally posted by: jhu
if they keep posting quarterly losses, how can they continue being solvent? how much cash do they have in the bank and where did it come from?

According to AMD, they have a $1.1 billion cash position and a $1.9 billion long term debt. That is plenty of available funds to continue operations for quite some time (assuming AMD keeps hovering just above or just below profitability). The fact that the company is just at the break even point, but has a huge $30 billion+ potential market if Intel/IBM falter, means investors will keep shelling up cash if AMD needs it. There is no fear of an immediate disaster for AMD (from a consumer standpoint).

Now as a potential investor, I have strong feelings about AMD. I'd sell anytime AMD gets to the $17/$18 range. I said that before publically on Anandtech and got major flame wars against me. And yes I would have missed their recent and very temporary run up to $24 (no one can predict all peaks). However, AMD's last 3 peaks were in the $17/$18 range (it is nice to have proof of my earlier AMD stock estimations).

 

[Matthias99]

Originally posted by: jhu

Originally posted by: dullard

Originally posted by: minofifa
is this a huge blow to AMD?

In my AMD loss post yesterday, I breifly discussed this. AMD has had many quarterly losses, some of which were much bigger than the most recent loss. So no, it is not a huge blow to AMD. Instead, it is business as usual. You should not be worried.

AMD is in a buisness that requires a huge R&D budget as well as huge facility costs. AMD barely makes enough sales to cover these costs. Some quarters it is covered, other quarters it isn't. Being the 'low-cost' seller in this market certainly doesn't help the bottom line. Performance is roughly equivalent with Intel. Sure there are differences. But in the grand scheme of things, the performance difference is quite minimal. It isn't like we are comparing AMD to the VIA chips... Thus there is no major reason for the public to switch to AMD. Sure on a typical computer you could save 5%-10%. However, have you ever been swayed to make a purchase for a brand that you normally avoid just due to a 5% sale?

if they keep posting quarterly losses, how can they continue being solvent? how much cash do they have in the bank and where did it come from?

AMD's 2004 Annual Report

(pages 16 and 17 are the ones with the financial data)

They made $222M (~$90M net) last year on sales of ~$5B. They also have assets of about $8B (with about $1.4B as 'working capital', ie relatively liquid assets), and ~$2B in debt. They spent ~$2.5B last year on capital investment (mostly new fabs and retooling for 90nm, I would think) and R&D.

Things were pretty rough in 2002, though; they lost over 1.2 billion dollars that year. That's offset somewhat by the fact that they made almost a billion in 2000. So while they are losing money overall, it's relatively slowly compared to their assets.

I don't know exactly where all the money came from, but I'd assume they started like most companies do, with venture capital and then probably an IPO (back in the pre-bubble days when this meant something). Flash memory used to be quite profitable for them, and I'm pretty sure they did well with their K5/K6 processors back in the late 80s/early 90s.

 

[Pocatello]

AMD could spin off its flash memory division, according to the inquirer.

 

[Gannon]

Originally posted by: minofifa
man, i don't understand economics at all...

i thought AMD would be doing well, considering all of the good stuff ye hear about it here. I never expected it to be ahead of intel or anything, but i never predicted a loss. is this a huge blow to AMD? should AMD users be worried?

I say good for mac, some competition for microsoft is probably a good thing.

The problem is some businesses are not profitable from the outset or very difficult to make profitable and I'd say semi-conductors is one of them. They had an article in one of the business rags I was reading saying that the market wants cheap PC components but the fabs keep costing 4 times as much with every new generation making such cheap components impossible for return on investment.

The US army (and most countries) knows that some important industries will always lose money and thats why many industries are subsidized by the governments around the world.

Don't be fooled by capitalist propaganda of the free marketeers, about "competition" many businesses and pursuits just by their very nature are monopolistic and take more money to run then they can ever make in profits just due to the nature of the endeavour but are so important they have to be invested in anyway for the benefits it brings elsewhere.

 

[doublejbass]

^^ With that kind of idiocy here, the OT/POL forum must be REALLY bad.