April 20th, 2007
Has AMD busted itself trying to beat Intel?
Bad news from AMD yesterday - the company posted a staggering quarterly loss. Has AMD busted itself by trying to beat Intel rather than concentrating on developing new exciting products?
AMD's price war with Intel has taken a toll on the company. Margins are down dramatically, falling to 31 percent from 40 percent in the previous Hector Ruiz, AMD's Chief Executive, isn't happy and told analysts that "We're not happy with having to miss the damn numbers." quarter and nose-diving from 59 percent a year ago. Despite being the #2 player in the processor industry, AMD has seen a quarterly profit it made a year ago of $184.5 million eroded down to a loss of $611 million (in share terms this works out at a loss of $1.11 per share this quarter against a profit of 38 cents a year ago).
AMD's failure is down to one thing and one thing alone. It made enthusiastic and very generous price cuts on products that couldn't hold their own against newer, faster and more efficient CPUs by Intel. To be honest, even with the price cuts, I've still considered AMD's products to be overpriced. And instead of investing R&D in better desktop processors, AMD made bad choices and instead tried to appeal to high end enthusiast markets with the Quad FX, which would never amount to anything more than low volume sales.
Hector Ruiz, AMD's Chief Executive, isn't happy and told analysts that "We're not happy with having to miss the damn numbers." Other executives used words and phrases such as "unacceptable," "a perfect storm," "a terrible start" and "a major setback."
One the plus side, the company does have a cash reserve of $1.2 billion and talk of financing did boost share prices despite the bad news. Chief Financial Officer Robert Rivet said that he was comfortable with the company's cash reserve and wouldn't be concerned until this was down to about $600 million. At the rate AMD are currently losing money, that might not be too long.
The company's Athlon 64 X2 dual-core range is just over the hill, it's a little dot on the horizon, and the lackluster 6000+ does nothing but underline thatTo turn the company around AMD needs to go back to basics and start making waves again in the processor market. The company's Athlon 64 X2 dual-core range is just over the hill, it's a little dot on the horizon, and the lackluster 6000+ does nothing but underline that. This chip is a 3GHz, 90nm, 125 watt dinosaur compared to the Core 2 Duo processors. I used to be a huge AMD supporter, having bought more AMD-based systems than Intel-based ones over the years, but the only reason I can see people buying these latest AMD CPUs is if they like the packaging. I want AMD to give me something exciting, but all they do as of late is disappoint. Now I guess that AMD executives have joined the crowd of people let down by AMD, maybe things will change.
Where it matters - price, performance and power consumption - Intel hammers AMD into the ground. That's why AMD has, in the space of 12 months, turned from making a tidy profit into making an eye-watering loss, and unless the company starts listening to what customers want rather than telling them what they need, AMD's going to continue down the plughole.
Adrian is a technology journalist and author who has devoted over a decade to helping users get the most from technology. He also runs a popular blog called The PC Doctor. See his full profile and disclosure of his industry affiliations
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