AMD narrows loss as it inches to profitability

The AMD CEO says product demand during its third quarter was strong

Advanced Micro Devices on Thursday narrowed its net loss during the third quarter of 2009 as the company inches closer to profitability.

The company reported a loss of US$128 million, or $0.18 a share, for the quarter ended Sept. 26. The loss is lower than the $134 million, or $0.22, the company reported in the third quarter of 2008.

AMD reported revenue of $1.4 billion, down 22 percent compared to the previous year, but topping expectations of $1.26 billion based on estimates polled by analysts at Thomson Reuters. Revenue increased by 18 percent compared to the second quarter. 

The company saw strong demand for its processors and graphics chips during the third quarter, said Dirk Meyer, AMD's president and CEO, in a statement. Microprocessor and graphics unit shipments grew compared to the second quarter.

The company also benefited from higher average selling prices and an increase in shipment of chips manufactured using the new 45-nanometer process. During the previous quarter the company was affected by falling chip prices and an aging inventory of old chips made using the older 65-nanometer process.

The company took a number of recent steps in order to reach profitability. In the first quarter it spun off manufacturing assets to a separate company called GlobalFoundries, which unloaded close to $1.1 billion in debt from AMD's books. GlobalFoundries is a joint venture with investment firm Advanced Technology Investment Company, which is owned by the Abu Dhabi government.

After deducting costs associated with GlobalFoundries, the company reported a $2 million profit.

Advanced Micro Devices also told employees last month that it was reinstating old salaries after canceling an earlier cost-cutting program in which the company cut pay by 5 percent to 20 percent. Meyer at the time asked employees to control spending until the economy fully recovers.

The global economy is not yet robust, but there is growing confidence that next year won't be as bad as previously feared, Meyer said on a conference call to discuss the financial results.

"The tone of the conversations we are having with CIOs ... has changed in the last three months. Clearly, wallets are starting to [open] up," Meyer said.

During the third quarter, the company recorded 28 percent growth in chip shipments sequentially, mainly driven by growing laptop shipments. There was a healthy demand for laptops during the back-to-school season, Meyer said.

Another bright spot for AMD was the company's graphics segment. Shipments of graphics processors grew sequentially during the quarter, driven by graphics cards for laptops. The graphics segment recorded a 22 percent sequential revenue growth, Meyer said.

There is a lot of momentum behind the company's new Radeon HD 5000-series graphics cards, with many PC makers expressing interest, Meyer said. AMD last month launched two new graphics cards that support DirectX 11, which are APIs (application programming interfaces) from Microsoft that allow for more realistic images and 3D experiences in games and movies.

AMD projected its fourth-quarter revenue to grow modestly compared to the third quarter. The company hopes to ship a larger mix of 45-nm chips, which are smaller and offer better performance than 65-nm chips. Chip shipments could also pick up with the launch of Microsoft's Windows 7 OS on Oct. 22, with people buying new PCs, Meyer said.

The company recently announced new processors that have already made their way to products and plans to announce new chips in the upcoming quarters that could go into thin and light laptops. Next month, AMD will shed more light on its microprocessor plans for 2010, Meyer said.

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