AMD narrows loss in Q3 on improved chip sales

The company also will ship Fusion chips this quarter, it said as it released its quarterly earnings statement

Advanced Micro Devices on Thursday posted a net loss for the third quarter, but reported a boost in microprocessor and graphics products sales as it inches its way back to profitability.

The company reported a net loss of US$118 million for the quarter ending Sept. 25, an improvement from the net loss of $128 million it reported in the third quarter last year.

As part of the results, AMD reported a $186 million equity loss related to its manufacturing spinoff, GlobalFoundries. Excluding that loss and other items, AMD would have reported a profit of $108 million.

The company reported revenue of $1.62 billion, which grew from $1.4 billion in the year-ago quarter. Analysts polled by Thomson Reuters expected revenue for the quarter to be $1.61 billion.

Revenue for the Computing Solutions segment, which includes revenue from microprocessor sales, was $1.23 billion, growing 13 percent compared to the year-ago quarter. Revenue for the graphics segment was $390 million, growing by 33 percent.

Ahead of the earnings, AMD lowered its revenue forecast for the third quarter, citing weak demand for laptops in western Europe and North America.

Despite weakness in the consumer segment, the company continues to focus on new products, said Dirk Meyer, AMD's president and CEO, in a statement.

The company hopes to receive a boost later this quarter when it starts shipping its much-delayed Fusion family of chips, which could appear in PCs starting early next year. The chip integrates a graphics processor inside the CPU, which could save battery life on laptops and provide better graphics capabilities.

The company expects fourth-quarter revenue to be flat compared to the third quarter, said Thomas Seifert, chief financial officer at AMD, during a conference call after the report.

However, it predicts PC shipments will grow slightly in the fourth quarter. That could lead to sequential growth in "CPU consumption" during the quarter, AMD's Meyer said on the call.

After explosive growth in PC shipments during the first two quarters of this year, PC makers built up inventory expecting fast growth in shipments during the third quarter. But slow PC sales affected chip shipments as computer companies tried to clear out inventory.

Demand for high-margin products such as triple-core and quad-core chips was healthy during the third quarter, Meyer said.

Next year, PC shipments will grow by double digits, Meyer said. In an effort to capture a larger microprocessor market share from Intel, AMD is jumping into the netbook market with the Ontario chip, which belongs to the Fusion family. The chip will start shipping in the fourth quarter.

AMD is also due to start shipping Fusion processors code-named Llano for mainstream consumer desktops and laptops in the first half of next year.

The company also received a boost from the rollout of servers based on AMD's eight-core and 12-core Opteron server chips, Meyer said.

"We did see a pretty good ramp of Opteron processors in our product line," Meyer said.

During the fourth quarter, companies will starting rolling out servers based on the Opteron 4000 series of chips, which are just becoming available. A full arsenal of server chips would help AMD gain some market share from Intel, Meyer said.

New server chips based on the next-generation Bulldozer architecture will start shipping next year, though officials did not provide a specific date.

The company also said it would introduce the next generation of DirectX 11 discrete graphics cards next week, and hopes to ship thousands of units by the end of the fourth quarter, Meyer said.

Tags business issuesAdvanced Micro Devicesfinancial results

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Agam Shah

IDG News Service

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