AMD gives up on 2007, aims Barcelona, profitability for 2008

Key products won't be unveiled until next year

AMD has delayed general availability of some key products until early next year, when it projects the chips, along with other new processors, will return it to profitability.

The biggest hit went to its quad-core microprocessor, code-named Barcelona, which it needs to compete against Intel among server vendors. The chips, along with AMD's desktop platform, Phenom, won't be generally available to customers until the first quarter of next year. The products were supposed to ship in volume by the end of this year, but a technical design error in the chips caused AMD to slow the schedule so it could apply a fix, the company's president and chief operating officer (COO), Dirk Meyer, said in a [meeting with analysts] on Thursday.

The company's Puma platform, a set of chips aimed at laptop PCs, will also be delayed until the second quarter of next year, a costly miss considering the fact that the laptop PC market is growing at around 30 per cent per year.

AMD also reduced its planned spending on new production lines to $US1.1 billion from a previous estimate of $1.7 billion, and said all its business divisions wouldn't return to profitability until next year.

The statements caused AMD's stock to fall as much as 5 per cent during early trading on the New York Stock Exchange, before rebounding to down just 1.8 per cent, at $8.81 in the afternoon. The market was still open as of this writing.

AMD executives apologised for missteps, such as the delay in Barcelona.

"We blew it and we're very humbled by it and we learned from it and we're not going to do it again," chairman and CEO of AMD, Hector Ruiz, said. He said AMD would go back to its habit of under-promising and over-delivering.

To start, the company will be on a path to break even financially by the second quarter of next year, and return to profitability by the end of the third quarter, he said. The financial performance will be boosted by the launch of several new products in graphics, chipsets, digital TV processors and more, not including the delayed products.

The company forecast its processor shipments will rise at least 15 per cent next year, while graphics processor shipment growth will be greater than 6 per cent, digital TV processors more than 13 per cent, and handheld chips up 8 per cent.

AMD's gross margin will rise to between 46 per cent and 50 per cent next year, up from 37 per cent during the past four quarters, said Bob Rivet, chief financial officer of AMD.

"We're in a massive product refresh. In 2007, we were living on some old stuff. 2008 is all new stuff, and we believe it will yield goodness," he said.

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Dan Nystedt

IDG News Service
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