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

by Dan Nystedt

December 13, 2007 —

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, said Dirk Meyer, the company's
president and chief operating officer (COO) 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 percent per year.

AMD also reduced its planned spending on new production lines to US$1.1 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 percent during early
trading on the New York Stock Exchange, before rebounding to down just 1.8 percent,
at $8.81 in the afternoon. The market was still open as of this writing.

AMD executives apologized 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," said Hector Ruiz, chairman and CEO
of AMD. 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 percent
next year, while graphics processor shipment growth will be greater than 6 percent,
digital TV processors more than 13 percent, and handheld chips up 8 percent.

AMD's gross margin will rise to between 46 percent and 50 percent next year,
up from 37 percent 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.

IDG News Service