AMD narrows net loss in Q2

IDG News Service - Advanced Micro Devices (AMD) narrowed its net loss during the second quarter of 2009 as it slowly inched its way toward profitability after consecutive quarterly losses, the company said Tuesday.

AMD reported a net loss of $330 million, or 49 cents per share, during the quarter that ended on June 27. That compares to a net loss of $1.195 billion a year ago and a net loss of $416 million in the first quarter of 2009.

Financial analysts polled by Thomson Reuters expected a net loss of 47 cents per share.

In an effort to reach profitability, AMD in the first quarter spun off its manufacturing assets into 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.

The company reported revenue for the second quarter of 2009 of $1.184 billion, which decreased 13% compared to the second quarter of 2008 and was flat compared to $1.177 billion during the first quarter of 2009. Revenue beat analyst expectations of $1.13 billion.

AMD successfully met its product plans during the first half of the year and hopes to release new products as it moves toward profitability, said CEO Dirk Meyer in a statement. He specifically mentioned new platform, microprocessor and graphics products that the company plans to release in the second half of the year.

Though the company's revenue exceeded expectations, underutilization of factories and dropping PC prices, led by laptops, affected the company's margins, Meyer said during a conference call. Pricing pressure on low-end graphics cards also reduced margins.

Margins were also affected by aging chips made using the 65-nanometer process, which dominated AMD's shipments, Meyer said. Although AMD no longer owns its manufacturing facilities, it is responsible for some of GlobalFoundries' manufacturing costs.

The company wants to clear off its remaining 65-nm inventory and quickly turn to the newer 45-nm manufacturing process, which produces faster and more power-efficient chips at a lower cost. Meyer said 45-nm chips will make up a larger percentage of shipments in the second half of this year, which could drive up margins by cutting manufacturing costs.

AMD hopes to reduce its exposure to GlobalFoundries' manufacturing costs over time as GlobalFoundries gains more customers and establishes its own identity. AMD is still the only customer for GlobalFoundries, which is set to announce its first non-AMD customer in the next 30 days.

One promising product for upcoming quarters is the six-core Istanbul chip, which was released on June 1. Istanbul chips are designed for cloud computing installations, which Meyer expects to be one of the bright spots in the struggling enterprise market.

Many lightweight laptops with AMD's low-power Athlon Neo chips are due in the third quarter. AMD also plans to launch the Tigris platform for mainstream laptops in the second half of the year.

Meyer said it was hard to predict whether Windows 7 would be a big driver of chip demand in the near term. It might provide an opportunity to sell more expensive systems with separate graphics cards, he said.