AMD reaches profitability for the first time in years

IDG News Service - Advanced Micro Devices reached profitability for the first time in three years during the fourth quarter of 2009, benefiting from a legal settlement with Intel and a change in its business model, the company said on Thursday.

The company reported net income of $1.18 billion during the quarter that ended on Dec. 26, an improvement over the loss of $1.44 billion it reported in the fourth quarter of 2008. The company reported diluted earnings per share of $1.52.

Revenue for the fourth quarter was $1.65 billion, a gain of 42% compared to the same period last year. The revenue beat estimates of analysts polled by Thomson Reuters, who expected revenue of $1.5 billion.

Revenue was driven by a healthy holiday sales period for PCs using its chips and increased demand for its Radeon graphics cards, AMD said. The $1.25 billion Intel paid AMD in November to settle a lawsuit also helped. AMD had accused Intel of offering rebates that kept AMD from making deals with PC makers.

Microprocessor revenue during the quarter was $1.2 billion, up 14% compared to the same quarter of the previous year. Graphics segment revenue was $427 million, up 40%.

"AMD's quarter marks another milestone in our transformation and underscores our growing momentum," said AMD CEO and President Dirk Meyer in a statement.

AMD suffered three years of consecutive losses as it failed to launch chips as scheduled and, more recently, because of lower chip sales during the recession. The company also took billions of dollars in charges related to the acquisition of graphics firm ATI in 2007.

In an effort to turn things around, AMD divested assets, cut staff and re-established itself as a chip design firm by spinning off its debt-heavy manufacturing facilities to a separate entity now known as GlobalFoundries. AMD remains a minority shareholder in GlobalFoundries.

"We're pleased with our progress," Meyer said during a conference call to discuss the financial results. The company ended fiscal 2009 on a high note, which has positioned it for stronger growth in 2010. AMD released chips on time and shed close to $2.2 billion in debt off its books over fiscal 2009.

The company is also signing new customers to sell its chips. which could result in more revenue, Meyer said. One of AMD's big signings in the fourth quarter was Lenovo, which will offer AMD chips in its ThinkPad laptops for the first time. AMD now has the top five PC makers worldwide as its customers, including Hewlett-Packard, Dell, Acer and Toshiba.

The company shipped a record number of laptop processors and chipsets during the fourth quarter, Meyer said. Notebook revenues were up 19% sequentially.