AMD gives up on '07, aims Barcelona, profitability for '08

'We blew it and we're very humbled by it,' says CEO Ruiz

Advanced Micro Devices Inc. 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 quadcore microprocessor, code-named Barcelona, which it needs to compete against Intel Corp. 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, in a meeting with analysts today.

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 that the laptop PC market is growing at around 30% per year.

AMD also reduced its planned spending on new production lines to $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.

AMD executives apologized for missteps, including the delay on 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, chip sets, digital TV processors and more, not including the delayed products.

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

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

"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.

Copyright © 2007 IDG Communications, Inc.

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