AMD Update: Losses Stemmed But It's Still In The Red


It's not often that I'm thrown for a loop when a company reports earnings. But when the headline number from Advanced Micro Devices crossed the wires as a loss of $3.06 a share, my eyes nearly popped. Where's the charge coming from? What's the problem here? What did we all miss?

After doing some quick, back of the envelope math, I backed out the extra $2.89 EPS charge I wasn't counting on, connected to the company's acquisition of ATI Technologies, and ended up with a loss of 17 cents. Still lousy, but not nearly as bad as that original $3.06 number, nor was it as bad as the 36 cent loss a share the Street had expected.

On the topline, AMD reported $1.77 billion, which was lighter than the $1.79 billion consensus.

Still, if there's good news here, it comes from AMD's gross margins: 44 percent instead of the 41 percent expected. There's also good news, such that it is, that AMD appears to be getting its costs in line. Sort of. The company says operational losses declined to $9 million. CFO Robert Rivet says the company shipped a record number of chips in the fourth quarter, including 400,000 higher priced, higher margin quad-core chips.

Shares are rising after-market on the news, and that's a real head-scratcher. Some expected AMD to announce a deal to unload its Dresden, Germany manufacturing plant to Taiwan Semiconductor, or a consortium in China which would eliminate $2.5 billion in annual operating costs, and could carry with it a $1 billion price tag, saving the company a total of $3.5 billion.

Such a move makes sense given that the industry is moving toward 45 nanometer manufacturing technology and the plant is still fitted at the older 65 nanometer size. Outsourcing the facility's manufacturing makes sense on a lot of different levels.

But there was no word on that, or anything that smacks of the dramatic steps needed to get this company back on track. AMD has said it plans to return to profitability during the back half of 2008, but says in its earnings release today that it will suffer declining, seasonal revenue during the first quarter.

Analysts were anticipating that, projecting a 38 cent loss on $1.66 billion in revenue. Which makes that return-to-profitability timetable all the more difficult. Let's see where the "hot money" goes from here.

FYI: The first part of the video is on Washington Mutual's earnings. AMD is in the second half.

Questions? Comments?