AMD's Q1 2007: $611M net loss

Friday 20th April 2007, 10:31:00 AM, written by Arun

AMD today reported a net loss of $611M, primarily due to an operating loss of more than $320M in the Computing Solutions group while former-ATI operations also incurred losses of about $40M. Non-GAAP gross margins were down to 31%, and exceptional charges of $113M further darkened the picture.

These numbers are substantially worse than those previously expected by analysts, and even a bit below what our own analysis article was predicting because we worked on the fairly optimistic basis of 34% gross margins and roughly flat GPU revenue. In terms of the CPU business alone, we were pretty damn close (perhaps unsurprisingly, given that this is what AMD's guidance gave the most colour on).

Looking a little bit deeper into the numbers, it should be noted that the chipset revenue is now rolled into Computing Solutions. Given that this was not the case previously, it makes it possible to determine Graphics and Chipset revenue separately for Q4: $166M revenue for GPUs with an operating loss of $27M, and $112M revenue for chipsets and an operating loss of only $6M. That quarter only had 8 weeks of revenue for these business units; taking that into account, GPU revenue in Q1 is down by 20-25%.

Compared to Q4 and including chipset revenue in both quarters, Computing Solutions revenue in Q1 was down by as much as 38%, while gross margins also tanked. It should be noted that former-ATI operations had lower margins than AMD's CPU business, and their relative share of revenue increased. So the CPU margins are still awful, just perhaps slightly less so than it might appear on first glance.

As for the future, AMD has announced it expects to get rid of 500 employees this year through attrition and performance reviews alone. Sales/Marketing/Administrative will likely be the most affected. Capital expenditure for the year will also be cut by $500M, by postponing Fab30's conversion to 300mm until Q1 2008. And finally, the company is currently considering a substantial restructuring and an asset-light strategy. Some further (but still quite preliminary) details are expected to be given at the company's Annual Meeting of Shareholders, on May 3rd.


amd ± financial

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