Does AMD/ATI have to sell at a loss?

[KidHorn]

I was perusing the financials of AMD, NVidia, and Intel and AMD's financials look horrible. They have over $5 billion in debt while NVidia has $25 million and Intel about $2 billion. AMD loses money every quarter. Their 3Q2009 losses were better than past quarters, but they made $66 million by buying back debt at below par. Basically, there were entities that loaned them money and agreed to retire it for less than what was owed because they would rather be paid now than risk not being paid in the future.

It looks like AMD gets about 75% of its revenue from CPU sales and 25% from ATI.

I know they're a good deal at the lower cost spectrum, but it seems they have to sell things at a loss to be competitive. I just can't see how they can survive with their debt load by selling CPUs for $87. They currently have about $2 billion in cash and lose about $1 billion a year, so if things don't improve or they don't find new investors, they'll likely go bankrupt in 2011.

 

[jennyh]

Why not rename it 'is amd/ati doomed' so we can really have a go at it?

AMD will not be going bankrupt. If they are selling cpu's for $87 it means they can afford to do that. The biggest issue right now is poor market share on both fronts, but the graphics will certainly be improving at least.

If AMD bring out quad cores for $99 then a lot of would-be intel buyers might think twice. It doesn't matter how little AMD make on these, all that matters is improving market share at intel's cost.

 

[shadow187]

Budget Tri+Quad-Core CPU's ($100) with Aggressive GPU's (380$ to ATI > $500 to nVid) will take these guys from the grave.

 

[KidHorn]

AMD will not be going bankrupt. If they are selling cpu's for $87 it means they can afford to do that.

Apparently, that's not true. They're losing money hand over fist.

 

[KidHorn]

Budget Tri+Quad-Core CPU's ($100) with Aggressive GPU's (380$ to ATI > $500 to nVid) will take these guys from the grave.

Their CPUs have always cost less than Intel and have given more bang for the buck. I don't see how this has changed other than the cost of CPUs have dropped across the board for both AMD and Intel. Deflation is a killer when you're buried in debt.

I agree their 5000 series will help, but, it will just be a dent in their losses. They sell about $300 million worth of GPUs every quarter and without the debt buyback, would have lost over $200 million last quarter, so it's hard to imagine how this will put them in the green. Even if they could make these cards for nothing, they would have to increase sales by 2/3rd to break even.

I think I'm actually being generous with their financial problems. In reality, if they don't start turning a profit in the next couple of quarters, they'll likely trigger some debt covenants and be at the mercy of their debt holders. They could have some very onerous terms placed on them.

 

[rodney_ws]

AMD CPUs most definitely have NOT always cost less than Intel. If anyone remembers when the X2s first came out, they would remember that AMD demanded a price premium for their products. An X2-4800+ for $1000? Yeah, thanks AMD!!! Don't try to make AMD out to be some altruistic company... they're not... they charge what they can and currently they can't charge a lot for their processors because Intel holds all the cards.

That said... my GPU is an ATI 5850 and I'm VERY happy with it and the price ($259) that I paid for it.

 

[jonpaul37]

AMD survives and will keep on truckin for this reason (there are many more reasons too, but this is the most obvious) US Monopoly laws. AMD goes down in the CPU market, there is no fair competition and thus Intel would be a monopoly.

Even if AMD falls and it's graphics division drops off the face of the earth, Intel and Nvidia remain, (thanks to Intel's shitty integrated graphics bundled in with some of their crap) but there is no other competition for CPU's. it simply cannot and will not be done until at least another CPU company emerges with at least 10% of the market share.

AMD is safe for now...

Not to mention intel's antics they used to OEM's that basically crippled AMD's sales. Anyone can agree that Intel acted dirty there... and what happens? they get fined a fraction of what they probably gained...

 

[Homeboy2]

AMD CPUs most definitely have NOT always cost less than Intel. If anyone remembers when the X2s first came out, they would remember that AMD demanded a price premium for their products. An X2-4800+ for $1000? Yeah, thanks AMD!!! Don't try to make AMD out to be some altruistic company... they're not... they charge what they can and currently they can't charge a lot for their processors because Intel holds all the cards.

That said... my GPU is an ATI 5850 and I'm VERY happy with it and the price ($259) that I paid for it.

amd not an altruistic company? What company is? A companies first loyalty is always to the shareholders and their first priority is to maximize profits, not give super deals to consumers.

 

[KidHorn]

AMD survives and will keep on truckin for this reason (there are many more reasons too, but this is the most obvious) US Monopoly laws. AMD goes down in the CPU market, there is no fair competition and thus Intel would be a monopoly.

Even if AMD falls and it's graphics division drops off the face of the earth, Intel and Nvidia remain, (thanks to Intel's shitty integrated graphics bundled in with some of their crap) but there is no other competition for CPU's. it simply cannot and will not be done until at least another CPU company emerges with at least 10% of the market share.

AMD is safe for now...

Not to mention intel's antics they used to OEM's that basically crippled AMD's sales. Anyone can agree that Intel acted dirty there... and what happens? they get fined a fraction of what they probably gained...

What are you saying? If AMD files for bankruptcy protection, they'll be turned down on the grounds it will give Intel a monopoly. Can you site an example of where this has happened?

 

[Mousemonkey]

What are you saying? If AMD files for bankruptcy protection, they'll be turned down on the grounds it will give Intel a monopoly. Can you site an example of where this has happened?

It's in Intels best interest to not let it go that far, which may be why they have let AMD take the bottom end of the market by not releasing any low end CPU's recently or slashing any prices.

 

[rodney_ws]

Yes, the X2-4800+ initially sold for ~$1000. I paid $600 for my X2-4400+ and felt like that was a steal! Fast forward a few years and I get a vastly superior quad core (i5-750) and a killer GPU (ATI 5850) for less than the price of that one stinking chip!

Here's an article that references the release prices of the X2s...

http://www.xbitlabs.com/articles/cpu/display/athlon64-x2.html

It was just the first I stumbled across, but there are many more out there I'm sure. The X2-4800 came out before the FX-60 if I recall correctly.

 

[jonpaul37]

You're missing the point here KidHorn...

Bottom line is that unless there is another contender in the CPU market, AMD will be there.

I don't have a crystal ball that'll show me what happens if AMD files chapter, but there is no way that it'll happen, otherwise, Intel would have the only Chips on the market and prices would sky-rocket.

Government involvement would ensue in the event that AMD had no choice but file. Period!

 

[jennyh]

Apparently, that's not true. They're losing money hand over fist.

Except they aren't. If you'd looked more closely you'd have seen that the product company made a profit of $55m. The $128m loss was the result of ~$200m spent on global foundries R&D.

 

[uncfan_2563]

AMD survives and will keep on truckin for this reason (there are many more reasons too, but this is the most obvious) US Monopoly laws. AMD goes down in the CPU market, there is no fair competition and thus Intel would be a monopoly.

Even if AMD falls and it's graphics division drops off the face of the earth, Intel and Nvidia remain, (thanks to Intel's shitty integrated graphics bundled in with some of their crap) but there is no other competition for CPU's. it simply cannot and will not be done until at least another CPU company emerges with at least 10% of the market share.

AMD is safe for now...

Not to mention intel's antics they used to OEM's that basically crippled AMD's sales. Anyone can agree that Intel acted dirty there... and what happens? they get fined a fraction of what they probably gained...

*cough* VIA *cough*

lol i'm just kidding on that by the way. I too think that AMD won't go down all the way. They might fade away at the worst case but even that i highly doubt. Someone will want in on their marketshare and it could be sold before they go down.

 

[Hellbound]

Imagine Intel being the only company selling cpu's. They could sell their basic cpu for $500..and people will buy it if its their only option. You want AMD to survive. Without AMD, Intel and Nvidia could make up their own prices without fear of competition, and vise-versa btw..

 

[randomizer]

I don't have a crystal ball that'll show me what happens if AMD files chapter, but there is no way that it'll happen, otherwise, Intel would have the only Chips on the market and prices would sky-rocket.

People always preach that doom and gloom pricing model, but it won't happen. Intel would be slugged with fines for monopolistic behaviour. That plus the fact that nobody will pay those kinds of prices and will simply stick with current hardware. Can you imagine how happy Dell will be when their customers don't want to pay $1600 for a baseline PC?

Would prices rise? Most likely. Would they "sky-rocket"? I doubt it.

 

[JAYDEEJOHN]

Who here doesnt think Intel would heristate to raise prices for AMDs viability sake?
Intels sales wouldnt hardly change, and whatever it did change, the higher profit per sale would offset it.
Intel needs AMD around, and ATI is just now starting to kick in its share, as, when they first merged, the 2900 came along, and we all know how that fared, not only in perf, but profit as well.
AMD is also releasing product now, and tho its not as compelling as Intels, its closer than theyve been, and theirs new releases coming along all the time.
Theyve done a much better job lately, and hopefully well enough for them to survive well enough to keep functioning fully

 

[rescawen]

for me the lower price wins and frankly intel and nvidia just doesnt cut it

 

[Harrisson]

AMD dont sell cpu and gpu at the loss, and Intel NEED competition to float around so they dont pressure too hard, while Nvidia cant even pressure on prices due to more expensive products, therefore AMD has pretty good margins (30-40%?). If you take away payments for ATI and R&D Globalfoundries, AMD is already in profit. Add rich investors, very successful 5000 series without competition, and you can see AMD is on the right track.

 

[smoggy12345]

This could explain why ATI are being so aggressive with their marketing and demoting of the competition....If their finances are already in trouble and the possibility Nvidia are gonna be releasing a stronger GPU card and their CPU business isnt exactly goin well....

 

[uncfan_2563]

I wouldn't say they're being more aggressive than necisary but yeah i think they're taking advantage of being the only DX11 card maker and turning out a profit while they can. Not saying anything about nvidia's cards cuz *cough* fanboyism *cough* we dont know anything about their performance yet, do we smoggy? I didn't know you were an nvidia insider and you already have performance figures? Oh wait, sorry, i guess you dont.

 

[purplefire]

I suggest you watch that new Battlestar Galactica movie titled, "The Plan"

ATi has a plan, we just don't know it.

 

[jennyh]

ATI's plan is finished. It was to price Nvidia out of the market and guess what?

 

[Mousemonkey]

ATI's plan is finished. It was to price Nvidia out of the market and guess what?

It hasn't worked as Nvidia are still there. :lol:

 

[purplefire]

I'd be really interested to skip ahead 10 years and see what the market is like then, or even 5 years. If ATi become the new Nvidia, will another rival company assert itself to keep up competition with ATi? What would drive the development market? Perhaps an 'end-all' graphics card will be produced that is so powerful that it cannot be upgraded, or makes upgrades irrelevant. The Genesis Card!

Ah well, the world could end in 2012 anyway.