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AMD: ''No Doubt, We Lost Market Share in Q2''

In a time when its mighty rival Intel appears to be navigating the storms of a macroeconomic financial challenge in Europe and China with solid execution and adjustment of its business, AMD seems to be tripping over its decisions and shooting itself in the foot. Fortunately, it appears that the company got away with only a black eye in Q2.

The company reported revenue of $1.41 billion for the second quarter, down 10 percent year over year, and down 11 percent sequentially. Net profit came in at a razor thin $37 million. The recently appointed CEO Rory Read had to, for the first time as the man in charge, calm analysts and investors about a rather sobering Q2 result that stands in stark contrast to the result announced by Intel earlier this week. Read chose to be straightforward with analysts and mentioned several times how "disappointed" he was with AMD's performance, highlighting that AMD could have done better.

The overall explanation for the reduced revenue were lower CPU shipments and slightly lower average selling prices, caused by a pronounced softness in the desktop consumer market late in Q2, AMD said. AMD was hit with, as Read called it, a "pause" in the adoption of its Bulldozer Opteron processors and the supply of Llano processors into the channel. The bright spots included Brazos 2.0, which is targeting the $500 and below notebook segment, as well as the GPU business, which contributed nearly half of the operating profit in the quarter and was in line with a seasonal decline of the business

Read wasn't exactly clear what happened and danced around the events, but noted that the supply constraints of Llano late last year caused the company to prefer OEM shipments over channel shipments. Once the chip became available, he noted that they had been sitting with OEMs for awhile, impacting uptake. AMD poured Llano processors into the channel, but misaligned the availability of boards with processors, which caused a substantial oversupply. Read described this as a problem of "linearity" and as a "supply mismatch", which is in AMD's control to fix. He said that the company has taken steps to accelerate channel sell-through and hinted that this problem was avoidable.

The executive also referred briefly to a price erosion in the client PC processor market and said that AMD chose "not to chase" lower price points. As a result, he told analysts that he had "no doubt" that AMD has lost market share in Q2.

It was unclear if that has happened in the server segment as well, but the description of "pause" was rather dramatic. While Read said that the adoption of Bulldozer especially in the HPC market was great, the current situation is less encouraging and it appears that Intel's Sandy Bridge Xeons may have hit AMD unexpectedly hard.

Like Intel, AMD also believes that the market will remain soft in Q3. Read said that, for the first time since the dramatic downturn of 2001, the PC industry faced a PC client shipment decline over three consecutive quarters, which could create a problem for AMD if this trend holds up. While AMD has a strong balance sheet today, it will have to cover debt obligations later this year, which CFO Thomas Seifert noted that he feels comfortable to cover from the cash reserves, which currently stand at $1.58 billion, up from $1.54 billion in Q1, but down from $1.77 billion in Q2 2011. Seifert noted that AMD will have to balance debt and investments payments as well as maintain cash reserves in a weakening economy.

So, is the new AMD becoming the old AMD again, at least from a financial perspective? It is too early to tell, but it is clear that Read has to put out fires rather sooner than later.

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  • math1337
    Another issue is that AMD processors are insanely slow, especially in poorly threaded tasks. The octo-core may be able to keep up with an intel quad core when running all cores, but it does not deliver great all-around performance.
    Reply
  • fpoon
    AMD should stop focusing on value and put more processing power behind their CPUs.
    Reply
  • xtc28
    Word^ my 965 be still kicks most of the new AMD's asses. And that my friends is bad news.
    Reply
  • AMD: ''No Doubt, We Lost Market Share in Q2
    but you are still a very important competitor to intel to push technology further more.
    Reply
  • Smeg45
    Rubbish. They are slow, but not "insanely" slow. They still do the job.
    Reply
  • aftcomet
    No surprise there. If they didn't have ATI the blow would be even larger. They need to make some serious changes or they're destined for failure. APUs are probably the future so they might be ready for that but their entire market is pretty slim. What are they a leader in? Mobile? No. Desktop? No. GPUs? No. APUs? Maybe.

    They should focus on ultimate value and price cut as much as possible. They need to get their products moving and fast. I don't see how anyone considers AMD "value" when a 4100 costs $140 and is absolutely outclassed by a $120 i3.
    Reply
  • tomfreak
    because u have lost price/performance on ur CPU. Bulldozer are barely manage to keep up with slowest i5 quad core, yet they are selling close to i7 price. FAIL.
    Reply
  • s3anister
    It's a dark road ahead for AMD.

    They keep pushing the old Llano and bulldozer parts into the retail space where almost nobody wants them. Release Trinity and Piledriver, already! Market share is not going to be gained, otherwise.
    Reply
  • alidan
    aftcometNo surprise there. If they didn't have ATI the blow would be even larger. They need to make some serious changes or they're destined for failure. APUs are probably the future so they might be ready for that but their entire market is pretty slim. What are they a leader in? Mobile? No. Desktop? No. GPUs? No. APUs? Maybe.They should focus on ultimate value and price cut as much as possible. They need to get their products moving and fast. I don't see how anyone considers AMD "value" when a 4100 costs $140 and is absolutely outclassed by a $120 i3.
    because amds new value cpus are apus, and beat out intel at the same value...

    math1337Another issue is that AMD processors are insanely slow, especially in poorly threaded tasks. The octo-core may be able to keep up with an intel quad core when running all cores, but it does not deliver great all-around performance.
    considering that all cpu tasks have been fast enough sense the eairly dual core chips, much less the current quad with threads we see, i say does it matter if amd is slower?

    all the tasks that intel beats amd where you would see a performance difference great enough to warrant an intel over amd, are going to the gpu, and the gpu, even a bad one, out preforms the cpu by so much that you would never want o use it for said tasks again.

    if anything, intel is in trouble. as they cant pull together a decent gpu after YEARS of trying, and now that we are moving to gpu co processors, intel has that much more ground to cover.

    with that said, if amd came out with a chip 4 times better than the current top end intel, do you really think that they would gain market share? intel would eat the few billions in fines to try and stomp out amd till they get a processor on par.
    Reply
  • vmem
    I'm a bit disappointed and surprised that Llano didn't help AMD more. We all know that Trinity's coming and seems to have greatly improved on bulldozer, but Llano really are some neat chips for low budget media PCs/laptops, and for HTPCs. I can see my parents being perfectly happy with a Llano laptop for light productivity and working on the train/plane etc. I mean, the general public doesn't need the i7 extreme, hell, most people don't even need an i5 2500k because they hardly game. I say AMD's marketing department needs to step up, and get it into people's heads that an APU's all they need for their general family computer to surf the web, blu-ray playback, store their photos from their vacations etc.
    Reply