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AMD Still Believes in Santa Claus

AMD Still Believes in Santa Claus

So AMD dragged in Wednesday with Q3 losses of $254 million, 74 cents a share, on revenues of $508 million, down 34% year-over-year and 15% sequentially. Excluding restructuring and other charges, it lost $97 million, 28 cents a share, on operations.

It said kinda what Intel said 24 hours before: Flash was up for a change, PC demand stinks.

It said it's had a "significant reduction in supply chain inventory," but claims that the actual consumption of AMD chips was higher in Q3 than in Q2. It admits it's lost ground to Intel on the desktop - maybe 3% share, it depends on how you look at it - but that it held its unit position in mobile and even made progress in server share, with units reportedly up 17%. Of course, AMD's hold on servers is pretty tenuous.

The company talked about cutting product and operating costs like 12%, $100 million a quarter, without really articulating that it'll have to cut jobs to do it. Evidently it's saving that news for its analysts meeting November 7. They're expected to be pretty massive. AMD's got 13,000 people right now.

Anyway, PC processor sales came to $262 million in the quarter, off 31% year-over-year due to a falloff in both units and ASPs. AMD claims that if it hadn't adjusted the inventory levels in the channel - upgrading, exchanging old for new and simply not shipping - it would have done another $100 million worth of business in the quarter. It thinks it's got the right mix now and the strongest backlog in a while.

By the way, all its Athlon XP chips are 0.13 now, ahead of plan.

Sounding more optimistic than Intel despite some queasy noises about the short-term, AMD's trusting in Santa Claus and talking about a Q4 seasonal improvement in demand. It's thinking PC shipments could be up 10%-14%, which would have a CPU pull-through of 8%-12%. It's sitting on $421 million in Flash and MPU inventory to fill Q4 demand, claiming it's "comfortable" with that amount.

Given improved sales, AMD expects to reduce its Q4 loss compared to Q3 and, given some serious cost reductions in operating expenses and capex, it thinks it can be at breakeven by Q2. It will need $775 million in revenues to break even. Right now breakeven is $875 million.

It even claims it can increase its market share, testing analyst credulity that it can execute on all the points in its three-part game plan. Evidently since it's reorganized its China operation in the last few weeks, it feels it can "recapture Asia big."

AMD CEO Hector Ruiz claimed the company, whose performance has raised concerns about its viability, is completely capitalized through next year. It's hocked Fab 25, got $108 million in new financing, a $200 million line of credit and $900 million in the bank.

Losses for AMD's first nine months now stand at $448 million, $1.31 a share, on $2 billion in revenues. Compared to last year, which wasn't any great shakes either, it's like almost $1 billion shy on revenues.

AMD declined to talk about its relationship with Fujitsu. The two have a joint venture in Flash and there's been talk of another they might take public.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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