AMD: Is the worst over?

  • AMD fumbled the Barcelona launch, lost $1.77 billion in its fourth quarter and has a bandwagon of doubters. But there are a bevy of reasons to be cautiously optimistic following AMD’s latest checkup. First let’s get the bad stuff out of the way. AMD lost money by the truckload on a net basis in the December quarter. If you strip all of that away, AMD lost $9 million and was close to break even. And depending on what charges you choose to exclude or include AMD may have topped Wall Street estimates–there was some debate on that among analysts Friday over a tax benefit. The acquisition of graphics chip maker ATI–the reason for the massive quarterly net loss–hasn’t turned out as AMD had planned. AMD has been yapping about this AssetSmart strategy to be more nimble on the manufacturing side, but management refuses to cough up any meaningful details. Meanwhile, AMD management, which is optimistic, is in the Wall Street penalty box for overpromising and underdelivering. Given those moving parts it would be understandable if you wrote AMD off and predicted a future of being Intel’s doormat. However, there is another side of the argument that merits further review. Here are a few reasons to be cautiously optimistic about AMD: AMD will more than double its Barcelona shipments this quarter. On AMD’s earnings conference call, CFO Robert Rivet said the company shipped “close to 400,000″ quad core units. “We continue to execute our volume ramp and in the first quarter we will more than double our shipments over the fourth quarter,” said Rivet. Executives were adamant that the errata problems with Barcelona were fixed. Now 800,000 to 1 million units isn’t a massive jump it’s a good start toward mass production. CEO Hector Ruiz said: We were determined to fix our Barcelona quad-core issues as soon as we could. I’m very pleased to report that silicone has been out of the factor with the fixes that we’ve put in place and we’re rea
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