Friday, April 18, 2008
AMD on Thursday reported a loss of $358 million for its fiscal first quarter, as soft consumer spending led to lower-than-expected sales across its business.
Nevertheless, AMD executives in a conference call with financial analysts said they still expect to break even by the end of the year through market share gains from new products, such as quad-core server and desktop processors, and aggressive cost cutting across the company. "We're turning over every rock to find every penny," said Robert Rivet, executive VP and CFO.
AMD reported that first-quarter revenue decreased 15% to $1.5 billion from $1.77 billion in the fourth quarter of 2007. Compared with the first quarter of 2007, revenue was up 22%. The net loss of $358 million, or 59 cents a share, was the sixth consecutive quarterly loss for the company. In the fourth quarter of last year, AMD reported a loss of $1.77 billion, mostly because of acquisition costs related to the 2006 purchase of graphics chipmaker ATI Technologies. In the first quarter of 2007, the company reported a net loss of $611 million.
Company executives blamed the size of the latest losses on softer-than-expected demand for its products because of a slowdown in consumer spending. Besides its server business, AMD's processors, both general purpose and graphics, are used mostly in consumer PCs. "We experienced lower-than-expected revenues across each of our business segments," Rivet said.
The drop in PC sales is typical in the first quarter, which follows the holiday shopping season of the fourth quarter, which is the busiest time of the year for retailers. AMD's sales, however, fell more than the quarter-to-quarter drop of the PC market in general, which AMD executives acknowledged was about 9%.
To meet its breakeven goal, AMD already has been cutting expenses. The company this month said it would reduce its worldwide workforce of 16,000 by 10%, or 1,600 employees. At the same time, AMD had warned that sales would be a lower-than-expected $1.5 billion.
Going forward, the company plans to cut expenses further and to grab market share with new products in order to raise its gross margin, a key indicator of profitability, "north of 45%," for the rest of the year, which is what Rivet said was needed to break even. The gross margin in the first quarter was 42%, compared with 44% in the fourth quarter of last year.
By: DocMemory
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