Advanced Micro Devices reports another quarterly loss as it struggles to return to profitability in the x86 processor and graphics markets. AMD is dealing with a global economy that has seen both consumers and business buyers severely cut back on their purchases of desktops and notebooks. In addition to reporting the loss, AMD says its plan to spin off its manufacturing division into a separate company will not violate its licensing agreement with Intel.
struggling with poor internal financials and a
crashing economy in which commercial buyers and consumers are cutting back on
reported another quarterly loss Jan. 22.
After reporting its fourth-quarter results, AMD
fired back at its main rival Intel with a statement about its plans to spin off
its manufacturing division
into a separate company. In the statement, AMD
wrote that its plans to split into two separate businesses would not violate
the cross-licensing agreement it had signed with Intel
that allows AMD to use Intel's x86 instructional in exchange for royalty
Since AMD's October 2008 announcement, Intel
has questioned whether the creation of the new company would violate those
Still, AMD's war of words with Intel
could not gloss over another quarterly loss for the chip maker. For the 2008
financial fourth quarter, which ended Dec. 28, AMD
reported a net loss of $1.42 billion or $2.34 a share. AMD
recorded revenue during the quarter of $1.162 billion. In the fourth quarter of
2007, AMD reported a loss of $1.77 billion
or $3.06 a share.
Wall Street analysts were calling for AMD
to post a loss of 54 cents a share with revenues of $1.23 billion. On Jan. 16,
a week before the company announced its financial results, AMD
said it would eliminate 1,100 jobs to cut expenses
and post a $622 million
impairment charge related to the 2006 acquisition of graphics maker ATI.
Intel, AMD is struggling in an economy that has seen commercial users cut back
on their purchases of hardware
such as desktops, notebooks and server
systems. At the same time, consumers, who helped fuel the PC market in the past
few years, have slowed down their spending. As with Intel, AMD is dealing with
an oversupply of processors in its supply channel that PC and hardware vendors
do not need, meaning there is less demand for AMD's x86 processors, ATI graphics
and chip sets.
"We saw the beginning of a severe inventory correction across the IT
supply chain, particularly acute in notebooks, and one that is continuing into
this quarter," AMD CEO
Dirk Meyer said. "The impact on the economy is going to continue to dampen
user demand-the degree to which is uncertain. This combination makes the future
AMD did not give any guidance about the
first quarter of 2009, but noted that it does expect its revenues to decrease
from the fourth quarter of 2008.
During the a conference call with Wall Street analysts Jan. 22, Meyer also
faced questions about Intel's concerns about The Foundry Company-the temporary
name of the business that will be formed from AMD's
manufacturing facilities. The deal is expected to close Feb. 10.
On Jan. 20, Intel sent a letter to AMD
questioning whether The Foundry Company qualifies as a "subsidiary"
under the cross-licensing agreement. On Jan. 22, AMD
released a statement saying that the spinoff does not violate any previous agreements
between Intel and AMD.
"The creation of The Foundry Company is not a breach of the provisions
of either of the Cross-Licenses and ... neither the transaction establishing The
Foundry Company nor the Company's acquisition of ATI
constituted a change of control of the Company under the Cross-Licenses," AMD's
Meyer also defended AMD's
position, saying, "we constructed that transaction consistent with the
terms and conditions of all of our IP [intellectual property] license
agreements. That was true then and it's true now."