AMD Hopes New Products Help Propel `08 Comeback

For AMD, the future of the company is all about products, products, products.

After reporting its sixth quarterly loss in a row earlier this week, Advanced Micro Devices CEO Hector Ruiz and President Dirk Meyer told financial analysts that the company plans to roll out a series of new products for notebooks, desktops and servers that it will close the gap with its much larger rival Intel.

A good mix of products can help the Sunnyvale, Calif., company, but it's also planning to trim its work force, reduce spending and possibly jettison unprofitable divisions in order to return to financial stability. During the call, Ruiz reiterated his call for AMD to return to profitability by the end of 2008.

For the rest of the year, AMD plans to focus on its core business of x86 microprocessors for servers and PCs as well as its graphics business, which it has been building since it purchased graphics chip maker ATI in 2006.

AMD is beginning to ramp up what it calls the B3 version of its quad-core Opteron processor for servers, which fixes a design flaw in the silicon that delayed its release in 2007. Although the corrected version of the chip appeared too late to help the company’s first quarter sales, Dell and Hewlett-Packard have announced several systems that use the new Opteron, and Sun Microsystems, IBM and Fujitsu-Siemens are expected to follow.

“We believe that the lack of availability of quad-core Opteron servers from brand-name servers, in particularly, dealt the chipmaker a blow in the first [quarter],” John Spooner, an analyst with Technology Business Research, wrote in an April 17 research note. “However, due to seasonality and slowing consumer demand in the U.S., AMD was unable to offset slowing server shipments with higher sales of notebook chips as was the case in the fourth quarter of 2007.”

The full release of the new Opteron should help the company within the multiprocessor server space as well as within HPC (high-performance computing) thanks to the chip’s floating point capabilities.

From there, Meyer said the company is working toward manufacturing its first 45-nanometer processors – Shanghai – which should give AMD a performance boost within it chips, and it also give the company a chance to produce smaller chips that use less power. AMD plans to begin ramping up its 45-nanometer production in the summer with the first products appearing in the fourth quarter.

Banking on Consumers and the Puma Notebook Chip

The other significant products push from AMD is the notebook market. During its call, AMD executives said that their company, more than Intel, is subject to the whims of consumer spending and in the slowing U.S. economy. The company wants to have a strong notebook offering to help it capture both consumer dollars as well as the SMB (small and midsized business) market.

In the second quarter, AMD will launch its “Puma” platform for notebooks, which includes a dual-core processor called Turion Ultra and new Radeon graphics and chip set. Meyer said this week that AMD already has a number of design wins from OEMs and it's hoping to capitalize on the still-healthy notebook market for later this year.

“Cleary, the exposure we have to notebook share in the consumer market makes us swing a little bit more in terms of seasonality compared to the overall notebook market, and due to that, we have serious opportunity to gain headwind in the back half of the year,” Meyer told analysts.

“In addition, the fact is that the Puma platform has enjoyed some design wins in terms of SMBs giving us an opportunity to grow our share in the back half of the year,” Meyer added.

For desktops, AMD began offering both its quad-core and tri-core Phenom processors late in the first quarter, but the shipments did not seem to help its sales. The company hopes to continue to ramp up these processors in the second quarter and also enter the commercial client space with a new platform called “Perseus,” which AMD believes can make inroads in a market traditional controlled by Intel.