AMD Posts Q1 Loss of $416 Million on Weak Chip Sales
With the continuing recession negating its efforts to return to profitability, Advanced Micro Devices reported that it sustained a net loss of $416 million for its 2009 first quarter on revenue of $1.177 billion.
But AMD CEO Dirk Meyer tried to sound upbeat as he discussed the quarterly results during an April 21 conference call reporting the company's earnings for the first quarter of 2009. "We continued to beat or exceed our road maps for the quarter," said Meyer.
AMD, consolidating the operating results of Global Foundries in its results as of March 2, 2009, reported first-quarter 2009 revenue of $1.177 billion. First-quarter revenue was flat, compared with the fourth quarter of 2008, and decreased 21 percent when compared with the first quarter of 2008.
However, Robert Rivet, AMD's chief financial officer, said the company has made progress in reducing costs and improving operating efficiency. "We are executing well in every major aspect of our strategy," Rivet said. "We enter 2009 a very different company than the one you were following as recently as a year ago-a much nimbler company."
For the quarter, AMD reported a net loss of $416 million, or $0.66 per share, which includes a net unfavorable impact of $22 million, or $0.04 per share. The company's operating loss was $308 million.
AMD's first-quarter 2009 gross margin was 43 percent, including a positive impact of 5 percentage points due to a $64 million benefit from the sale of inventory written down in the fourth quarter of 2008. Gross margins for the fourth quarter of 2008 were 28 percent. The first-quarter 2009 gross margin for AMD, excluding Global Foundry, was 34 percent.
"We delivered on a number of important priorities in the first quarter," Meyer said. "We launched Global Foundries, maintained our cadence of new product and platform introductions, and made solid progress on our restructuring activities."
AMD's official launch of Global Foundries on March 4 created a rift, and eventually a lawsuit, between AMD and Intel. Intel claims that, in creating Global Foundries, AMD has breached the terms of their 2001 cross-licensing agreement.
AMD denies the allegation, and on March 16 filed documents with the U.S. Securities and Exchange Commission, stating that in accusing AMD of breach, Intel itself committed a breach. AMD officials did not discuss the status of the lawsuit during the April 21 earnings call.
Intel's first-quarter 2009 earnings, which were announced April 15, were anticipated as a bellwether for the industry. According to analysts, Intel's profits of $670 million on its reported revenue of $7.15 billion offered a glimmer of hope for better times ahead.
In fact, analysts found reasons to offer AMD congratulations during the earnings call despite reporting yet another quarterly loss. The company showed growth in notebook and desktop sales, but the growth was not strong enough to offset losses in other areas, according to Meyer.
"Server was the weak spot," said Meyer. "Strongest growth was in notebooks, and then desktops were reasonable, but still grew. And that added to a positive for quarter to quarter." First-quarter 2009 revenue for computing solutions totaled $938 million. Graphics system revenue totaled $222 million.
When asked about cash flow projections, Rivet responded, "I'm positive we'll be cash positive in the second half of the year." Whether that would cover cash flow problems in the beginning of the year he wasn't sure, he said.
Regarding the second quarter, the tone was more conservative. "The second quarter is seasonally a down quarter," said Rivet. "We believe there's still some supply chain things to work through. We're just being cautious at this point, and saying potentially we'll be down."
When asked when one might watch the calendar for an update on AMD's legal dispute with Intel, both men offered no comment.