AMD Turns Profit, Grows Revenue Despite Manufacturing Issues

AMD made $97 million in the third quarter due in large part to strong mobile chip sales and increased prices of Opteron processors.

Advanced Micro Devices, plagued earlier this quarter by manufacturing problems that limited the supply of some PC processors and forced the company to cut its financial forecast, turned a profit in the third quarter thanks in large part to strong sales of notebook chips.

AMD executives Oct. 27 reported third-quarter revenues of $1.69 billion, a 4 percent jump over the same period in 2010, and turned a profit of $97 million. During the third quarter last year, AMD lost $118 million. AMD saw significant growth not only in its mobile chip business, but also with its Opteron server processors, due to higher average selling prices.

During a conference call with analysts and journalists, AMD CEO Rory Read talked about the gains the company has made with its Fusion strategy, offering processors-what AMD calls accelerated processing units, or APUs-that integrate the CPU and high-level graphics chips on the same piece of silicon. The vendor first introduced the Fusion APUs at the 2011 Consumer Electronics Show in January, and has expanded the initiative since, introducing such processors for everything from low-power PCs to mainstream desktop to embedded systems.

According to Read and CFO Thomas Seifert, AMD is seeing particular traction with APUs for notebooks, with revenues jumping 20 percent over the same period last year, with shipments increasing 60 percent over the second quarter. The Fusion chips now account for more than 90 percent of all the mobile processors AMD ships, said Read, who was appointed CEO in August.

In particular, Read noted the success of the "Brazos" APUs for lightweight notebooks and netbooks, and "Llano" chips for mainstream systems. AMD officials expect the momentum to continue into 2012, when the company will release "Trinity," the next-generation Fusion chips for mainstream PCs that they say will offer a 20 percent to 30 percent increase in performance.

However, while pleased with the financial figures from the third quarter, Read said the biggest challenge facing AMD is improving the company's execution of its strategies. In September, AMD officials lowered their financial forecast for the quarter due to problems at the Germany plant of manufacturing partner Globalfoundries.

Globalfoundries was created in 2009 when AMD spun off its manufacturing business. According to AMD, the issues at the manufacturing facilities limited the supplies of the vendor's 32-nanometer Llano chips, and also forced AMD to slightly delay the shipments of its Opteron 6200 "Interlagos" server processors.

The delays had a ripple effect to PC and server OEMs, who had to delay some products until the chips were available. Read said that while the problems did not "irreversibly damage our trust [with OEM partners] ... we've eroded it." Ensuring that such problems don't recur is a top job at AMD going forward, he said.

"Improving our execution and improving our supply position has to be our priorities," Read said, adding that that work is already under way. The situation is improving, "but we're not out of the woods yet."

Read, as president of PC and server vendor Lenovo before taking the top job at AMD, said he understands how important it is to systems makers to have reliable supply partners, particularly chip vendors.

The manufacturing issues hit AMD as it finds itself in a difficult competitive landscape, pinched between larger rival Intel in the high end of the processor market and chip makers using designs from ARM Holdings in the low-power space. Read said AMD will continue to focus on its low-power push as a key tenet of its overall strategy.