AMD posts stellar growth
Published: 13 Apr 2006 09:10 BST
AMD saw revenue surge 70 percent year-on-year during the first quarter as it continued to take market share from Intel, the chipmaker announced on Wednesday.
Revenue for the first quarter, that ended on 26 March, was $1.33bn (£759m), up from $780m in the same quarter last year and in line with the expectations of analysts polled by Thomson First Call. (The $780m recorded last year did not include $447m from Spansion, AMD's former flash memory venture that was spun off from the company in December.)
Net income was $185m, or 38 cents per share. Last year, AMD lost $17m in the first quarter, based on a poor performance by Spansion. This year, without Spansion, AMD topped analysts' expectations of 30 cents per share.
AMD's performance was led by strong sales of its Athlon 64 and Opteron processors. In early March, Intel warned that its first-quarter revenue would be lower than expected based on a slow market and some loss of market share to AMD.
AMD thinks it took share in desktop, notebook and server processors, Bob Rivet, chief financial officer, said on a conference call following AMD's results. Mercury Research doesn't usually post the final quarterly numbers until about a month after AMD and Intel report earnings. Intel is scheduled to report next week.
"We continue to show the capacity to show share gains in our industry's most important markets," said Hector Ruiz, chairman and chief executive of AMD.
In addition to gains in market share, AMD increased the average selling prices of its products, said Henri Richard, executive vice-president of sales and chief marketing officer. Average selling prices for all AMD processors increased about 7 percent led by gains in desktop and mobile. The company cut prices on Opteron processors during the quarter in order to put pressure on Intel, he said.
For the second quarter, which is traditionally the slowest operating period for PC and processor companies, AMD expects revenue to be flat or slightly down, in line with its normal seasonal expectations, it said.
The financial analysts questioning the AMD executives were particularly interested in the second quarter, during which many analysts believe Intel will significantly cut prices on its processors to clear inventory before it introduces new products in the desktop, mobile, and server categories during the second half of the year.
AMD has already seen some pricing activity on Intel's part at the low end of the market, Richard said. "I'm seeing drastic price cuts on products people don't want to buy," he said. But the company declined to talk about whether it believes Intel will make wider cuts during the quarter. Intel, citing the quiet period in place up until next week's earnings call, declined to comment on its pricing strategy.
In June, AMD will hold a financial analyst meeting during which it will disclose future road map plans beyond the end of 2006, said Dirk Meyer, president and chief operating officer. AMD only plans to introduce one major technology upgrade during the year, its AM2 socket, which is not expected to provide a huge performance boost according to early reviews.
Meyer acknowledged that the AM2 socket's introduction of DDR2 memory support doesn't provide a huge advantage by itself, but said that AMD will introduce more powerful processors to go with the socket over the upcoming months. The company will also draw on its manufacturing agreement with foundry Chartered Semiconductor in the second half of the year, Meyer said, but declined to say what percentage of AMD's chips will be made by the foundry.
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