How gloomy is the outlook for AMD?

Summary:Yesterday AMD announced after business hours that it had cut sales forecasts for Q2 and that it expected income from CPU sales to fall 9% from Q1 results. Pretty gloomy news. But just how gloomy is it?

Yesterday AMD announced after business hours that it had cut sales forecasts for Q2 and that it expected income from CPU sales to fall 9% from Q1 results.   Pretty gloomy news.  But just how gloomy is it?

AMD have declined to If investors are going to be upset by AMD's Q2 results, then they had better brace themselves for Q3 & Q4comment further on this announcement we'll have to wait for any further news until July 20 when the financial results will be announced.  However, the reason for this profits warning was made clear yesterday - while Opteron server CPU sales are expected to hit record highs, AMD has suffered at the lower end of the spectrum, with sales of entry-level and mainstream mobile and desktop processors down dramatically as a result of a price war with Intel.

A few weeks ago I predicted that AMD would see some tough times ahead, not just from the price war with Intel but because of how strongly the Intel Conroe CPUs seemed to be performing.  However, I didn't think that the effect would be felt this early.  I was expecting the price war to go on for longer before we started to see the effects on the bottom line.

But what does all this mean?

First, let's put the 9% number into perspective.  Analysts were expecting $1.3 billion in revenue but it seems that they'll only be getting $1.21 billion.  But this $1.21 billion is still a whopping 52% increase compared to Q2 '05, so it's not all that shabby really.

But this doesn't mean that AMD won't have plenty to worry about.  If investors are going to be upset by AMD's Q2 results, then they had better brace themselves for Q3 & Q4 (and possibly Q1 and Q2 of '07) because I don't see things getting any better for AMD.   Intel has caught AMD in a crossfire of Conroe and Kensfield and all AMD has to offer as a counterattack are price cuts and 4x4.  Until AMD start to get CPUs based on 65nm technology out of the fab plants and into PCs, Intel has the upper hand both in terms of price and performance.  Intel has both the cash reserve and the sales to continue to hammer at AMD's market share.  And what could be a lot worse for AMD in the long run is the loss of market share in the consumer desktop and laptop market that this could represent.

Topics: Processors

About

Adrian Kingsley-Hughes is an internationally published technology author who has devoted over a decade to helping users get the most from technology -- whether that be by learning to program, building a PC from a pile of parts, or helping them get the most from their new MP3 player or digital camera.Adrian has authored/co-authored technic... Full Bio

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