The stage is set for AMD's fourth quarter results Thursday and trap doors are everywhere.
AMD most likely had a dreadful quarter amid product delays and price competition--not to mention Intel's scale.
Intel reported its results on Tuesday and shares were thumped. The company missed estimates and delivered a weaker than expected revenue outlook, but management was fairly upbeat on its conference call. Why? Intel doesn't have much competition because AMD doesn't have its act together.
Intel CFO Stacy Smith said:
The CPU business is [roughly] seasonal when you look at the unit volume that we expect in the first quarter. We saw demand grow through the fourth quarter. We didn't see anything unusual in terms of cancellations and we didn't see anything unusual in terms of inventory building up. Our inventory is lower than I'd like. The channel inventory that we have visibility into is at the low end, so it all felt pretty healthy through the fourth quarter.
Intel CEO Paul Otellini about the U.S. economy:
I have the same caution that I think that everybody in America who watches CNBC has today. You hear all of the pundits saying that the world is going to go to a trash basket and you worry. It may be a self-fulfilling prophecy. At this point though, we don't see anything on the horizon. Our customers don't see anything on the horizon. I was at CES last week talking to people from all around the world and we just don't see it.
Does that sound like the sky is falling? I didn't think so. Nevertheless, Intel cut its first quarter revenue outlook and got booed by analysts. So why is Intel confident? AMD will spend most of 2008 getting its house in order. That fact means Intel has little competition. The unknown is how much time AMD has to spend fixing its business. We'll find that out when AMD reports its fourth quarter.
Expectations for AMD's results are low. According to Thomson Financial, AMD is expected to report a fourth quarter loss of 36 cents a share. It's not expected to be profitable for the next four quarters. Sales for the fourth quarter are expected to be about $1.78 billion.
Deutsche Bank analyst Ross Seymore advocates that AMD shrink its ambitions and focus on more profitable businesses--a common refrain. His biggest focus areas for AMD are PC growth, market share losses to Intel and Nvidia, the health of the ATI business and average selling prices.
Other analysts have the same outlook for AMD and are clearly off the bandwagon. Can AMD say anything that will make analysts more optimistic? Given the reaction to Intel's results the answer would appear to be no.