How gloomy is the outlook for AMD?

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?

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TOPICS: Processors
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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.

Topic: Processors

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26 comments
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  • Gloomy?

    That's just silly.
    D T Schmitz
    • Others have used stronger words to describe it!

      I was being restrained ...
      Adrian Kingsley-Hughes
  • Then again ...

    Intel has supply problems with the chipset support for their new CPUs (and they killed off all of their partners.)

    Intel's new chips have been disqualified by the US Federal government for purchase based on reliability issues in testing.

    Dell has inked a deal to buy AMD processors for use across the board.

    Intel server chips have major memory bottleneck problems, high system power consumption, and issues with price, heat, and performance scaling based on their need for FBDIMM memory.

    Give Intel's PR props, they're doing a good job of making things look one-sided. AMD is letting their chips do the talking.
    Yagotta B. Kidding
    • Intel Conroe CPUs seemed to be performing?

      well said sir!
      loydc19
  • Free good advice, sell any AMD stock you may own.

    Look, the Intel bashers will try to tell you different but Intel has AMD dead in their sights and they are not going to back off at all.

    Performance and price are going to give AMD far more than they can compete against.

    Now rant way, but do sell the stock...
    No_Ax_to_Grind
    • AMD just bought ATI

      Doesn't sound like they are worried to me.

      johns
      johns_z
      • Yup, obviously they need to get out of CPUs.

        ;-)
        No_Ax_to_Grind
      • Purchase hasn't happened yet!(nt)

        .
        ShadeTree
    • Money where your mouth is

      Hey, if it's such a sure thing you should short AMD right to your credit limit.

      Let us know how it goes.
      Yagotta B. Kidding
      • Been considering...

        I'll let you know if I think it the stock will tank bad enough to make it worth my time after Q3.
        No_Ax_to_Grind
    • Yeah, he's right! Sell it quick!

      Never mind the fact that AMD is STILL worth more than Intel, and don't pay any attention to the fact that amd will prevail AGAIN when they reenergize their shares using any new plans they develop with ati and vodafone; just SELL IT NOW while it's still worth something!

      (and besides the cheaper I can buy them before they start climbing again the better)
      yogeee
  • Intel misfire?

    While Conroe [i]should[/i] be part of an Intel crossfire on AMD, I noted this post yesterday:
    http://www.theinquirer.net/default.aspx?article=32842
    According to The Inquirer (a site I take with a grain of salt) the US Government (it doesn't say what part) has disqualified Conroe for server purchases. This is potentially a [b]huge[/b] market, both for Intel to lose and for AMD to gain.

    I haven't been able to find coroborrating stories through Google, however. Perhaps you might want to look into it?
    FamilyManFirst
  • What about the MP space ??

    Think Tulsa is going to make a dent in the 4-way and beyond space?? Sure, clients are volume, but servers are MARGIN.

    VMWAre, XEN etc. are looking for big n-way servers, and AMD is a winner here for some time to come.
    JackPastor
    • Thundering silence

      I've brought this up time and again on zdnet's boards and been met with thundering silence. The performance gap between AMD 4way and up and everything else is unbelievable. Currently nothing really comes close to it in the low end server market, and AMD is even competing well against the Power driven IBM P series machines now. Intel's not even in the running yet, due to the much slower interconnect and memory access speeds they have.

      It'd be nice to read something here that addressed that difference. Cause, as a DBA, I can tell you that intel is not in the running right now for servers running databases.
      Sxooter_z
  • AMD stock down 42% since IDF announcements of Core2

    If you look at AMD's stock performance since the IDF announcements in March, it's taken a massive beating. That beating will continue.
    georgeou
    • How many

      systems does the US Federal government buy in a year?

      How many CPUs will Dell alone be buying now that they're solidly in alternate-source territory?

      How many AMD processors will other vendors buy thanks to Intel's supply problems?

      Of course, that discounts the fact that AMD still owns the 4-way and up server space and will for the next several years.
      Yagotta B. Kidding
      • Not enough

        systems does the US Federal government buy in a year?
        *** NOT ENOUGH ***

        How many CPUs will Dell alone be buying now that they're solidly in alternate-source territory?
        *** NOT NEARLY ENOUGH***

        How many AMD processors will other vendors buy thanks to Intel's supply problems?
        *** Check with your boss, puk'n Hector, but Intel has no supply problems anymore. Might want to update your collateral.***

        Of course, that discounts the fact that AMD still owns the 4-way and up server space and will for the next several years.
        *** Agree there - mostly. AMD does own all 10,000 servers in this category. I hope they can sell them at $5,000 each because they'll need it.
        Prognosticator
      • You mean 4 sockets and up, 4 socks might be a wash though

        With the Quad FSB coming from Intel soon for their four socket chipset, the four socket battle might be a wash from the chipset standpoint which would still give Intel the advantage due to the CPU itself. 4 sockets is 8-way and soon to be 16-way. So Intel looks like it might dominate the 2-8 or 2-16 way market.
        georgeou
        • Please benchmark those systems!

          Please get ahold of a 4 way intel and amd based system and benchmark them for us. Now that would be some meat on the bone.

          Has Intel greatly changed their design of their interconnects in their 4way+SMP? I hadn't heard anything about that.
          Sxooter_z
        • AMD is not dead

          intel has a lot of money for now but look what happens when it runs out.
          loydc19