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AMD: Is the glass half full--or empty?

AMD CFO Bob Rivet said Thursday that the chipmaker will cut capital expenditures, hold the line on R&D costs and turn a profit in 2008. It was a part of an overall AMD theme today.

AMD CFO Bob Rivet said Thursday that the chipmaker will cut capital expenditures, hold the line on R&D costs and turn a profit in 2008. It was a part of an overall AMD theme today. The message: Focus on the future, not the quad-core missteps of 2007.

"We will be profitable 2008, but clearly we're not done," said Rivet. "We think our execution issues are largely behind us."

Rivet acknowledged that the last four quarters for AMD have been a train wreck, but he urged investors to see the glass as half full. "I feel like you're in that glass half empty mode," said Rivet. "And my challenge is to get you to think about the glass being half full."

The big question is whether Rivet's outlook is good enough to spur a little optimism. I doubt it based on the reasons I outline below.

But first here's AMD's outlook for the industry:

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Here are AMD's target:

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And the capital expense outlook:

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Is that enough? The general theme of the AMD analyst meeting was this: Things are going well BUT. And the "but" is the quad-core issue, which torpedoed AMD's year. Rivet, however, did say that AMD's fourth quarter results will "be seasonally strong" despite the Barcelona issues.

AMD CEO Hector Ruiz picked up on the glass half full vs. empty theme. AMD had channel issues and has fixed the problem. AMD has an asset light strategy--that relies on foundries such as TSMC and Chartered and outsourced manufacturing--but didn't provide many details. And AMD is targeting new markets such as HDTV and mobile handsets.

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Ruiz noted that AMD has gained from its adversity and repeated another mantra of the day: AMD's quad-core problems were design oriented not manufacturing oriented. I'm not sure why that's comforting, but executives harped on it a lot.

Rivet acknowledged that AMD's market share has gone from 26 percent to 13 percent, but the ramp is about to begin again although it sounds like real Barcelona volume will come in the back half of the first quarter. He added that AMD's "unacceptable cash flow" will improve.

Ruiz asked investors how investors could refrain being optimistic about AMD given the executive presentations they have heard. "How in the hell can anyone conclude that AMD is worth 40 percent less than it was four weeks ago?" asked Ruiz.

Perhaps, AMD shareholders have been spoiled a bit. Ruiz noted that the last four years before 2007 were marked by perfect execution. The message: One quad-core misstep shouldn't color the company's image. "At the end of the day we're dealing in a technology industry with a combination of rocket science and a little magic," said Ruiz.

So did AMD's glass-half full approach impact anyone's thinking? The Wall Street analyst questions were a bit hostile. And AMD's pitch didn't affect me at all. Here are the factors that keep me on the same largely neutral footing I had yesterday. Yes, AMD has an interesting product lineup ahead. Yes, AMD can control expenses. But I was looking for more detail on AMD's asset light strategy--there were a few items--but it was far from specific.

Meanwhile, I credit AMD management for taking on the Barcelona issue up front. However, you can't put a botched Barcelona launch in the "but" category when it was AMD's most important product in years.

Ruiz may be shocked by AMD's valuation, but I'm not. AMD is in the penalty box and until it delivers quad-core chips in volume, stabilizes its average selling prices and generates cash flow the company remains in the "show me, don't tell me" camp. Bottom line: AMD has to execute on all of its potential. And until it does the jury remains out.

More takes on AMD's spiel:  ArsTechnica and News.com.