AMD on road to recovery, says research firm

Technology Business Research says Opteron and Puma are boosting AMD's chip business, but the company could be hurt by the economic downturn

While AMD's processor business is showing strength, the company is still in a worse position than Intel to face a dip in demand for the rest of the year, research firm Technology Business Research has cautioned.

In a statement on Friday, John Spooner, senior analyst at Technology Business Research (TBR), said AMD enjoyed stronger-than-expected processor unit shipments in the first half of 2008, as a result of a healthy global PC market — driven by strong sales in emerging markets — and the US server space.

"These trends allowed chipmakers Intel and AMD to grow their respective processor unit shipments at rates higher than would normally be expected," said Spooner.

However, should demand fall in the second half of 2008, AMD "is in far worse a position to weather" the downward spiral compared to stronger rival Intel, and will need around $1.6bn (£801m) in revenue to break even, the analyst said.

While Intel gained in shipment volumes in the second quarter of this year, AMD's shipments declined by two percent, though this was lower than a greater loss forecasted earlier by TBR.

One of the reasons for AMD's resurgence is the positive response to its new product line, including the quad-core Opteron, in spite of a "lengthy delay" to the server chip's rollout.

The delay put AMD a full generation behind Intel in terms of the manufacturing process, said Spooner.

Manufacturers are also embracing AMD's Puma notebook processor platform, with more than 100 notebook models expected to be offered in the coming weeks, added TBR.

"We believe these new products will allow the company to boost its revenue and profitability in the third quarter of 2008," added Spooner. "However, we do not expect AMD to report an operating profit until the fourth quarter of 2008."

TBR also said it expected AMD's recent announcement that chief operating officer Dirk Meyer would take the reins from chief executive Hector Ruiz following the company's history of losses, including that suffered during its $5.4bn acquisition of graphic card-maker ATI Technologies.

Spooner said: "We believe that Meyer has been preparing for the transition for many months."

"We believe that AMD's recent hiring of several new executives, including Nigel Dessau, its new chief marketing officer, is evidence of these preparations," Spooner added.

TBR said it expects Meyer to focus on expanding the company's share of the enterprise client segment and growing its share of the global 'netbook' market.