AMD showing strength, but still weak

Chipmaker did better than expected in the first half this year, but is in "worse position" than rival Intel to cope with potential fall in demand, says analyst.

While Advanced Micro Devices' processor business is showing strength, it is still in a worse position than Intel to face a dip in demand for the rest of the year, cautioned research firm Technology Business Research (TBR).

In a statement Friday, John Spooner, senior analyst at TBR, said AMD enjoyed stronger than expected processor unit shipments in the first half of the year, as a result of a healthy global PC market--driven by strong sales in emerging markets--and the U.S. 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 some US$1.6 billion 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 2 percent, though this was lower than a greater loss earlier forecasted by TBR.

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

Codenamed Barcelona, the chip's delay had 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."

CEO replacement not a surprise
TBR said it expected AMD's announcement today that COO Dirk Meyer would take the reins from current CEO Hector Ruiz, following the company's recent history of losses including that suffered during its US$5.4 billion 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."

TBR expects Meyer to focus on expanding the company's share of the enterprise client segment and growing its share of the global "Netbook" market, including the unveiling of a mobile Internet device (MID) which reports say AMD is making plans to unveil with a low-power chip.