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AMD Takes Huge Charge, Widening Losses

AMD lost $1.77 billion, or $3.06 a share, in the fourth quarter.

That’s $1.6 billion, or $2.89 a share, lost to impairments in its Spansion investment (12 cents) and write-offs of goodwill and intangibles connected with ATI, its $5.6 billion graphics house acquisition ($2.77).

Oh, well, it did say last month that it would flush out a material part of its ATI buy. It just didn’t say how material.

 And it’s still not finished. There’ll be another $55 million acquisition-related charge this quarter.

That makes for a total net loss last year of $3.379 billion, including non-cash charges of $2 billion on $6 billion in revenue, up 6%.

The good news is that AMD was close to breakeven operationally in the fourth quarter, reducing its non-GAAP operating loss to $9 million.

Revenues were $1.77 billion, up 8% year-over-year but light of the $1.79 billion that Wall Street expected. With the charges stripped out of its results it only lost 17 cents when the pundits were expecting 36 cents a share.

It also improved its gross margin by three points sequentially to 44%, driven by increased shipments, higher ASPs and cost containment.

It’s forecasting a seasonally down first quarter, and decreased revenue in line with seasonality, but sees no problems despite the negative economic indicators. CEO Hector Ruiz said there was “no substantial change from normal.”

It also expects the price war ceasefire to continue – in part presumably it’s not chasing share at any cost – but it’ll know better by the second half.

It thinks it can return to profitability in Q3.

It expects to start shipping 45nm chips in the second half.

The company said it shipped a record number of microprocessors in Q4, including nearly 400,000 of its troubled, hard-to-get quad cores, roughly a 2:1 ratio of desktop to server.

It’s gotten the erratum-correcting Barcelona B3 stepping back from the fab, it said, and expects to be sending samples out the door in two or three weeks, anticipating that Tier 1 OEMs could have Barcelona servers out late in the quarter.

It will continue to ship B2 product with the BIOS fix. It expects the ratio of desktop to server quads to be 3 or 4:1 going forward and to double Q4 shipments in Q1. AMD sees the desktop quad as a 100-million unit stream to the servers’ 14 million or 15 million this year

AMD said processors did $1.402 billion, up 9% sequentially and it claims it may have captured some share. ASPs were up 4% sequentially and the operation was profitable despite the Barcelona debacle.

Server, mobile and desktop processor revenue increased 11% quarter-over-quarter. AMD said record desktop and mobile processor unit shipments produced a 7% sequential increase in overall microprocessor unit shipments. Server processor unit shipments increased 22% sequentially.

AMD’s new graphics segment showed revenue of $259 million, up 3% sequentially, attributed to demand for the new ATI Radeon HD 3800 series and continued adoption of the Radeon HD 2000 series of graphics processors.

The company’s fourth-quarter consumer electronics business was worth $109 million, up 12% sequentially, driven largely by increased game console royalties and handheld sales

AMD still won’t talk about its flexible manufacturing strategy although it’s convinced it can handle any demand.




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