The move many industry insiders said Advance Micro Devices had to make in order to stay competitive with its larger rival, Intel, has come back to haunt the company in a big way. The Sunnyvale, Calif-based chipmaker posted an enormous net loss of $1.68 billion in its fourth quarter earnings report this week, the direct result of charges from its 2006 purchase of graphics card maker ATI.
But it wasn't all doom and gloom for AMD. In the end, the chipmaker came close to breaking even on an operating basis and said shipments of its microprocessors also hit an all-time record for the quarter. AMD even managed to surprise some analysts by selling nearly 400,000 of its high-end quad-core processors, which were plagued by delays and technical glitches last year.
In fact, based on its sales, AMD believes it may have actually gained market share in the quarter-- not that market share is a concern for the company right now.
As CEO Hector Ruiz said during an analyst meeting last December, the company is now "maniacally focused on profits." After admitting AMD made some big missteps over the past year, Ruiz told analysts he still expects "to exit the second quarter at a break even rate." Profitability should come shortly thereafter, he said, by Q3 or Q4 at the latest.
Were it not for the ATI charges, AMD would have posted a loss of $9 million on an operating basis, far better that the $576 million loss it posted a year ago. Good news also came in the form of higher average selling prices for AMD chips, too. Due to cutthroat competition in the processor market and having to compete against a larger company that is flush with money, AMD usually has to cut prices on its processors to stay competitive. This was especially true in 2007.
