I'm not going to repeat the numbers here so please read the earnings release (PDF) and listen to the webcast before jumping in:
http://phx.corporate-ir.net/phoenix.zhtml?c=101302&p=irol-earningsresults
Intel came in more or less on forecast though revenue was a bit below mid-point which is concerning. If AMD is going to miss their revenue forecast by a mile and Intel is gaining share and holding ASPs and still can't hit it's mid-point then I'm wondering if we're seeing a bit of a slow down in the PC market. Anyways - not a topic for this post.
Margins were slightly up on reduced costs of manufacturing and they made good progress to their reduced headcount numbers getting there 1 qtr earlier. Inventory seems to be ok overall - in the details WIP is actually down and raw materials are up which may be a good thing. Server ASPs were down explained by Otellini as an increasing mix of DP compared to MP in the Conroe liine up. Hmmm...not sure I buy that completely. I'm sure the price war is hurting them to some extend. Desktop and notebook ASPs held which is interesting.
We'll really need to see what happened to AMD on most of these to understand what's really going on. Bottomline - Intel making progress. Q208 BK still not in sight. Their increased focus on cost and managing the business effectively is putting pressure on AMD. It does appear they re-gained market share but didn't confirm. We'll know soon enough but if they did, I won't be eating crow and yet another of my predictions will have come through.
For some insight into what I think AMD will present, have a look at the comment here:
http://sharikou180.blogspot.com/2007/04/amd-q1-pre-announcement.html
As I've said before, AMD has already suffered a GAAP loss and will probably suffer an operating loss within 6 months. It appears that will happen this quarter. They are going to start wiping out cash in the bank pretty quickly and will be forced yet again to raise money in the market. See the comments in the link above for my stock price prediction. AMD is now in a death spiral of not having the cash to fund their medium-long term strategies as they entered a price war they just could not afford. With no real impact of Barcelona this year, they are going to suffer record losses this year. Nett result - some pretty ticked off shareholders!
7 comments:
"Server ASPs were down explained by Otellini as an increasing mix of DP compared to MP in the Conroe liine up."
I agree with your skepticism (sp?), unfortunately Intel (nor AMD) breaks down the financials to this level of detail. I would theorize they may also be losing some Itanium share (which tend to have much higher ASP's)to a greater swing toward x86 servers,whether it be AMD or Intel. This is just speculation on my end. I also think Woodcrest based chips have lower ASP than the older P4 based, I do think there also might be more of a migration toward 1P/2P solutions with advent of quad core stealing a bit from higher margin 2P/4P solutions, but I doubt that is the whole story.
I'm frustrated with this whole price war "theory" - Intel has now gone 9 months without changing desktop Core2 pricing - while they clearly took a hit in Q2/Q3 margins when they slashed P4 pricing to clear out this inventory, their margins have basically held since Q3'06. Seems pretty odd to maintain gross margin if you are in a price war.
AMD is really the only one cutting prices within the last 9 months (though I think Intel did cut some server chip prices in that time period). I think this whole price war thing is overdone and makes for good headlines, but it is really only AMD who has consistently slashing prices - look at the FX pricing those prices have already been cut twice in the <4months that product has been available. Also what used to be top of the line FX-62 chips is now a <$300 X2-6000 chip, just look at THG's pricing trend graphs to look at the AMD vs Intel "price war"
Intel's upcoming price cut at end of Apr will be their first cut on Conroe since release. The press is confusing slashing prices on old product (P4) with a price war, in any other industry this would be called clearing old inventory to make room for new models (cars, TV's, etc) - of course that doesn't sound as sexy as "price war".
"Server ASPs were down explained by Otellini as an increasing mix of DP compared to MP in the Conroe liine up."
This should only hurt AMD more as they are more dependent on MP.
Hmmm...looks like AMD Q1 was even worse than expected.
I like how folks are referring to a 7% YoY revenue decline...it is actually far worse than that if you take a closer look at the numbers...
If you recall not too long ago when AMD spun off Spansion folks were quick to split out the flash revenue when comparing YoY revenue (as they should have)
Now folks are looking at Q1'06 - CPU only and comparing it to combined Q1'07 CPU + ATI revenues. The ATI revenues were slightly over $300Mil. CPU revenues went from $1.332Bil to 0.918Bil - this is not a drop of 7%, it is a >30% revenue drop in CPU's!
In other areas:
- Inventory went up >10% YoY (probably not that big a deal as some of this is likely due to increased WIP and raw materials as fab36 capacity increased)
- Margins got hammered and are now less than 1/2 of what they were in Q1'06 - these will likely get worse in Q2 as AMD has more price cuts kicking in and the Q1 #'s reflect cuts that were not in place at the start of the quarter. This should be somewhat offset by increased 65nm production.
- quarterly interest expense is now slightly more than 6% of their quarterly revenue and ~1/6 of what they spend on R&D!
In positive news they are guiding revenue as flat to slightly up, this is a better outlook than Intel (which is projecting revenue down). Of course AMD is comparing this to a really bad Q1 so it's debatable whether or not this is actually good news.
AMD lose again.
Actually ATI part in AMD had less total revenue than NVidia professional quadro series alone. Not only did CPU revenue drop but GPU one also.
http://www.fabtech.org/content/view/2739/2/
Intel back to 80 percent market share dominance, according to iSuppli
Poor AMD
How about AMD's q2?
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