Perspective: My free financial advice for AMD

I have piled up greater net earnings over my lifetime than Advanced Micro Devices, and you probably have too.

By reporting a net loss of $611 million for the first quarter, AMD has actually lost more money than it has earned since its 1969 infancy--a figure found by summing up all of the annual net income figures found in the company's annual reports. (The reports made a great tour of groovy 1970s fonts.) In all, AMD has lost $203.2 million.

Granted, the company has a lot to show for its net loss: it spun off Spansion, its memory unit, bought graphics giant ATI Technologies and has billions of dollars in real estate around the world. It has also become a formidable competitor to Intel in microprocessors, particularly in the past three years, winning kudos for its chip designs and manufacturing.

By contrast, I have some couches from Copenhagen Furniture and three pairs of bike pedals. Without my wife's financial acumen and guidance, I would probably be earning money the old-fashioned way: standing on a bucket, pretending to be a statue and begging for change from Cub Scouts.

I'd be standing on a bucket, pretending to be a statue and begging for change from Cub Scouts.

Still, I'm net income-positive. I have tax returns to prove it. My net worth, I'll add, is past the four-figure mark.

It's the kind of success story that I could probably sell to The Learning Annex: "Learn to Beat the Fortune 500 and Bartend in Your Spare Time. Tuesday at 7:30. Airport Hyatt. Sequoia Room II."

What explains AMD's situation? From 1969 to 2003, AMD was largely struggling to keep up with Intel. The company would release products, only to stub its toe in manufacturing or lose in a price war.

By the end of the 2003 second quarter, AMD had a historical, cumulative net income of $186.4 million

Fortune then began to smile on it with the releases of Opteron and Athlon 64 that year. Profits and market share grew. In the second half of 2003, AMD reported net income of $12 million.

In 2004, net income came to $91 million.

However, AMD then had to take charges to spin off Spansion. It also bought ATI for $5.4 billion.

While strategically sound moves, the two decisions did put dents in net income, which came to $165 million in 2005. Then, in 2006, AMD reported a $47 million net loss.

The company was about $407.4 million in the net black until this quarter. AMD's market share gains made Intel angry--Sheriff Buford Pusser in Walking Tall angry--and the smaller chipmaker is now losing market share and being forced to sell its chips at lower prices.

Still, AMD tends to bounce back, and it is set to digest ATI. In addition, financial analysts and others routinely ignore acquisition costs.

If I were to ignore the costs, I'd count AMD as a few billion dollars ahead. But who am I to argue with generally accepted accounting principles, particularly when they make me look good?

So, AMD, don't sweat it too much. If you're feeling down, we can go to the Philosopher's Club and have a few drinks one night.

And if things really get bad, you can stay on the couch.

Biography
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas. He has worked as an attorney, travel writer and sidewalk hawker for a time share resort, among other occupations.

More Perspectives

[Philips]

Thanks for your POV!

It was nice reading.

Sadly, many "Intel fan boys" - people used to use solutions from Intel - try to sound like Intel won CPU war.

I hardly can keep up with them - reminding that AMD is about *10* *times* smaller than Intel. It is really miracle (to me) that AMD had managed to pull a decent CPU performance showdown against The Chipzilla.

Kudos to AMD. Thanks for AMD64/x64!!

[tundraboy]

Back to status quo

The chip business is so R&D intensive and Intel has far, far more resources than anyone else that it needed a major blunder by Intel for AMD to get some traction on market share and profitability.

For AMD to achieve continued market share gains, Intel will have to commit a seires of blunders, turning themselves the Keystone Cops of the chip industry. That is highly unlikely.

So we're really just back to status quo. As Intel puts their big blunder behind, R&D resources again become the deciding factor and sadly AMD will go back to its old place at distant second.

[Sniche]

Micheal's POV is not worth a grain of salt

AMD or any other company would be better served by not taking
his advice seriously. if going on the past, his storyline shows a lack
of research and knowledge base makes for a great laugh.

I think c/net could do a lot better here, come on CNET you can do
better

[ngreazel]

I agree

I agree. What is is his advice anyway?

[oxtail01]

another CNET worthless article

I'll be surprised if this writer knew how to decipher a financial statement to make an informed decision on a value of a company (or whether the company actually made money).

[Orion Blastar]

AMD needs to change its stategy

if it is showing losses that big. I don't want AMD to go away, because I think the market is big enough for Intel, AMD, and VIA and many others. AMD makes some chips cheaper than Intel does, and many AMD CPUs are used in lower cost laptops and desktops. The AMD Septron is one of the lower cost entry level chips that competes with the Intel Celeron.

In most cases a company reports losses that big due to having too many expenses, AMD needs to cut back on expenses. That could mean they have too many support costs and need to improve the quality control of their chips and devices they make to have a lower support cost in the future. They might also have to get rid of some products that costs more to support than the revenue they bring in. Maybe offer sabbaticals to employees to go back to college, help an elderly relative, go visit a part of the world, on 20% of their salary instead of massive layoffs that hurt our economy.

[hoffmkr]

AMD sells chips cheaper, not makes

Just a clarification but AMD tends to sell chips cheaper but costs more to make then Intel. Intel's fabrication technology is why they produce higher margins and generally why whenever they slash prices, they make a profit but AMD takes a loss.

[AxeTracks]

joke

can't believe I actually was hoping to gain knowldge... waste of time

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