Advanced Micro Devices reported a much smaller loss for the third quarter and better-than-expected revenue.
The Sunnyvale, Calif.-based chipmaker reported third-quarter 2008 revenue of $1.776 billion, including process technology license revenue of $191 million.
Revenue increased 32 percent compared to the second quarter of 2008 and 14 percent compared to the third quarter of 2007.
A positive surprise is the net loss, which was significantly smaller than expected. The company reported a net loss of $67 million, or 11 cents per share. Analysts polled by Thomson Reuters had expected a third-quarter loss of 40 cents per share on $1.48 billion in revenue. The company also reached operating profitability in the quarter.
Analysts were impressed by the numbers. "Even in a normal environment this would be a pretty remarkable achievement. In today's environment, it's extraordinary," said Ashok Kumar, an analyst at investment bank Collins Stewart.
"Improved execution across all of our businesses," Robert J. Rivet, AMD's chief financial officer, said in a statement, "was punctuated by a refresh of our graphics product line-up, driving 55 percent sequential revenue growth and market share gains. In addition, customer adoption of our quad-core microprocessors was strong, with unit shipments increasing 46 percent sequentially."
In the second quarter of 2008, AMD had revenue from continuing operations of $1.349 billion and a net loss of $1.189 billion. In the third quarter of 2007, AMD had revenue from continuing operations of $1.558 billion and a net loss of $396 million.
Third-quarter 2008 gross margin was 51 percent, or 45 percent excluding process technology license revenue. This compares favorably to both the second-quarter 2008 non-GAAP gross margin of 37 percent, and the third-quarter 2007 gross margin of 41 percent.
"We achieved a significant milestone with the recent announcement of our Asset Smart strategy, which will transform both AMD and the industry," Dirk Meyer, AMD's president and CEO, said in a statement.
Earlier this month, AMD announced that it was splitting into two companies: one for designing chips (AMD), the other for manufacturing them (The Foundry Company). The capital-intensive business of manufacturing chips had been weighing on AMD as it reeled under a $5 billion debt load, partially due to its purchase of ATI Technologies in 2006.
The investment is expected to allow AMD to remain directly involved in chip manufacturing--crucial for competing with Intel.
AMD said it has secured $5.7 billion of "confirmed, pledged investment," with some of the money earmarked for a future manufacturing facility in Malta, N.Y. It will own part of the new manufacturing entity, and Advanced Technology Investment Co. (ATIC) will own the rest.
In addition, ATIC will commit a minimum of $3.6 billion and up to $6 billion in additional funds over the next five years for the upgrade and expansion of fabrication facilities in Dresden, Germany, and construction the Malta, N.Y., facility.
One of the largest investors, Mubadala Development, now owns 19.3 percent of AMD.
Update Tuesday 4:12 a.m. PDT: AMD has made the official announcement of the manufacturing spin-off.
On Tuesday, Advanced Micro Devices will announce a long-expected restructuring, according to sources familiar with the deal.
As expected, the No. 2 supplier of PC processors will split into two companies: one for designing chips, the other for manufacturing them. The capital-intensive business of manufacturing chips is weighing on AMD as it reels under a $5 billion debt load.
The investment is expected to allow AMD to remain directly involved in chip manufacturing--crucial for competing with Intel, which has used its manufacturing prowess to great advantage.
AMD would not comment Monday.
The company has secured about $5.7 billion of "confirmed, pledged investment," with some of the money earmarked for a future manufacturing facility in Malta, New York, according to sources.
AMD will own part of the new manufacturing entity, for the time being to be called The Foundry Company, while Advanced Technology Investment Co. (ATIC) will own the rest. One of the investors, Abu Dhabi-based Mubadala Development Co., invested approximately $622 million in AMD last November.
Mubadala already holds an 8.1 percent stake in AMD. Upon closing the deal, Mubadala will own 19.3 percent of AMD, according to sources.
ATIC--also based in Abu Dhabi--will have equal voting rights with AMD in The Foundry Company and own 55.6 percent of the new entity. ATIC will invest an initial $2.1 billion, of which $1.4 billion will be invested directly in the new company and $700 million will be paid directly to AMD, according to sources close to the deal.
In addition, ATIC will commit a minimum of $3.6 billion and up to $6 billion in additional funds over the next five years for the upgrade and expansion of fabrication facilities in Dresden, Germany, and construction of a new facility in upstate New York, near the town of Malta.
Mubadala, for its part, will purchase 58 million newly issued AMD shares valued at $314 million and warrants for 30 million additional shares, giving it a total stake in AMD of approximately 19.3 percent on a fully diluted basis, sources said.
Mubadala will also have the right to designate a representative for election as a member of the board of directors of AMD.
All of this is expected to greatly improve AMD's liquidity.
AMD CEO Dirk Meyer and other company executives are expected to make the announcement Tuesday.
The investment is characterized by one source as coming from investors with "a long-term vision, who want to help (AMD) scale the foundry operations to compete globally." A foundry is a manufacturing facility.
AMD has been laboring for months over details of the restructuring, which it has termed "Asset Smart." AMD Chief Financial Officer Bob Rivet said during AMD's second-quarter earnings conference call that Asset Smart would be "a major reformation of the company."
Also, at that time, AMD announced that Meyer would take over as CEO and Hector Ruiz would relinquish that post but remain as chairman to oversee AMD's transition to Asset Smart.
AMD already has a relationship with IBM in which AMD uses IBM's advanced test manufacturing facilities.
- prev
- 1
- next
