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AMD's processor business has been in the dumps for well over a year. But a resumption of quad-core shipments and a reduction in its workforce, though painful, may signal a turnaround.

AMD quad-core Opteron finally on its way to computer makers

(Credit: AMD)

Before we get to the good news, let's first consider a draconian scenario for Advanced Micro Devices. As the chipmaker was announcing Monday that it would lay off 1,650 employees later this year, the stock was hovering just above $6, down from the mid-$20s a year ago and about $40 two years ago. If things do not improve, the company may split in two, according to Ashok Kumar, an analyst at CRT Capital Group.

Kumar sees one scenario in which AMD bifurcates into a manufacturing concern and a design company. If earnings don't trend up by the second half, this is a real possibility according to Kumar. "They don't have too many options with the debt overhang (from the ATI acquisition)," he said. The soft economy may not help matters either.

Kumar listed the well-known reasons for AMD's profit shortfalls: Lack of competitive offerings, blended ASPs (average selling prices) well below Intel's, and the delayed ramp of the high-end quad-core Opteron.

But these negatives--so the upbeat narrative on AMD goes--are the chipmaker's past, not its future. After a very long delay (about one year), AMD's quad-core Barcelona for servers is just about set to ship to the largest computer companies in the world: IBM, Hewlett-Packard, Sun Microsystems, and Dell, among others. "Barcelona ASPs are 300 (dollars) plus. That historically has been the profit pool of the company," Kumar said. Once AMD ramps Barcelona and the desktop quad-core Phenom, things should "dramatically improve," he said.

And AMD's mobile offerings are getting better too. "They were probably at their weakest point in 2007," said Dean McCarron, founder and principal of Mercury Research. "The next design cycle for notebooks is happening right now. You can safely say that they are more competitive than they were last year" vis-a-vis Nvidia, he said.

Along these lines, AMD is slated to bring out the "Puma" mobile platform this quarter. Puma is based on the RS780M chipset and AMD's dual-core Griffin processor--now called the Turion Ultra. The new Turion is all about power consumption (to reduce power, each core can run at different frequencies) while the RS780M, AMD claims, is up to five times faster than Intel's current X3100 integrated graphics silicon.

Partnerships may also be helping AMD in the mobile market. "They've been partnering with some of the most aggressive OEMs out there. That plays to their favor," said Jim McGregor, an analyst at In-Stat. "Companies like Acer and Toshiba have been extremely aggressive worldwide, especially in North America, at gaining market share," he said.

The desktop is looking better too, with the triple-core and quad-core Phenom processors just beginning to ship in volume.

All this optimism is cautious, of course. "The competitive environment that they're in now is a little bit different than the one that they were in before. Intel is much stronger," said McCarron. "We have Nehalem (the next-generation Intel microarchitecture) coming at the tail end of the year and the Penryn products are very competitive," he added.

AMD also said Monday that it expects to post first-quarter revenue of $1.5 billion, about 15 percent lower than the fourth quarter. This is well below seasonal declines. So upcoming earnings could be ugly in some respects. "Plus the pullback in consumer and business spending. Q2 tends to be a little bit low in terms of revenues," McGregor warned, referring to factors that affect both Intel and AMD. "They're facing a little bit of headwind in terms of economic and spending conditions."

And all of the positives cited above may happen slowly for AMD. "Things don't swing overnight. They take time," McGregor said.

In its ongoing battle with rival Intel, AMD announced the latest round of desktop CPU price cuts today. According to the list the company shared with us this morning, the price cuts mean that all of the company's dual-core Athlon 64 X2 processors will be priced at less than $200, with the top-end Athlon 64 X2 6000+ now selling for $178. The two low-end models in AMD's dual-core line, the Athlon X2 3600+ and 3800+, have been dropped, making the Athlon X2 4000+ the new entry-level dual-core model at $73.

In the high-end Athlon 64 FX line, strangely both the FX-72 and FX-74 now sell for the same price of $599 a pair. AMD's single-core Athlon 64 chips now range in price from $48 (Athlon 64 3200+) to $78 (Athlon 64 4000+). The budget Sempron line now starts at $31 for the Sempron 3200+ chip and goes up to $53 for the Sempron 3800+. It's hard to see how there's room for single-core processors when prices for nearly half of AMD's dual-core Athlon 64 X2 chips have crept well below the $100 mark.

Prices for AMD's mobile chips remain unchanged.

For its part, Intel is expected to cut prices on July 22 for its quad-core desktop and server chips prior to AMD's Barcelona introduction in August. 'Round and 'round we go.

eMachines announced three new budget PCs.

(Credit: CNET)

eMachines has become so regular with its quarterly refreshes, it might be more newsworthy if they didn't announce new systems every three months. But rest assured, if you head to your friendly-neighborhood desktop retailer next week (and possibly even today), you'll find three new eMachines budget PCs on the shelves: the $500 T5230, the $450 T5062, and the $400 T3616. All come with a $50 mail-in rebate as well.

We've been lukewarm on eMachines the past few releases, mostly due to questionable CPU selection. This time, though, we're particularly impressed with the T5230 and its Athlon 64 X2 4400+ dual chip. We'll have our full review of that posted today or Monday, but our early impression, based on our benchmarks, is that eMachines has a performance coup on its hands with this system. The other two we're less high on, mostly because they still cling to single core chips.