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Memory woes color AMD's Q1 red

Adios, Spansion. Hello, dual-core Opteron

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AMD stumbled back into the red during its first quarter, as sluggish memory sales weighed down robust processor sales.

AMD pulled in $1.23bn during its first quarter and posted a $46m operating loss. These totals compare to $1.24bn in revenue and a $61m profit in the same period last year. AMD's results were impacted by an underperforming flash memory unit, which faced intense pricing pressure, oversupply problems and a seasonal down market.

To distance itself from the memory biz, AMD said its Spansion memory venture would seek an IPO.

Investors ignored the most recent results, deciding to cheer the Spansion IPO instead. They sent shares of AMD close to 2 per cent higher in the after-hours markets. Many shareholders had hoped the company would separate the memory unit from the better performing processor group.

"We saw strong momentum across our microprocessor business ... and we saw continued challenges in the flash memory market," said AMD's CEO Hector Ruiz, during a conference call.

AMD noted that its microprocessor sales surged 31 per cent year-over-year, including the notebook, desktop and server products. Ruiz also confirmed that AMD will release a dual-core version of its Opteron server processor at an event next week. Also at the event, AMD will preview its dual-core desktop and notebook chips. AMD expects to have an all dual-core lineup by year end.

AMD has beat Intel to the punch with dual-core server chips but trails its rival on the PC front.

"We made the decision to put all of our emphasis in the beginning on the server part of the market because that is the one that is ready to jump on the exploitation of the technology," Ruiz said. Adding later that when more threaded PC software was ready, "We believe that over time this technology will find incredibly powerful uses also in the client."

Ruiz would go on to take several more jabs at Intel for being late with a dual-core server product. AMD is hoping that the likes of HP, Sun Microsystems and IBM will help it gain ground against Intel in the server market, since Intel will not have a dual-core x86 server chip until 2006. Dell is the only major vendor to reject Opteron from its hardware lineup.

In total, AMD's processor group pulled in $750m and posted operating income of $92m. "(The) first quarter sales growth was driven by record server and mobile processor sales, and strong overall penetration in high-growth regions, particularly greater China," AMD said.

The memory group reported sales of $447m, which were down 29 per cent from the same quarter last year. This led to an operating loss of $110m. AMD declined to comment about second quarter memory sales due to regulations around the Spansion IPO.

Looking forward, AMD expects processor sales to be flat or slightly down. ®


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