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AMD casts off memory shackles and soars

Doing great against a 'brutal' rival

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Investors celebrated Wednesday afternoon after AMD issued glowing fourth quarter results. Record sales of server and notebook processors pushed AMD's revenue higher, and shareholders remained bullish on AMD after seeing the sales figures. AMD's stock surged more than ten per cent in the after-hours markets.

In the fourth quarter, AMD posted $1.84bn in revenue. That marks a 45 per cent rise from the $1.26bn reported in the same period last year. AMD's net income reached $96m, compared to a $30m loss in 2004.

Excluding the results of the memory unit AMD has spun out as Spansion, AMD posted fourth quarter sales of $1.35bn - a 78 per cent year-over-year increase. In addition, its net income hit $268m as compared to $59m in 2004.

The AMD results are in stark contrast to those from much larger chipmaker Intel, which yesterday missed its own fourth quarter earnings forecast. While Intel pointed to weak demand for PC chips as one reason for this miss, AMD celebrated its server, notebook and PC products.

"Our fourth quarter results underscored the undeniable fact that the AMD growth engine is gaining momentum," said CEO Hector Ruiz, during a conference call with analysts.

"Revenue is not just growing. It is accelerating."

AMD continues to take only a small fraction of the processor market when compared to Intel. Still, AMD saw a huge year-over-year jump in processor sales while Intel's sales of server and desktop chips actually declined when comparing 2005 to 2004. Both companies enjoyed gains with popular notebook chips.

Without question, AMD's strong 64-bit, dual-core processors have allowed it to steal market share and take advantage of product delays and miscues by Intel. Many analysts wonder whether this trend can continue given that Intel is now attacking the dual-core game with force.

Investors, however, were quick to judge the vendors. They shaved more than 11 per cent off Intel's share price during Wednesday's trading to hand in a $22.59 close. By contrast, AMD shares rocketed more than 10 per cent higher in the after-hours markets to $37.80 at the time of this report.

The financial analysts couldn't congratulate AMD enough during their conference call with management. Such showings are embarrassing beyond belief, but shame is a word unknown on Wall Street.

"I don't think I've ever seen a competitive momentum shift like," said one analyst. "So, congratulations."

The chap was clearly not a follower of Enron and seems unaware of the iPod. But, hey, you can't be everywhere.

When not calling Intel a "brutal and monopolistic competitor," Ruiz shed more light on AMD's operations. Customers and investors can expect "much more of the same" in the first quarter. Believing it has made strong corporate inroads via Opteron in the data center, AMD plans to attack desktops in 2006.

For the full year, AMD reported revenue of $5.85bn - a 17 per cent year-over-year increase. Its net income hit $165m, which compares to net income of $91m last year.

Without the memory group drag, AMD's revenue surged 48 per cent to $3.94bn, and operating income rose to $543m from $187m. ®

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