AMD parts with profits in Q2

AMD suffered from the same desktop chip syndrome as rival Intel during its second quarter, as the company handed in another loss.

The chip maker's Q2 revenue increased double-digits to $1.4bn. But perfect year-over-year comparisons remain tough to come by, since only part of the acquired ATI's corresponding '06 quarter is included with AMD's financial results. It is clear, however, that AMD remains in the red, handing in a net loss of $600m during this year's second quarter. The loss includes $130m in charges tied to the ATI buy and tens of millions more in stock option and severance charges.

"While we made solid progress in the second quarter across a number of fronts, we must improve our financial results," said AMD CFO Bob Rivet.

AMD sold $1.1bn worth of chips during the quarter, which compares with $1.2bn in silicon moved last year. Rather than comparing year-over-year sales, AMD opted to focus on sequential gains, saying it made 20 per cent more in revenue and shipped 38 per cent more processors. It did, however, note that mobile processor shipments increased 82 per cent year-over-year, so we'll go ahead and assume that desktop and server shipments dropped year-over-year.

Graphics product revenue came in flat sequentially at $195m.

Like Intel, which reported results yesterday, AMD complained that average selling prices of desktop chips dropped during the quarter. The two chipmakers appear set on crushing each other's desktop margins, while they go after the growing mobile market and the more-lucrative server segment.

AMD's management seemed pretty optimistic overall, during a conference call with financial analysts to discuss the results. We're told that the company will continue to try and trim costs by selling off equipment and land and trimming sales and marketing efforts. AMD also sees a "pretty strong" second half of 2007 coming, due to healthy customer demand and the release of new server and graphics chips.

"The performance of Barcelona (AMD's upcoming quad-core chip) is extremely satisfactory," said EVP Henri Richard, who usually manages a bit more enthusiasm for new product than that.

Silicon watchers have been unmoved by the early Barcelona specs with the chip arriving later and slower than some had hoped.

"Barcelona, while being an absolutely great product, is complicated," said Dirk Meyer, AMD's COO. "It is taking more design work than we anticipated getting the final rev(ision) in place."

Not really what you want to hear.

AMD hopes to get its gross margins up and to reach profitability during the fourth quarter.

Shares of AMD rose close to five per cent in after-hours trading, at the time of this report, as investors seemed to react to claims of market share gains made by AMD executives and optimistic talk about improving gross margins during the latter part of 2007. By contrast, Intel shares dropped five per cent after its earnings report yesterday. ®