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AMD misses Q3 revenue targets

Lays the blame on GlobalFoundries wafer baker

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Struggling x86 and graphics chip maker Advanced Micro Devices put out its preliminary financial results for the third quarter of fiscal 2011 after Wall Street closed today, and the numbers were not good.

AMD ends its third quarter on October 1, which for all intents and purposes is nearly done, and rather than surprise investors on October 27 when it reports its numbers, the company decided to surprise them today. (We now have a better idea of why Rick Bergman, who was formerly general manager of AMD's Products Group, left the company for "a new opportunity" late last week.)

In a statement released after the market closed, AMD expected for sequential revenue growth of between 4 and 6 per cent in the third quarter. The company had previously forecast revenue growth of double this. In the second fiscal quarter ended on July 2, AMD reported $1.57bn in sales, so the current quarter will come in at between $1.63bn and $1.66bn. If you do the math, AMD is short somewhere between $63m and $94m for the quarter.

To make matters worse, AMD said that gross margins for the quarter would be in the range of 44 to 45 per cent, down from the 47 per cent it was predicting three months ago.

"The less-than-forecasted preliminary third quarter 2011 revenue results are primarily due to 32 nanometer yield, ramp, and manufacturing issues at GlobalFoundries in its Dresden, Germany factory that limited supply of 'Llano'," AMD said in a statement. "Additionally, 45nm supply was less than expected due to complexities related to the use of common tools across both technology nodes. AMD continues to work closely with its key partner GlobalFoundries to improve 32nm yield performance in order to satisfy strong demand for AMD products."

Things started going wrong late last year, apparently. In January, AMD dismissed Dirk Meyer as CEO, tapping Thomas Seifert, AMD's CFO, to be the interim CEO. By April, AMD announced that it has rejigged its fab pact with GlobalFoundries to motivate its spun-out wafer baking operations to do a better job on the 32 nanometer ramp, which is critical for AMD's Opteron server and Fusion PC processors.

"The less-than-forecasted preliminary third quarter 2011 gross margin results are primarily due to less-than-expected supply of 'Llano' and associated products with higher average selling price (ASP)," AMD continued in its statement. "Additionally, shipments of AMD's next-generation server processor, code-named 'Interlagos', occurred later in the third quarter than originally anticipated."

You can see now why Intel is not in any great hurry to get its Xeon E5 server processors out the door. Intel was bragging at its Developer Forum two weeks ago that it was selling the Xeon E5s under non-disclosure to hyperscale cloud and HPC customers and would launch the chips formally in early 2012. ®

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