Can AMD return to profitability in 2008?
Following market closure on Thursday, AMD announced losses of $1.77 billion ($3.06 per share) during the fourth quarter of 2007, more than double the losses incurred during the same period in 2006.
Yet, despite the gloomy looking figures, AMD remains positive and perhaps with due reason too. Analysts had feared larger losses for the struggling microprocessor manufacturer but having shipped some 400,000 Barcelona-based processors during the quarter, AMD in fact isn't too far from profitability.
AMD has struggled to cope with its $5.4 billion acquisition of ATI and admitted to having overspent by 30%. Having had to write down the value of ATI, AMD incurred charges of $1.67 billion in the fourth quarter.
In retrospect, if AMD hadn't incurred these charges, it would have recorded losses of a much more respectable $9 million this quarter, a loss of only 17 cents per share, far below the expected loss of 36 cents per share by some analysts.
Still, it's a bad year no matter how you look at it when losses of only $9 million is viewed as progress.
AMD's CEO, Hector Ruiz said "We have got to return to profitability as soon as we can", and the company largely expects to return to profitability by the third quarter of 2008.
Nonetheless, AMD currently only has a plan and seeing that plan through to fruition is the challenge the company faces. Though it's Barcelona chip is helping matters and its forthcoming "Puma" mobile platform holds a lot of promise, it may be 2009's "Fusion", which aims to bring CPU and GPU together, that could bring AMD back closer to rival Intel.
If however history is anything to go by, we won't bet on AMD just yet.
In January 2003, AMD reported losses of $854 million and blamed a big income tax charge coupled with the cost of letting people go. Back then, AMD CEO Hector Ruiz made 1,600 people redundant throughout the year. Always full of promise, AMD hoped that 90nm would save the day.
In January 2007, AMD reported losses of $574 million, largely blaming the ATI takeover. As in 2003, many were made redundant and this time around, it was said that 65nm would save the day.
One has to wonder what losses, blame and solutions will be at hand in January 2012.
It's good to know that Ruiz admits mistakes however, in December's analyst meeting he said "We blew it and we're very humbled by it and we're going to learn from it and not do that again". We hope so Hector, 2008 is as important a year as any for AMD.
