Big losses projected at struggling AMD
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MarketWatch
5:23 p.m. 01/10/2008 By Benjamin Pimentel
SAN FRANCISCO (MarketWatch) -- Advanced Micro Devices Inc. will report fourth-quarter results next week with Wall Street projecting bigger losses at the struggling chip giant.
Analysts expect AMD (AMD) to report a loss of 36 cents on revenue of $1.79 billion, compared with a loss of 4 cents, on revenue of 1.77 billion in the year-ago period, according to Thomson Financial.
The Sunnyvale, Calif.-based company has been struggling to become profitable over the past year as it faced stiffer competition from archrival Intel Corp. (INTC) and grappled with the cost of a major acquisition.
AMD reported a wider-than-expected third-quarter loss of $396 million in October, largely due to a $120 million charge for its merger with ATI Technologies in 2006. The company has also struggled with product roll-out delays and mounting operating costs that some analysts warned were not sustainable.
"We are lowering our estimates to reflect continued execution missteps, an increase in operating expenses due to engineering costs and continued pressure from Intel's roadmap," analyst Doug Freedman of American Technology Research said in a research note.
Analysts believe AMD could bounce back as a stronger competitor, especially with the graphics technologies it now has after the ATI acquisition. The company also got a boost recently from an Abu Dhabi firm, which invested $622 million in AMD.
AMD executives vowed last month that his company will be back in the black in 2008, and that recent production missteps will not be repeated.
"We blew it, and we're very humbled by it," CEO Hector Ruiz told analysts in December. "We're going to learn from it, and we're not going to do that again."
However, analysts say concerns about weakening demand in North America make it harder for AMD to stage a comeback.
"For AMD, the issue is how much did they get to participate in what is a comparatively weak North America, compared to the footprint they have all around the world," said analyst Crawford Del Prete of International Data Corp.
AMD tends to do quite well in emerging markets, he said, but it's not unclear if that was enough for the company in the fourth quarter.
"It's still pretty tough times for AMD right now," he added.
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