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AMD swings to 4Q loss, incurs heavy expenses related to ATI acquisition

AMD swings to 4Q loss, incurs heavy expenses related to ATI acquisition

Advanced Micro Devices Inc., the world's No. 2 microprocessor maker behind Intel Corp., said Tuesday that it swung to a loss in the fourth quarter as the company incurred heavy costs related to a major acquisition, negating record processor sales.
A brutal price war and Intel's increasingly competitive processors also weighed on AMD's earnings, as the company said overall shipments of its high-margin server chips were essentially flat compared with the third quarter and that selling prices for those chips were down significantly.
However, AMD's overall microprocessor shipments rose 26 percent over last year. The company said it set a record for total units shipped, but it would not disclose specifics or details on the previous high.
The company said it experienced especially strong growth in shipments of laptop chips, which commanded slightly higher prices.
For the quarter ended Dec. 31, the Sunnyvale-based company posted a net loss of $574 million (euro440.18 million), or $1.08 (euro.83) per share. For the same quarter last year, AMD earned $96 million (euro73.62 million), or 21 cents per share.
AMD said after the markets closed that the fourth-quarter figures include $550 million (euro421.78 million), or $1.04 (euro.80) per share, in acquisition-related charges and $27 million (euro20.71 million), or 5 cents per share, in stock-based compensation expense.
AMD announced in July that it was acquiring graphics chip maker ATI Technologies Inc. in a $5.4 billion (euro4.14 billion) deal that analysts said would erode a key advantage for Intel. The deal closed in October.
Revenue for the quarter was $1.77 billion (euro1.36 billion), compared with $1.84 billion (euro1.41 billion) at the same time last year.
Analysts were expecting the company to earn, on average, 10 cents per share on $1.74 billion (euro1.33 billion) in revenue for the quarter, according to a survey by Thomson Financial.
Hector Ruiz, AMD's chairman and chief executive officer, said on a conference call that AMD had underestimated pricing and competitive pressures, forcing the company to "tweak" its business model to prosper. Ruiz did not elaborate.
Ruiz said the company is currently focused on cost controls, a new design for its computer chips and its transition to a more advanced manufacturing technology to better compete with Intel.
"We have actually forced the competition to become more efficient," Ruiz said. "But in doing so, it made us realize that we have to raise our own efficiency to a higher level."
For the year, AMD said it lost $166 million (euro127.3 million), or 34 cents per share, on $5.65 billion (euro4.33 billion) in revenue. The company said it expects revenue in the range of $1.6 billion (euro1.23 billion) to $1.7 billion (euro1.3 billion) in the first quarter.
AMD's troubles come after a year of dramatic market-share gains at Intel's expense.
According to Mercury Research, AMD has lured about 5 percent of the overall computer chip market from Intel over the past year.
Most of those gains have come in the high-margin server and laptop chip markets, areas Intel has traditionally dominated but whose chips in recent years were seen as too power-hungry compared with AMD's offerings.
But Intel fired back last year with a new line of chips that boosted performance while reducing energy consumption. Intel also beat AMD to market with its "quad-core" chips, which have four computing brains instead of previous lines with just one or two. AMD is expected to introduce its own quad-core chips this year.
AMD also suffered a setback this week when Sun Microsystems Inc., which for several years has relied exclusively on AMD chips for a type of server based on the x86 design, said it would begin building servers and workstations that run on Intel chips.
Although Sun will still use AMD chips as well, analysts said the deal reflects the growing demand for Intel's new line of chips and should lower chip prices overall.
Before the report was released, AMD shares dropped 2 cents to close Tuesday at $17.51 on the New York Stock Exchange. The shares fell $1.01 to $16.50 in after-hours trading.


Updated : 2021-10-22 11:57 GMT+08:00