Infrastructure // PC & Servers
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1/22/2009
06:19 PM
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AMD Reports $1.4 Billion Loss

In attempt to regain profitability, the company is undergoing a restructuring that includes spinning off its manufacturing operations in a deal with the Abu Dhabi government.

Advanced Micro Devices on Thursday reported a narrower loss in the fourth quarter and said the majority of its $1.4 billion of red ink was related to the acquisition of graphics chip company ATI Technologies and a write-down of unsold inventory.

AMD is the latest tech company hit hard by the slump in the PC market caused by the economic downturn. The company, whose microprocessors power business and consumer PCs, reported a 33% drop in revenue from the same period a year ago to $1.2 billion. Revenue from microprocessors that are the brains in business and consumer PCs fell 38% from a year ago, and sales of graphics processors dropped 8%.

AMD's losses included a $684 million write-down of goodwill and other assets related to the 2006 acquisition of ATI. In addition, the company reported a $227 million write-down of inventory, which lowered the company's gross margin 20 percentage points to 23%.

Overall, AMD's losses amounted to $1.4 billion, or $2.34 per share, compared with $1.8 billion, or $3.06 a share, a year ago.

AMD has suffered from a string of quarterly losses that stretch back more than two years and amount to billions of dollars. In attempt to regain profitability, the company is undergoing a restructuring that includes spinning off its manufacturing operations in a deal with Advanced Technology Investment Co., formed by the Abu Dhabi government.

Under the agreement, AMD would have a 34.2% stake in the company, with the remainder owned by Advanced Technology. The deal is expected to close in February.

This month, AMD sold its business for mobile phone microprocessors to Qualcomm for $65 million. The move was expected to help AMD cut costs and focus on more profitable areas. The company last year parted ways with its digital television division, selling it to Broadcom for $192.8 million.

During a conference call with financial analysts, AMD president and CEO Dirk Meyer said the company is feeling the effects of a global economic slump that has lowered sales and has brought "limited visibility" as to revenue for the rest of the year.

As a result, AMD did not offer a forecast for the current quarter, other than to say that revenue would decrease from the fourth quarter.

AMD rival Intel also has been hit hard by the economic downturn. The larger chipmaker last week reported that fourth-quarter profits plummeted 90% and revenue fell 23%.

Overall global PC sales fell in the fourth quarter for the first time in six years, according to IDC. Shipments dropped 0.4% from a year ago and 2.5% from the third quarter. The decline followed a half-dozen years of rising shipments, with the last five averaging increases of 15%.

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