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AMD Narrows Losses On Higher Revenues

Contributing to the improved financial performance was an upgrade to its ATI graphics processor line that drove a 40% increase in revenue from the same period a year ago.
Advanced Micro Devices on Thursday reported a significantly narrower loss in the third quarter, because of fewer charges cushioning higher revenue and margins.

While it was the eighth consecutive quarterly loss, the chipmaker showed progress by reaching its goal of operational profitability while increasing its gross margin to 51% from 41%.

Contributing to the improved performance was an upgrade to its ATI graphics processor line that drove a 40% increase in revenue from the same period a year ago, the company said. Overall, AMD reported revenue of $1.8 billion in the quarter, a 14% increase from the year before. The latest revenue figure included $191 million from license revenue.

The revenue increase, however, was not enough to push the company into the black. AMD reported a net loss of $67 million, or 11 cents a share, compared with a loss of $396 million, or 71 cents a share, a year ago.

The latest results included $39 million in acquisition-related costs and restructuring charges. A year ago, the company reported a $120 million charge related to AMD's $5.6 billion acquisition in 2006 of graphics-chipmaker ATI Technologies.

Among the major moves AMD has taken to reverse the string of quarterly losses is the recent spin-off of its manufacturing operations to a joint venture with Advanced Technology Investment Co., formed by the Abu Dhabi government. If the deal closes as expected in the beginning of 2009, AMD would immediately reduce its workforce by about 3,000 people, cut capital expenditures, and redirect more research and development resources to chip design versus manufacturing process design, analysts said.

"We achieved a significant milestone with the recent announcement of our Asset Smart strategy, which will transform both AMD and the industry through the creation of 'The Foundry Company,' " Dirk Meyer, AMD's president and chief executive, said in a statement.

Asset Smart is the name AMD gave to its initiative to shed its manufacturing operations. The Foundry Co. is the temporary name of the joint venture.

Looking forward, AMD said it expects revenue in the fourth quarter of $1.6 billion, which is roughly flat with third-quarter revenue, excluding the license revenue.