AMD puts in stronger showing than Intel

Advanced Micro Devices, the second-largest PC microprocessor maker after Intel,
on Wednesday reported record fourth-quarter sales of $1.84bn, 45 per cent up on a year earlier and ahead of market expectations.

A day after its much larger rival disappointed Wall Street as it failed to meet its own and analysts’ forecasts, AMD reported revenues ahead of the market consensus of $1.66bn recorded by Thomson First Call.

But its net profits of $96m or 21 cents a share – compared with losses of 8 cents a year ago – were below market expectations of 25 cents. Net income would have been $205m or 45 cents a share but for a non-cash charge of $110m or 24 cents associated with the spin-off of its Spansion memory-chip joint-venture in December.

“AMD’s growth rate increased in the fourth quarter resulting in continued market share gains across server, desktop and mobile product lines,” said Bob Rivet, chief financial officer.

Paul Otellini, Intel chief executive, conceded in a conference call on Tuesday that Intel had lost about one point in market share for low-end PCs to AMD because of a shortage of chipsets in its fourth quarter.

AMD said it expected first-quarter sales to be flat to slightly down seasonally from the fourth quarter – a slightly better forecast than Intel, which predicted an
8 per cent sequential decline caused in part by a customer inventory build-up.

AMD shares traded 5 cents higher at $34.20 in after-hours trading.

Intel shares had closed more than 11 per cent lower at $22.59.

Analysts were still taking stock on Wednesday of Intel’s disappointing fourth quarter with several reasoning it was more because of a loss of market share to AMD than to a weakness in demand for PCs – Intel had blamed both circumstances.

Joseph Osha of Merrill Lynch said in a report: “In posting the weakest fourth-quarter revenue result and first-quarter outlook since the bursting of the bubble, Intel has made it clear how much competitive ground the company has lost to AMD.”

Charlie Glavin of Needham & Co downgraded Intel from “buy” to “hold” and said it faced a wider problem.

“We find it hard to identify enough high-volume, high-margin markets for Intel to replace its traditional lucrative PC/server markets that fuelled its success since the 1980s. In many ways, Intel is beginning a multi-year process to re-invent itself,” he wrote.