GuidesAMD CEO Targets 2010 Growth in Mobile, Servers

AMD CEO Targets 2010 Growth in Mobile, Servers

ServerWatch content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.




AMD is going into 2010 without foundries or an Intel lawsuit to preoccupy it, which means the company is targeting new areas of growth following an outstanding fourth quarter.

With its troubles and foundries behind it, AMD seeks growth in areas Intel has been mining for years.

The chipmaker has long favored the desktop market, and was a little late to market with a notebook platform compared to its rival Intel (NASDAQ: INTC). But AMD (NYSE: AMD) appears to finally be ready to rev up its mobile efforts and it’s off to a good start. For Q4 AMD said it had a 19 percent growth in notebook product revenues.

“We’re looking into next year feeling good about the PC market being a growth opportunity in 2010. We’re looking at the low double digits, around 10-12 percent. Our experience with Q4 confirms that thesis. Holiday sales were strong,” CEO Dirk Meyer told a conference call of analysts following the release of earnings Thursday.

“I was a little surprised at how robust demand was in Q4,” he added. “Some enterprises are clearly looking to start upgrading technology now. I’m not sure on momentum, hopeful it will continue. But we saw signs of strength everywhere.”

AMD posted revenue of $1.646 billion, its best in more than a year, for the quarter ended December 26, 2009. Net income, thanks to the $1.25 billion antitrust settlement with Intel, helped it post a $1.178 billion net profit.

With the settlement behind it, AMD is now in the process of fully divesting its interest in Globalfoundries, its old fabrication plants in Germany. In the process, it is restating its earnings and for the time being, calling itself “AMD Products Company” in reference to it being a fabless company.

The first quarter of 2010 will be its first quarter without the foundries on its balance sheet and all of the different reports, GAAP vs. non-GAAP earnings, will be consolidated into a single item line on the balance sheet, according to CFO Thomas Seifert. He would not speculate on how much that item might be.

For now, Meyer was feeling rather satisfied with AMD’s (and by extension, his) progress. The company lowered its break-even point to reach profitability, focused on keeping to roadmaps and delivering on time and worked on its core processor business. Plus, it reduced its debt by $2.2 billion. “We delivered on every major milestone to which we committed this year, placing us on a better position to execute this year,” he said.

Adoption of the company’s six-core Opteron processor was one of the bright spots. Server processor sales were up 21 percent year-over-year, and the hexa-core processor accounted for 60 percent of server processor revenue and half of unit shipments. It has been particularly well-received in high-performance computing and cloud environments, said Meyer.

CPU sales overall rose 14 percent, and thanks to the move to 45nm, AMD was able to improve its gross margin from 38 percent in the third quarter to 41 percent in the fourth. The shift to 45nm for CPUs and 40nm for GPUs will help drive margins up, although like its competitor in GPUS, nVidia, AMD can’t get enough parts to sell, either.

“We are heavily constrained in graphics. We could have done a lot more business. We’re seeing progress in delivery of yields but we are constrained today,” Meyer said. Despite that, graphics were still up 40 percent sequentially, which is consistent with the season, as graphics cards are a common gift item.

Q1 Outlook

For the first quarter, AMD expects revenue to be down seasonally but declined to give a figure. Analyst consensus is $1.39 billion, but then again they also projected Q4’09 revenue of $1.46 billion, well below AMD’s final results.

Seifert projected operating expenses of $550 million, a bit higher as the company has restored employee salaries after pay cuts were made last year. Gross margins will be between 40 and 45 percent and the company expects to be profitable on operating expenses all year with positive free cash flow.

AMD plans to continue to push on the mobile market. “Opportunity number one is in the notebook category. Our share is half or less of our desktop business. There’s no good reason for that. Our product offerings are very good and very appropriate for needs of small business and consumers. I think that represents a good opportunity for share expansion this year,” he said.

He thinks SMB remains a bigger market but there will be some “updraft” from the enterprise market as big companies start buying new equipment again. AMD is noticing an increasing number of laptops going out with discrete GPUs and not just the cheaper, less powerful discrete graphics.

Later this year, AMD will introduce Magny-Cours, its 12-core Opteron, which Meyer was extremely bullish on. “Magny-Cours will be the biggest leap in performance in the Opteron lineup since we introduced the Opteron processor in 2003,” he said.

Andy Patrizio is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

Follow ServerWatch on Twitter

Get the Free Newsletter!

Subscribe to Daily Tech Insider for top news, trends & analysis

Latest Posts

Related Stories