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AMD optimistic although future is murky

Analysis – A conference call hosted by senior AMD executives has revealed that it’s far from dissatisfied with the future, although it remains unable to predict when things will get very much better.

As we reported yesterday, AMD turned in a first quarter loss of $416 million, but that figure matches the company’s expectations.

Dirk Meyer, CEO and president of AMD, said: “The outlook is murky, at best.” But that, he added, is because of the macro-economic situation. It’s impossible for anyone to predict the future accurately because of the economic meltdown.

What is clear, however, is that the commercial market, which includes enterprise server systems. He said: “The commercial market is still weak, and wallets are closed.”

There are however some bright spots ahead. He said that AMD will pull Istanbul into May, with shipments in June. It will reveal more details of that today. Plus, claimed Meyer, AMD is “well positioned” because people have become more discerning for paying only what they need. AMD is showing it can be even more agile and responsive than before.

AMD will also switch over to 45 nanometres completely at the end of this quarter. AMD did sell a lot of 65 nanometre parts in the last quarter, but the majority will be 45 nanometres in this quarter. AMD is confident it will be cash flow positive in the second half of this year. It turned in a gross margin of 37 percent for its quarter.  Nor does AMD anticipate it will lose market share in Q2 to Intel. AMD’s forecast is not to lose share, but the economy is still so weak that it’s being ultra cautious.

On average selling prices (ASPs) are concerned, Meyer said that desktop ASPs were up a bit, on notebooks  down a bit while servers affects the entire mix. He said notebook graphics sales are affected because AMD offers those for both Intel and AMD CPUs.

China was stronger than North America and Western Europe in terms of sales, while sales in the Middle East were also stronger, with Eastern Europe weaker.

AMD is hopeful that Windows 7 will spur sales of its graphics products towards the end of this year, while it will release Congo at the end of this month.

As far as the spun off Global Foundries is concerned, currently AMD is its only customer and expects the fabs to make a loss for the foreseeable future. Utilization affected AMD during the quarter and capacity wasn’t as good as it wanted to be. We were under the impression that Global Foundries would present itself to the rest of the industry in the same light, for example as IBM Semiconductor does, or TSMC does, but that’s far from clear from the comments the AMD execs made.

Again, the future is probably so murky that AMD will have to suck it and see until the entire semiconductor sector begins to buck up. And it’s far from clear when that will happen.