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AMD records profit in Q3 despite manufacturing issues

Advanced Micro Devices (AMD) on Thursday reported revenue and profit growth for the third fiscal quarter of 2011, despite issues with the manufacturing of processors.

AMD reported revenue of US$1.69 billion after late last month reducing its revenue projection for the quarter ending Oct. 1, after its manufacturing partner GlobalFoundries had problems with chips manufactured using a 32-nanometer process. The yield problems led to a limited supply of AMD’s Fusion chips for mainstream PCs, the company said.

“Third-quarter revenue was adversely impacted by the manufacturing issues experienced by a manufacturing partner,” AMD said in a statement. AMD’s revenue grew by 4% compared to the third quarter last year, representatives of the company added.

AMD reported profit of $110 million on a non-GAAP basis, a slight increase from profit of $108 million during the third quarter last year. Earnings per share were $0.15, which beat estimates of $0.10 from analysts polled by Thomson Reuters.

On a GAAP basis, AMD reported profit of $97 million, improving from a loss of $118 million in the third quarter last year.

Revenue for the computing solutions group, which deals in PC and server chips, grew to $1.29 billion from $1.23 billion in last year’s third quarter. Revenue for the graphics segment during the quarter was $403 million, growing from $390 million last year.

For the fourth quarter, AMD said it expects revenue to increase sequentially by 3%, plus or minus 2%.

“AMD’s customers are looking for the company to deliver products on time,” AMD CEO Rory Read said. “No doubt, we must improve our execution,” Read said.

“The company is making improvements step by step and one manufacturing machine at a time”, Read said. “We are working with GlobalFoundries to fix problems and bringing in manufacturing partners such as IBM to help resolve issues,” he added.

The company will deliver significantly more chips made using the 32-nanometer process in the fourth quarter, according to him. However, he did not provide a clear picture on when the manufacturing issues would be completely resolved.

Despite manufacturing problems, there was an uptick in demand for AMD’s chips, it was reported. “AMD is doing well in the market for PCs priced between $200 and $600 and is gaining market share worldwide from rivals,” Read said. Third-quarter revenue for AMD’s mobile processors grew 20% year over year.

About 90% of processors shipped during the third quarter were Fusion chips, which combine a graphics processor and CPU in a single chip. The line of Fusion processors includes chips code-named Ontario and Zacate for netbooks and low-power PCs, and Llano for mainstream PCs.

“The PC market is solid and will continue to grow consistently over the next several years,” Read said.

Read declined to reveal AMD’s future tablet plans but said the company will “double down” on low-power chips and extend its Fusion architecture to new markets. The company has already said that it would sit out the smartphone market.

In the third quarter, AMD also shipped its new 16-core Opteron server chip, code-named Interlagos. Servers with the chip are expected to appear in the fourth calendar quarter.

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