AMD scores profit on stronger computer market, lift from investment in manufacturing spinoff
By Jordan Robertson, APThursday, April 15, 2010
AMD scores 1Q profit as PC market strengthens
SAN FRANCISCO — Advanced Micro Devices Inc. returned to profitability in the first quarter as the world’s No. 2 microprocessor maker benefited from a strengthening computer market.
The company also got a lift from an accounting boost related to the manufacturing division it spun off last year. But more importantly, the numbers suggest that AMD is being helped by some of the same trends as its main rival. Intel Corp. reported this week that its first-quarter profit nearly quadrupled and that consumer demand for laptops and corporate spending on computer servers were strong.
Although Intel and AMD make the microprocessors that are the “brains” in the vast majority of personal computers, the market dynamics they cite could help many other kinds of tech suppliers as well.
AMD’s CEO, Dirk Meyer, described spending on servers as “pretty healthy” and said on a conference call with analysts that he’s optimistic the trend will hold through the rest of the year. However, he wouldn’t discuss his projections for corporate spending on personal computers, an area that has been slow to recover.
AMD said after the market closed Thursday that it earned $257 million, or 35 cents per share in the first quarter. In the same period last year AMD lost $416 million, or 66 cents per share.
Excluding the gain from the manufacturing spinoff, AMD would have earned 9 cents per share in the most recent quarter.
Analysts polled by Thomson Reuters expected AMD to lose 3 cents per share. That number doesn’t compare directly to AMD’s results because some analysts included the spinoff in their forecasts, while others didn’t.
AMD’s revenue jumped 34 percent to $1.57 billion. Analysts were expecting $1.54 billion. Those numbers do compare directly.
The company predicted that revenue would decline from the first to second quarter, in line with seasonal trends. Analysts were predicting $1.53 billion in revenue for the second quarter.
The latest results mark the first time AMD isn’t counting numbers from its manufacturing division, which were spun off into a company called GlobalFoundries Inc. in 2009. Until now, AMD had included those numbers within its own results.
The change is helpful for Wall Street analysts to measure whether AMD is prospering in its new strategy of focusing solely on designing chips instead of making them as well. The spinoff was done to help rescue AMD from mounting losses by cutting costs and unloading debt.
Still, AMD still owns about 30 percent of the spinoff and has to account for the investment in its results. In the latest period, AMD recorded a $325 million one-time, non-cash gain for changes in how that investment is valued.
AMD shares rose 14 cents, or 1.4 percent, to $10.36 in extended trading, after the results were announced. The shares had risen 27 cents, or 2.7 percent, to close the regular trading session at $10.16.
