AMD Q2 financial stats released

AMD posted their financial earnings and losses for the 2nd quarter of this year on July 19th. Total revenue was $1.378 billion, up from $1.216 billion in this quarter of 2006. Unfortunately, increased revenue was offset by increased expenses, and AMD's net losses totaled $600 million this quarter, despite a 38% increase in CPU shipments.

AMD's rival, Intel, reported their Q2 earnings just the day before. With a revenue of $8.7 billion, and net income of $1.3 billion for the quarter.

source: Dailytech

My take:

So AMD has had 2 consecutive quarters of fairly large losses. $611 million in Q1, $600 million in Q2. That's pretty bad for a company that brings in a total revenue of just above $1 billion per quarter. A lot of talk across the geeky areas of the interweb the last 6 months or so has been centered on AMD's financial troubles. The Intel camp sees this as the demise of AMD as a company, probably to be bought out by a large corporation like IBM. The AMD fanboys (which I am sometimes) are quick to point out Intel's anti-competitive practices, such as giving OEMs like HP and Dell large price cuts on CPUs if they didn't buy AMD CPUs. Of course, that has obviously been stopped recently, as about half of all HP PCs are equipped with AMD CPUs, and Toshiba, Dell, Acer, and Gateway/Emachines all use some AMD CPUs in their systems now.

In my opinion, this is definitely a bad time for AMD, but by no means is it the end. At the moment, Intel is almost 2 generations ahead technologically, but AMD hasn't put out a truely new product to compete with the Core 2 Duo in a long time. That will hopefully change later this summer with the launch of Barcelona. If Barcelona flops, or AMD can't get production up quick enough, they will certainly be bleeding red financially by the end of the year.

But will AMD be allowed to die? Would the US gov't, and the governments of the world allow Intel to snatch up AMD's market share to add onto the 70%+ market share they already have. AMD is Intel's largest and pretty much only competitor in the microprocessor market, and they have a lowly ~20% market share. My prediction, if AMD's financial woes continue, is this... I can see a situation similar to the Chrysler bail-out by the US gov't back in the 80's. Maybe AMD won't be saved by our gov't, but someone will do it. The US gov't saw the danger to the economy of losing one of three major auto builders. Of course, cars were the country's big booming business back then. Now computer technology is, and now there are only two major players instead of three. Giving Intel a market with essentially no competition would be horrible for consumers around the globe. They would have no reason to pour huge amounts of money into Research and Development. They would have no price wars to make their products affordable to the average consumer.

Let me tell you a story, if you'd care to listen for a bit.

The Pentium 4 processors were a good example of what could happen in this sort of market. Intel didn't see AMD as a threat in the market. At the time, they weren't much of a threat. Most of their CPUs were barely competitive with the new Pentium 4. Intel reused the same architecture (Netburst) for several generations of CPUs, adding small tweaks and features here and there. Netburst could scale to huge frequencies, up to 3.8ghz (not counting overclocking; some of these CPUs could hit 7ghz on exotic cooling like liquid nitrogen), but they were horribly inefficient. They were power hungry. They were so hot the higher end models almost required water cooling to run optimally. Intel ramped up the frequencies, and the populace began to believe that higher numbers meant always better. People shelled out big money for these Pentium 4 processors because they were told by Intel that a higher number followed by "ghz" was better. Then a few generations later, along comes AMD with its Athlon XP processor. Not anything amazing, but a worthy competitor performace-wise to the P4. But nobody notices. Then AMD becomes the first to market with a 64 bit CPU, the Athlon 64. Again nobody notices. Why? Intel has outmarketed and hypnotized the computing population with higher numbers. The numbers were higher, but the performance wasn't. A 2.0 ghz Athlon 64 is the equal of and even marginally better than a 3.2 ghz Pentium 4. Slowly AMD starts gaining market share on Intel. The wool is pulled off the consumers' eyes. At the release of the Athlon 64, AMD is sitting at ~15% share. By 2005, they're up to ~28%, their highest ever. Intel is finally taking notice. They realize they can't shove their outdated Netburst architecture down the throats of consumers anymore. People have realized that AMD CPUs are faster, produce less heat, provide longer battery life in laptops, and are just generally better. Over the last year or two they've dumped their savings into R&D on a new architecture, and in a short amount of time, leap three generations technologically over their own current CPUs, and are suddenly back on top.

This tells me that they believed that they were the king of the hill because their marketing machine was holding their old technology on top. When AMD started digging the hill out from under them, they finally saw that they had some real competition, and kicked things into high gear. This scenario would play itself out again if Intel no longer had any competition for real.

Anyway, that's enough ranting for tonight. I tried to be as little of an AMD fanboy there as possible.

Right now, Intel is on top because they have a superior CPU. If I had money, I would probably have a Core 2 Duo, or Core 2 Quad. I tend to go for the best bang for the buck, because I'm a broke college student, and I enjoy overclocking. But I will always root for AMD, because for several years, they have provided superior technology at a lower price than Intel. And I like rooting for the underdog. It keeps things interesting.