Hot off the wire, we received AMD’s financial results for the third quarter of 2009. At first glance, you might feel that AMD disappointed but actually we’re pretty satisfied with them.
The AMD Consolidated [AMD reports results from the AMD Product Company and GlobalFoundries] reported revenue of 1.396 billion dollars, with a net loss of 128 million dollars. However, the company repurchased part of their debt [due in 2012] in the form of 66 million USD. The global finacial crisis gave AMD an opportunity to repay a small chunk of its overall debt. In the past couple of months, we heard about early debt repurchase deals reaching even to the tune of US$1 to US$3, meaning AMD could pay $50 million and get 150 million written off. We are not aware of such deal taking place for this 66 million debt purchase, but we are quite certain AMD got a really good deal. Gross margin also improved from 37% to 42% as well, a significant recovery.
But maybe the most important part is the fact that AMD Product Company finally posted a profit. Just like Dirk Meyer promised, he returned the product side of AMD into the black before the end of 2009. , a year after we went to Iceland and saw "Back to Black" tagline on posters announcing the ATI Radeon HD 4870X2 card [first ATI product with the black PCB]. If we take a look at AMD Product Company only, the company posted its first net profit since the acquisition of ATI Technologies, back in 3Q 2006. Yes, it was a very long time ago.
That last minute fire-sale of 60 day inventory for the ATI Radeon HD 4800 series to Apple was the golden ticket to profitability, with net profit being two million greenbacks. Non-GAAP income was 47 million dollars, mostly carried out by the graphics and chipset business. Graphics alone reported an eight million dollar profit, up from 12 million dollar loss in the previous quarter. This means ATI achieved a 20 million dollar boost in sales, and the trend is expected to continue – ATI is first out the door with DirectX 11 parts, and even though supply is tight at the moment, ATI has full quarter to sell their 5000 series parts. Coupled with bundling deals for one or two DirectX 11 games [BattleForge and DiRT 2], ATI could significantly help AMD to improve the bottom line.
Other than that, results were quite positive – past quarter [2Q 2009] revenue was 1.184 billion with a 330 million net loss. If there wasn’t for debt repurchase, AMD Consolidated would report an operating loss of 77 million, or net loss of 62 million USD. But the biggest goal for the product side of AMD is finally reached. Going back a little – AMD’s former CEO, Mr. Hector Jesus Ruiz was promising that AMD will be "back in black" by the end of 2008. When it was clear that this is not going to happen even with the GlobalFoundries deal – Hector stepped down and pushed Mr. Dirk Meyer into the role of AMD’s CEO. On the other hand, Dirk promised that the company will be "back in black" by the end of 2009. Dirk’s management team managed to pull AMD Product Company into black, but we wonder how long it will take to see AMD Consolidated into the black. With massive investments into building the Fab2 complex in New York, we doubt that GlobalFoundries will post a profit in the next 2-3 years. Then again, GlobalFoundries is no longer a financial burden for AMD, since the company is predominately owned by ATIC.
The thing is, 4Q 2009 isn’t an easy quarter for AMD – Intel’s Core i5 and i7-800 series processors weren’t exactly shipping for revenue during Q3’2009, since Intel was late to the Back To School party. But we can expect Lynnfield-based desktops and notebooks to create real pressure on AMD. Then again, the shining part of AMD CPU sales were exactly those "anti-netbooks" – Yukon platform achieved great success and brought decent profit into the company [HP DV2 sales were at rage]. On the server side, Intel’s Nehalem-EX is yet to ship, but after that happens, it will be a tough battle until AMD reveals its new quad-core, sexa-core, octa-core and duodedici-core line-up – Opteron 4000 and 6000 series with their respective San Marino and Maranello platforms.
Update October 16, 2009 02:09AM GMT – We talked to Drew Prairie from AMD Investor Relations and learned more details about the quarterly results. First of all, AMD cannot compare the results prior to 1Q09 due to the fact that the company still operated as a single entity. In the future, we’ll report financial results for both "AMD Consolidated" and "AMD Product Company".