Intel's Financials Strengthening, AMD Waiting for Barcelona Kick

Published: July 24, 2007

by Timothy Prickett Morgan

Chip giants Intel and Advanced Micro Devices reported their most recent quarterly results last week, and those results clearly show Intel is gaining steam while AMD is trying to generate as much steam as it can ahead of its "Barcelona" Opteron launch in August.

Intel closed out its second quarter on June 30 with $8.7 billion in sales, an increase of 8 percent over last year's second quarter. Significantly, after big cost cuts and improving margins, Intel had an operating income in the quarter of $1.35 billion, up 26 percent, and brought $1.3 billion of that to the bottom line, up 44 percent. Intel said that microprocessor shipments were up, but average selling prices were down and offset the growth. On a sequential basis from the first quarter, chip shipments rose and ASPs were lower as well. In the second quarter, Intel's chipset business set a new unit record, showing that the company has done much to counteract the competition in this area, which can generate as much profit as a CPU sale can these days.

Paul Otellini, Intel's chief executive officer, said that the company has shipped over 1 million of its "Clovertown" quad-core Xeon 5300 series of processors, and said further that server chip unit shipments and revenues were up "by double digit percentages" in the quarter, both on a year-over-year basis and sequentially from the first quarter of this year. Otellini reminded Wall Street that the Core architecture will make its debut in the "Caneland" four-socket server platform later in the third quarter with a new Xeon MP processor, code-named "Tigerton" and replacing the defunct "Whitefield" kicker to the current "Tulsa" Xeon 7100 series. Presumably, this chip will be sold as the Xeon 7300 series.

AMD has been struggling against a resurgent Intel in recent quarters, but was nonetheless able to boost its sales by 13 percent in the second quarter, to just under $1.4 billion. AMD managed to outgrow Intel on the revenue front in the quarter, but it posted an operating loss of $457 million after gross margins plummeted by 33 percent thanks in large part to the price and technology war that AMD is engaged in against Intel. AMD's net loss in the second quarter of 2007 came to $600 million, which was a little better than the $611 million loss it had in the first quarter; AMD had a skinny net income of $89 million in the year-ago quarter.

AMD's chip sales were bolstered by an impressive 38 percent sequential increase in shipments from the first quarter, and AMD said that its ATI Radeon HD 2000 graphics chips were starting to build momentum, too. AMD sold $1.1 billion in CPU chips in the quarter, up 20 percent from the first quarter. AMD confirmed in its call with Wall Street analysts that the "Barcelona" quad-core Opteron Rev F chips would ship in this quarter in both standard and low-power variants. Because AMD has its 65 nanometer plants fully online (to make the Barcelona and other future chips) and it can control how quickly it ramps up a new 45 nanometer fab, AMD believes that it can keep its capital expenses under control and move the company to a breakeven on the financial front by the end of the year. A lot depends, of course, on how the new Opterons are received by the market.

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