Our share gains continue, said AMD CFO Bob Rivet, on a conference call.
The offloading of its flagging flash memory venture, called Spansion, last December also helped to buoy AMD’s bottom line and blow past analyst expectations.
Wall Street welcomed the results and sent AMD shares 3% higher to $35.43 on the Nasdaq following the announcement. The stock slid in after-hours trading to $34.70.
However, AMD’s claim of market share gains at the expense of Intel may have helped nudge Intel’s shares to a new 52-week low of $19.12 – its second in as many days.
Early in March, industry leader Intel warned its first-quarter results would be below expectations due to AMD snatching slivers of market share and an overall market slowdown.
While the second half of the year promises some significant product upgrades for Intel, its soon-to-be-released numbers will probably be the worst set of results and forecasts that the company has delivered since the bursting of the bubble, wrote Merrill Lynch analyst Joe Osha in a recent research note.
All this seemed to work in AMD’s favor.
For its first quarter, AMD posts a profit of $184.5m, or 38 cents a share, versus a loss of $17.4m loss, or 4 cents, a year ago. The results included a $15m stock-based compensation charge and $20m related to the partial redemption of notes.
Analysts had hoped on average for 30 cents per share.
Revenue growth met analyst expectations, coming in at $1.33bn, up from $780m a year ago. The $780m recorded last year does not include $447m worth of Spansion revenue.
Sales of AMD’s Athlon 64 and Opteron microprocessors were strong during the recent quarter, particularly in the last few weeks of March due to normal seasonality, said AMD chief executive Hector Ruiz. Sales of server chips led revenue growth at the company, followed by mobile.
We had a very decent quarter in the desktop space. [But] server is clearly the leader with triple digit growth, year-on-year, said AMD chief officer for marketing and sales Henri Richard.
While emerging growth markets, including India, China and Latin America, experienced strong growth during the quarter, the only market that was weaker than expected was Europe, Ruiz said.
Q2 is always a difficult quarter in Europe, he said. The US market was very strong. The only guidance I would give you is that Western Europe, in particular, has not fully recovered from a glut of inventory from Q4, frankly, from our competitor.
Several times Ruiz referred to Intel’s excess inventory woes, which Ruiz claims AMD does not face. We love lean inventory, Ruiz said at one point on the call.
He also alluded to an otherwise strong market.
The only stall that’s been rumored in the market is the fact that there was an excess of inventory carry over from Q4 to Q1 from our competitor – mainly in the mobile space, he said.
Looking ahead, Sunnyvale, California-based AMD said it expects revenue for the second quarter, which historically is a weak period for the market, to be flat or slightly down.
While AMD may have made some technology strides over Intel in recent years, notably with its 64-bit single- and dual-core processors, Intel is a far larger company with about 85% of the global chip market. Analysts quizzed Ruiz on what AMD would do if Intel chose to cut its prices in the coming months to regain market share.
We believe we are in a position to continue to price for value, Ruiz said.
Ruiz also said he expected the competitive situation to tighten in the second half of the year as Intel rolls out its dual-core chips designed on its new low-power architecture. But he said AMD would relay more details of its roadmap in June, which would bear the fruits of AMD having tripled the headcount of its design team during the past three years.
We don’t expect to give, in any shape or form, any leeway in our leadership in the technology, Ruiz said. It will be interesting to see the things we will be doing later in the year, which will again force [Intel] to react.
