AMD has for the last year or so been spending large amounts of money on the development of its coming K10 architecture, but also invested in new factories. When it at the same time has been battling a price war with Intel this could only result in a negative cash flow. Rumors of a possible acquisition by a private group have been going around, but also that a private investor may be on the verge of investing in AMD. AMD has continued to grab market shares, despite Intel’s launch of the Core architecture, but unfortunately the stock market hasn’t been as kind as the market as the stock has dropped by 60%. It is expected to continue down the same path until AMD launches its new processors.
AMD has been said to present Barcelona on Monday, but the launch date is still set to the middle of 2007. The market shares of the desktop and mobile market hasn’t been affected by the launch of the Core processors, just that the gaining has slowed down. The server market is very different though, a market on which AMD was progressing very fast about a year ago, has now come to a stale.
AMD is calm though, but unfortunately the analysts are not as optimistic and they seem to believe that AMD will not be able to make the quick recovery it needs to get the stock moving again, thus adding more money to the accounts. But it’s not just the earnings that have gone down but also the total revenue, but then again this is quite normal for a company about to enter a new product cycle.
Unfortunately, ATI’s work with R600 has most likely made AMD’s current situation even worse and by the looks of it AMD is already in big debt and could use some more loans to stand up to Intel. Intel wasn’t exactly doing great last year, but despite the price war, new factories and reconstructions it still performed a lot better while still spending an equal amount of money on R&D. 17% of Intel’s total revenue vs. AMD’s 21%, but then again Intel has a total revenue seven times higher than AMD.
AMD is currently hoping that it’s close cooperating IBM will result in it catching up to Intel soon and that the two companies will soon offer processor with equivalent manufacturing processes. This will in turn improve the situation for AMD. Right now, 2006/2007 seems like a chapter AMD would preferably not discuss in the future, but we can only hope that Barcelona will result in the upswing AMD so badly needs.
