Analyst Conference Summary
conference date: July 21, 2009 @ 2:00 PM Pacific Time
Overview: Still pretty dismal. Graphics doing better, but new microprocessor sales still poor.
Basic data (GAAP):
Revenue was $1.18 billion, about flat sequentially from $1.18 billion, but down 13% from $1.36 billion in the year-earlier quarter.
Net loss was $330 million, an improvement sequentially from a net loss of $414 million, and improving on the year-earlier net loss of $1.19 billion.
EPS (earnings per share) were negative $0.49, improving sequentially from negative $0.66, and up from negative $1.16 year-earlier.
Product revenue is expected to be up slightly in the third quarter and gross margin is expected to improve due to better product mix and factory utilization. Capital expenditure for the year will be about $100 million. 705 million shares in Q3 after warrants are exercised.
Reports they are doing well with their product roadmap, including introduction of six-core Opteron processors. Cash increased and revenue was above expectations, but margins were below expectations. They believe they are well positioned to improve margins in the second half. End user demand in general has stabilized.
Sales of inventory that had been written down had a $86 million favorable impact. The operating loss was $249 million. Non-GAAP net loss was $189 million, with non-GAAP operating loss of $123 million. Gross margin was 37%, with 8% due to the inventory benefit and hurt by sell down of 65 nm product, which is low-margin.
Adjusted EBITDA was positive $14 million. Operating expenses were reduced $29 million from Q1. Break even is still estimated to be at $1.3 million in revenues.
$1.6 billion cash and securities balance, up slightly sequentially. $15 million was used to repurchase debt. $103 million for depreciation and amortization. Capital expenditures were $15 million.
June introduction of 6 core Opteron server introduction, means third quarter will show the first full quarter's results for this technology.
GlobalFoundries is preparing to break ground on the new fab in New York state.
Microprocessor revenue was $910 million, down 3% sequentially and down 17% from year earlier, on sequentially flat units with lower ASPs (average selling prices). Operating loss was $72 million. Growth was strong sequentially in Asia, flat in Americas, and down in Europe.
Graphics processor revenue (Radeon) was $251 million, up 13% sequentially and up 1% from year-earlier on sequentially up units with lower ASPs. Strength was from Asia. Operating loss was $12 million.
$158 million of net loss was from the new product company.
ASP decline quantification, and gross margin trends? Unit costs should improve with more 45nm product sales. Utilization should improve by about 10 percentage points. Mix should improve too. We reserved a lot of inventory in Q4, but it was good product. Die costs are about half for 45 nm as they are for 65 nm. In Q3 we may cross over to shipping more 45 nm than 65 nm.
Workstation revenue? We have new products showing up on Dell, HP and Lenovo systems. It will take a while to ramp these up.
GPU segment? We saw a lot of price competition in the low end of the market. We believe we will be ahead of the competition in DirectX 11, which should help us in the second half.
OEMs are telling us that the second half will be better than the first half, and Q4 will be better than Q3, so we will need to build some inventory.
Graphics 40 nm GPU issues? These should have higher margins, and with DirectX 11 high ground we should have some competitive advantage. We expect a very quick DX11 ramp in the desktop AIB (mainly retail) channel, but not in notebooks until 2010. The 40 nm DX 10 parts will benefit from a production cost reduction.
Our goal is to exit the year at a 40% gross margin and to be cash flow positive.
You are going to benefit from foundry utilization rate? GlobalFoundries has capacity that we pay for. The relationship will evolve over time to a typical foundry relationship.
Normal Q3 seasonality? Normal historically is low to mid teens, sometimes above or below that. Guidance is due to weakness in economy, we can't assume return to normal seasonal growth.
Growth factors in Q3? Tigris notebook platform will be introduced in Q3, as well as the thin notebook products. Cloud computing with 6 core Opteron.
Expects the first new GlobalFoundy customer beyond AMD to be announced within 30 days.
GlobalFoundry capital call plans? AMD will not participate, so AMD share will be reduced.
Istanbul Opteron oportunity? Should be a nice incremental benefit to 4 socket installed base. Some more in 2 socket market. Our product shines in our low-power bands. We think buys for cloud computing will pick up in second half of year.
Back to school and Windows 7? Hard to predict for Windows 7. We are enthusiastic about DX11 that comes with it. Depends on whether consumers wait to get Win 7 computers, or continue to buy in advance of the release. Overall we expect seasonality to be muted.
Challenges of 40 nm process? We don't have any ramp issues for us.
Netbook and smart phone space? We are working on more power efficient and lower cost components. We are targetting 10 inch size screens and above. We are not looking at smart phones at this time.
Server segment versus other spaces? Mobile was weakest. We made progress in the server space. ASPs were lower in the quarter for a lot of different areas.
Up slightly guidance? Low to mid single digits.
Legal spend? Trial for Intel is set for March 2010.
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Copyright 2009 William P. Meyers