With Christmas just 11 days away, you have to wonder what Hector Ruiz is going to find under his tree. It’s been a terrible year for Advanced Micro Devices, and the chipmaker’s analysts conference on Thursday did nothing to spread holiday cheer.

Confirming what many in the chip world had suspected for some time, CEO Ruiz and other AMD execs fessed up that bugs in its new quad-core Barcelona server and Phenom desktop chips will delay these key next-generation technologies.
The technical problems will delay general availability of the fastest version of the chips for three or four months. Customers willing to settle for slower clock speeds will be able to get the processors sooner; for example, AMD will ship a 2 gigahertz version of the Barcelona first, instead of the expected 2.5 gigahertz speed. In either case, the chips will be close to a year late; the original target date was the first quarter of 2007.

AMD STUMBLES AS INTEL SPEEDS AHEAD

The problem couldn’t come at a worse time. AMD has struggled all year to close the performance gap between its high-end chips and Intel’s. Barcelona, the company had promised, would restore its technical supremacy. Indeed some analysts said they had expected the quad-core server chip to do just that. “At 2.5 gigahertz it would have beaten any Intel products,” said analyst Nathan Brookwood of Insight64. “But at 2 gigahertz, it’s bringing up the rear,” he said.

Intel, meanwhile, has corrected many of the problems that dogged it earlier in the decade. “AMD isn’t competing against the Intel of two years ago,” said Dean McCarron of Mercury Research. Intel has had quad-core chips in the market for about a year. To be fair, its chips are based on a somewhat simpler design; Intel gets to four cores by packaging two dual-core chips together. By contrast, AMD’s design integrates four cores on one chip, a more efficient solution, said McCarron. Except that AMD’s approach reduces yields and thus raises manufacturing costs, he added.

There was earlier speculation that Barcelona’s problems were related to the ATI graphics chipset, but the problem turns out to be deeper, at the chip level. AMD has said it is related to the translation lookaside buffer (TLB) in the processor's L3 cache.

DOUBTS ABOUT A QUICK FIX

In the Thursday conference, analysts had expected discussion of the company’s “asset light strategy,” which will apparently entail outsourcing more manufacturing to foundries such as Chartered Semiconductor or TSMC. But they didn’t get it, and the lack of details made CEO Ruiz’s promise to return to profitability in 2008 less credible to Wall Street. AMD’s financial performance has been terrible, losing money for four straight quarters. Part of the reason: Intel and AMD have engaged in a bloody price war, a struggle that has been very tough on the smaller company’s profit margins. But the Barcelona and Phenom delays are serious self-inflicted wounds.

AMD’s stock lost another few points yesterday and has now shed about 40% in the last two months and a bone-jarring 56% since the beginning of the year. At $8.84 a share, Thursday’s closing price, the stock is at its lowest ebb since the summer of 2003. Ironically, AMD has so far rewarded Ruiz with pay raises.