AMD ends losing streak with profitable Q2

Advanced Micro Devices (AMD) swung back to a profit in the second quarter, as the continued strong growth of its processor business was bolstered by slightly better results from its flash memory division, AMD announced Wednesday.

For the period ended June 26, AMD recorded US$1.26 billion in revenue, essentially flat compared with revenue from last year's second quarter and in line with analyst expectations as compiled by Thomson First Call. Net income was $11 million, down from last year's second-quarter net income of $32 million but substantially better than the $17 million net loss that AMD posted in the first quarter. AMD also posted a net loss in the fourth quarter of 2004.

Earnings per share were $0.03 for the quarter, ahead of analyst expectations that AMD would post a loss per share of $0.05 for the quarter.

"In the second quarter of 2005, AMD continued to show solid momentum gains in our microprocessor business," said Hector de J. Ruiz, chairman and chief executive officer of AMD, during a conference call.

AMD's processor business had another excellent quarter, with revenue of $767 million, a company record. This was a 38 percent increase from last year, and largely attributable to strong growth in sales of the company's 64-bit Opteron and Athlon 64 processors, the company said.

In fact, Opteron revenue nearly doubled in the second quarter compared to the first as more companies, including Sun Microsystems, Hewlett-Packard, and IBM, used the chips in servers, AMD executives said. The strong showing of the chip family highlighted revenue records for AMD in microprocessors, mobile processors and server processors, Ruiz said.

Flash memory revenue was $462 million, a slight improvement over the first quarter but down 31 percent from last year's second quarter. The group lost $90 million during the quarter. AMD blamed the poor performance of its Spansion flash memory joint venture for its net loss in the first quarter, and the company is actively pursuing an initial public offering of Spansion shares to rid itself of the business.

However, AMD did move a step forward on its latest flash memory chip offering, dubbed Ornand since it's billed to combine the speed of NOR flash memory with the storage capacity of NAND flash. The company produced its first chips using 90 nanometer production technologies, said Ruiz. Once the chips are ready, they'll be sent out to customer companies to sample in new gadgets.

In the third quarter, AMD expects microprocessor sales to continue to strengthen. Microprocessor growth will be better than normal for this time of year, or over 8 percent growth, said Robert Rivet, AMD's chief financial officer. The third quarter is normally good for chip makers due as a result of back-to-school gadget sales and retailers' stock build-ups for the end-of-year shopping season.

The personal computer market overall looks "very favorable" in both the consumer and business segments, and AMD is "very optimistic" on the second half of the year, said Rivet.

AMD did not mention the antitrust lawsuit it filed against Intel earlier this month. The company did say it expects its legal costs to rise in the third quarter.