AMD tops estimates with $1.3 billion revenue

AMD has been taking semiconductor market share away from rival Intel in the last year

Advanced Micro Devices (AMD) beat analyst estimates for financial performance in third-quarter results released on Wednesday, with net income of US$134 million (NZ$202 million), or US$0.27 cents a share on revenue of US$1.33 billion (NZ$2 billion), as it continues to pressure number-one chipmaker Intel.

AMD's results for the quarter that ended September 30 topped analyst estimates of US$0.24 cents a share on revenue of US $1.31 billion.

"The AMD growth story continues," says Hector Ruiz, AMD's chief executive officer.

The company's latest results are an improvement over net income of $US44 million, or US$0.18 on US$1.52 billion in revenue in the same quarter a year ago and net income of US$89 million, or US$0.18 on US$1.22 billion in the second quarter of 2006.

When memory products sales are excluded, AMD's sales grew 9% from the previous quarter and 32% from last year's third quarter, says Robert Rivet, AMD's chief financial officer.

However, AMD's operating margins slipped in the third quarter to 51.4%, down from 56.8% in the previous quarter and 55.4% in the year ago quarter. AMD attributes the decline to lower average selling prices for processors used in desktop computers.

AMD has been taking semiconductor market share away from rival Intel in the last year with new dual-core processors, forcing Intel into a defensive posture.

The gross margin slip is evidence of a price battle with Intel, whose dominance in computer microprocessors AMD has been challenging over the last year. AMD grew its share of the market for x86-based servers by 133% to 25.9% in the second quarter of 2006, according to Mercury Research.

Sales revenue for AMD microprocessors used in desktop computers was relatively flat in the third quarter compared to the second, says Ruiz, while revenue and unit sales volume rose by about 50% for notebook computers. Server sales grew, as well, he says, but only by single digits. He was not more specific.

AMD forecasts that growth in fourth quarter sales will be driven, in part, by its US$5.4 billion merger with Canadian graphics chip vendor ATI Technologies, which is expected to be completed on October 23. AMD sees the merger as a way to offer integrated products for the mobile computing and consumer electronics markets.