AMD Enters Rehab

The best thing that can be said about Advanced Micro Devices'(AMD Quote) first-quarter meltdown is that at least the company is not in denial.

After reporting a stunning $611 million net loss, AMD's management promised to get immediate treatment for the company.

"We know the only way to get healthy is to fully understand our problems and fix them," AMD President Dirk Meyer told analysts in a postearnings conference call Thursday.

This sober assessment may have kept the stock from collapsing, given the magnitude of the miss. In midday trading Friday, AMD's shares were off 1.8%, or 26 cents, at $14.02.

But while AMD executives ticked off a catalog of interesting ideas to cure the company's various ailments, it's far from clear that any of them are guaranteed to lead to an immediate recovery.

The most pressing need is simply to get some new products out the door. AMD's current predicament is largely attributable to the fact that it's fighting a two-front war against industry leaders Intel(INTC Quote) and Nvidia(NVDA Quote) with a stale lineup of products.

The toll was obvious in AMD's financial results. Sales in its computing division were down 38% sequentially. And sales of graphics chips, in the first full quarter of results since AMD acquired ATI in October, were below many analysts' expectations.

Though AMD grabbed 25% of the PC microprocessor market in the fourth quarter of 2006, several analysts and investors view that as the peak, and believe that AMD's market share is now heading south again.