AMD Posts Another Big Loss

The chipmaker company narrows its loss in the first quarter from a year ago.
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Updated from 4:57 p.m. EDT

SAN FRANCISCO --

Advanced Micro Devices

(AMD) - Get Report

reported narrower, but still hefty, losses Thursday, as the company limped through the final quarter in which it fielded an incomplete product line.

And the Sunnyvale, Calif. chipmaker said it would assess its "non-core" businesses, and is prepared to exit businesses that are hampering its ability to get back in the black.

"It is clear that our business environment has changed from just the second half of last year, where we saw some of our non-core businesses on a path to growth and profitability that is now questionable," said CEO Hector Ruiz in a post-earnings conference call.

"We need to intensely scrutinize all our businesses in order to ensure that our core x86 and graphics products are on a healthy path to leadership and profitability," he said.

Ruiz's comments suggests AMD could soon offload its digital television and cell phone chip businesses, as the company searches for ways to stay afloat after six-consecutive quarters of losses and diminishing cash reserves.

Last week, the company said it would lop off 10% of its headcount. And AMD noted Thursday that it could rustle up about $400 million in cash by selling off older chip manufacturing equipment and some of its real estate if necessary.

In the three months ended March 29, AMD posted a net loss of $358 million, or 59 cents, a share, vs. a net loss of $611 million, or $1.11 a share, at this time last year. The results included an 8-cent charge for acquisition-related charges.

Analysts polled by Thomson Financial were looking for a loss of 51 cents a share.

"A seasonally weak first quarter was amplified by a challenging economic environment for consumers and lower-than-expected revenues of previous generation products, resulting in lower-than-expected revenues in all business segments," AMD CFO Bob Rivet said in a statement.

Revenue was down 15% sequentially at $1.5 billion, in line with dampened expectations following last week's preannouncement in which the company cut its sales forecast.

Despite the bad start to the year, AMD reiterated its commitment to achieve profitability on an operating basis in the third quarter -- a goal executives said will require significant cost reductions every quarter.

Given AMD's more than $5 billion of debt, incurred to finance its acquisition of graphics chipmaker

ATI

, and the high cost of servicing the debt through interest payments, analysts don't expect AMD to post a net profit until 2010.

AMD said its gross margin in the first quarter was 42%, down two percentage points from the fourth quarter, due primarily to decreased unit shipments of microprocessors. AMD said the average selling prices of its microprocessors were flat compared to those in the fourth quarter.

AMD recently began shipping its new generation of quad-core microprocessors to PC makers

Dell

(DELL) - Get Report

and

Hewlett-Packard

(HP) - Get Report

, after months of delays owing to a bug in the chip.

The delays left AMD shorthanded in its battle against

Intel

(INTC) - Get Report

, the world's dominant maker of PC microprocessors.

On Tuesday, Intel reported results that were slightly ahead of Wall Street expectations and said it achieved particularly strong demand for its server processors.

AMD said it expects revenue in the current quarter to decrease in line with seasonality, which CFO Rivet said has historically ranged anywhere from flat to down 10% sequentially in the second quarter.

Analysts were looking for flat revenue of $1.5 billion.

"Our position for the second quarter is we're cautious, we clearly still see the consumer pressures," Rivet said.

By filling out its selection of server and desktop products with quad-core chips, AMD said its average selling prices should get a boost and the company has an opportunity to regain some of the market share it has lost to Intel, particularly in the server business. At the very least, executives said, AMD can now hold on to its existing market share, which stood at 23% at the end of the fourth quarter according to Mercury Research.

AMD lost money in all four of its main business units in the first quarter. The company's computing division, which includes processors and chipsets for PCs and servers, saw sales fall 15% sequentially. AMD's graphics division posted an 11.2% sequential decline in sales, although revenue was up 17% year over year.

AMD's cash and marketable securities declined $136 million to $1.75 billion.

Shares of AMD were up 6 cents at $6.25 in extended trading Thursday.