The ailing chipmaker is set to give the Street an important update on its financial condition when it reports second-quarter earnings results Thursday.
And in the wake of a
disastrous first quarter in which AMD twice ratcheted down expectations ahead of the results, the mere absence of a preannouncement this time around is a good sign.
Or at least it's the best possible sign, given the chipmaker's grim predicament.
With more than $3 billion in debt and dwindling cash flow and profit margins, AMD has the look of damaged goods.
Analysts expect AMD to report a loss of 85 cents a share in the second quarter, compared with a profit of $88.8 million, or 18 cents a share, a year ago.
The top line offers some encouragement. The Street's expectation of $1.26 billion in sales would represent a 2% sequential increase, in line with the company's guidance of flat to slightly increased revenue in the second quarter.
One thing helping AMD's top line is the improving demand for the PCs that its microprocessors sell into, say analysts.
That should allow AMD to show increased unit shipments in the second quarter, as
did in its
second-quarter report earlier this week.
"The only positive for both stocks is that the market for PCs is getting a little stronger," says Fred Weiss, a chip analyst at Atlantic Trust Stein Roe, which has a position in Intel but not in AMD.
Of course, Intel also said that
average selling prices decreased in the second quarter, which could bode ill for AMD's prices.
There Is Movement
AMD also announced that it will ship its forthcoming Barcelona processor in August -- despite rumors of delays -- and in May, the company released a new graphics chip from its acquired ATI operations.
Though the graphics chip has proven something of a disappointment from a critical standpoint, the fact that AMD finally got the product out the door and appears to be on track with Barcelona has removed two negatives that were weighing on the stock, says American Technology Research analyst Doug Freedman.
After sliding almost 50% from its 52-week high of $27.90 throughout the year, AMD's stock has recovered about 10% in the last three months. Shares closed down 38 cents, or 2.4%, to $15.46 Wednesday.
"Once you've taken the negative catalysts out of the equation you're really only left with potential positive catalysts," says Freedman, who upgraded AMD to a buy in May.
Investors are particularly eager to hear about any major changes in AMD's manufacturing plans going forward.
AMD CEO Hector Ruiz hinted at a new direction in April, when he said the company was evaluating various "asset light" business models that would entail outsourcing more of AMD's chip production to third-party manufacturers.
At a time when AMD is on shaky financial footing, such a move would save it a bundle on capital expenditures.
Whether AMD chooses to farm out certain aspects of its chip production to partners, as
has successfully done, or even go completely fabless, as some analysts have speculated, remains to be seen.
AMD operates a pair of fabs in Dresden, Germany, and has an option to build a third fab in Saratoga, N.Y. In order to collect some $650 million in subsidies and incentives offered by the state of New York, AMD must begin construction sometime between July 1, 2007, and July 1, 2009.
With the clock now ticking on the New York project, AMD has even more reason to figure out the right manufacturing model. And the company will have plenty of opportunities to address the issue during its earnings call Thursday and at its technology briefing with analysts a week later.
American Technology Research analyst Freedman doesn't expect AMD to reveal much about its manufacturing plans or any other strategic or product news at the forthcoming briefings, however.
"Any time they've given the Street details, Intel has beaten them to the punch or blocked them," says Freedman.
Silence is not something tech companies are particularly good at. But it could prove to be AMD's most valuable asset.