SAN FRANCISCO --
Advanced Micro Devices'
financial warning last week was chock full of special charges, from the $880 million writedown to $32 million in restructuring charges.
But optimists may have taken heart in what was missing from the pre-announcement: any mention of a revenue shortfall.
Compared to three months ago, when AMD cut its revenue estimate due to poor sales in each of its businesses, this represents a modest measure of progress. With a slew of new products coming to market, AMD's business may no longer be deteriorating as badly as it once was.
But the company is still a long way from prospering.
Analysts expect AMD to post revenue of $1.45 billion in the second quarter (a sequential decline of 3% in keeping with seasonality for this time of year) with a loss of 52 cents a share, when it reports earnings after Thursday's closing bell.
AMD has already racked up a cumulative $4.3 billion in losses over the past six quarters, a sizeable profit drought for a firm playing in the capital-intensive chip business, and whose main competitor is
, the world's largest chip maker.
The gloom is reflected in AMD's stock price, which recently fell to the
lowest level in nearly six years
. On Wednesday, shares were up more than 5% to $4.98.
More important than the second-quarter financial results, which are not expected to offer much cheer, will be the updates on how AMD intends to get itself out of this mess.
As always, the potential for the company to announce its long-awaited manufacturing reorganization plan hangs in the air. CEO Hector Ruiz began talking about the plan -- which some speculate could involve spinning off the company's factories -- more than a year ago, but has yet to provide any meaningful details.
The apparent lack of progress on the so-called "asset smart" plan has raised doubts about AMD's ability to get the deal done, putting further pressure on the stock, say some investors.
Investors and analysts are also waiting for AMD to pull the trigger on other restructuring moves.
Patrick Wang, an analyst at Wedbush Morgan Securities, says he's surprised it has taken AMD so long to sell the consumer electronics business, given statements three months ago by AMD that it was assessing certain non-performing parts of its business.
Writing down the value of the consumer electronics business
was likely necessary to make it palatable to prospective buyers such as chip companies and cell phone handset firms whom Wang says have been in deal discussions with AMD.
"In order for
AMD to sell it they had to do the impairment," Wang says.
Shedding that business, which had an $8 million operating loss on revenue of $81 million in the first quarter, combined with AMD's ongoing efforts to eliminate 10% of its headcount, are necessary for AMD to meet its goal of achieving profitability (on an operating basis) by the third quarter.
After backing off a similar goal last year, AMD can ill afford to break its word with the Street again, and any update on the profitability timeline Thursday will carry a lot of weight.
The other key to AMD's salvation are products. Many analysts have essentially dismissed the company's quad-core Barcelona processor -- the long delays getting the chip out the door have quashed any hope for AMD to gain share in the market for servers made by the likes of
. At best, they say, Barcelona's release can staunch any further loss of share to Intel.
The situation is different on the graphics side of the business, which represents 19% of total revenue, and where AMD has suddenly regained its mojo. The latest batch of chips from AMD's ATI group have put graphics powerhouse
on the defensive and prompted Nvidia to cut prices on its latest products.
Earlier this month, Nvidia
slashed its quarterly revenue forecast
While the gains from AMD's new graphics chips are unlikely to show up in the second-quarter results, the degree to which they affect AMD's third-quarter forecast will be closely watched by investors.
The average analyst expectation calls for AMD to post a loss of 30 cents a share on revenue of $1.6 billion in the third quarter, according to Thomson Reuters.
With so much in disrepair at AMD, any sign of progress is good news.