Price war with Intel takes its toll on AMD

Posted by Wolfgang Gruener

Sunnyvale (CA) - Despite its recent avalanche of design wins and market share gains, AMD appears to be vulnerable to changing market environments. For the first quarter of this year, the company reported a sequential decline in revenues and operating income. But thanks to its Opteron processor and compared to last year, AMD still holds a strong position in the microprocessor market.

AMD said that sales for the quarter were $1.22 billion, down about 8.7% from the first quarter and about in line with the revised quarter estimate published on 7 July. Operating income was $102 million, down 60.6% sequentially. Compared to the second quarter of 2005, revenues are up 52.6%; the operating income improved by 22.9%.

According to the company, sales dropped primarily because of "the challenging pricing environment for high-volume desktop processors which negatively impacted average selling prices (ASPs)." Total microprocessor unit shipments were down 4% sequentially, AMD said.

The fact that AMD was able to achieve 53% year-over-year growth was attributed especially to the Opteron processor, which achieved "double-digit percentage growth quarter-over-quarter" and delivered 26% more revenue than in the first quarter of this year. The workstation and server chip allowed AMD to record its twelfth consecutive quarter of greater than 20% year-over-year microprocessor sales growth.

AMD said that it "expects demand for its products to be seasonally strong in the second half of 2006." As a result, the firm believes that third quarter sales will increase sequentially.