AMD Barcelona - technical details in pictures ...

Many semiconductor companies mention in their disclaimer in quarter conference calls that the “semiconductor industry is generally volatile.” This phrase especially applies to AMD, which was flying high in 14 consecutive quarters, but was brought down to brutal reality in just two quarters - due in part to challenges the company isn’t used to dealing with and in part to competitors that have been gaining lots of traction.

President Dirk Meyer explained that the company experienced a “perfect storm” of challenges in Q1 that resulted in declining shipment numbers and a decrease in average selling prices. The company is still trying to recover from delivery issues in the channel, where many retailers switched to Intel, as AMD neglected smaller customers in Q4 and provided preferred treatment to new and larger customers such as Dell and Lenovo. Pricing pressure remained intense, as Intel “did everything in its power to protect its monopoly,” Meyer said. Delayed products, especially in the GPU segment, declines in the consumer electronics market, as well as a much more complex product portfolio than the company has had in past years added to an already difficult business environment.

AMD headquarter in Sunnyvale

AMD did not release any numbers on how dramatic the impact may have been on the basis of its microprocessor market share, other than generally admitting that it has suffered market share losses and that its microprocessor/chipset department lost $321 million during Q1.

However, market research firm iSuppli did a quick analysis of market data and came up with numbers that indicate that AMD’s battle against Intel has been thrown back to Q3 2005. In the overall microprocessor market (including all microprocessors and not just x86 units), AMD’s share is estimated to have dropped to 11.1%, down 4.6 percentage points from 15.7% in the fourth quarter. Rival Intel has gained 4.5 points in the same time frame and is estimated to hold about 80.2% of the market. “We knew Intel had gained share compared to AMD in the first quarter, but the sales gap between the companies widened to a much greater degree than we had expected,” said Dale Ford, vice president, market intelligence services for iSuppli. “The microprocessor market-share disparity between the companies expanded to 69.1 points in the first quarter, up from 60 points in the fourth quarter of 2006.”

Read on the next page: How AMD plans to bring back growth