In its report on third-quarter 2004 results, AMD swung from a year-ago loss of $31 million to a profit of $43.8 million, or $0.12 per share. This comes at a time when companies in every element of the semiconductor market seem to be streaming to the confessional with bad news, most recently Magma Design Automation (Nasdaq: LAVA ) , Zoran Corporation (Nasdaq: ZRAN ) , and Credence Systems (Nasdaq: CMOS ) . AMD's improved performance comes at a time when there are no tailwinds to be found.
AMD reported a 34% rise in sales of processors over the same quarter last year. Processors account for a little more than half of the company's total revenues. For comparison, Intel's own forecasts in processors call for growth from 4-5%, a number that may prove, if anything, optimistic. As we noted in July, one of the major drivers for AMD's re-emergence (maybe I should say re-re-re-emergence) is that for the first time it is AMD and not Intel that is driving one of the key chip-design movements. In this case Intel announced that it would offer a chip based on AMD's Opteron 64-bit processors. In its conference call, AMD noted that its 64-bit chip sales had doubled and now make up more than a third of all computer chip sales.
Significantly, a substantial drop in flash memory sales, particularly to the mobile phone industry and large customers such as Nokia (NYSE: NOK ) , impacted overall revenues. AMD's sales of memory chips decreased by more than 20% In this case, AMD was not able to withstand overall industry weakness.
But flash memory isn't the core of AMD's product offerings; microprocessors are. Ask AMD in which segment that they'd prefer to see industry-beating growth, and they'll take microprocessors every time and twice on Saturday.
AMD has managed to snatch defeat from the jaws of victory more times than its shareholders would care to remember. This time, though, it seems that AMD has managed to take a bite out of Intel, and the numbers bear this out in stark relief.
Bill Mann owns none of the companies mentioned in this article.