On Thursday night, we get the lowdown on the second-quarter results of Advanced Micro Devices (NYSE:AMD). Here's the early word on what to expect out of the troubled chip maker.

What analysts say:

  • Buy, sell, or waffle? Twenty-eight analysts keep an eye on AMD. Their recommendations come on a balanced bell curve -- six buys, six sells, and 16 hold ratings. In our Motley Fool CAPS community of 60,000 investors like you and me, it's a two-star stock, based on input from more than 1,800 users.
  • Revenue. The average analyst expects about $1.26 billion of net revenue, 3% above last year's $1.22 billion.
  • Earnings. Income is a different story. There, Wall Street is looking for a loss of $0.85 per share. One year ago, AMD posted an $0.18 per-share profit. Those were the days.

What management says:
The last quarter was a boggy, soggy, squitchy picture, truly -- enough to drive a nervous man distracted. Management said plenty about its recent results in the latest earnings call, so let me just pick a few cherries from that event.

The age-old battle with crosstown rival Intel (NASDAQ:INTC) (the corporate campuses are just a five-minute drive apart) has finally driven AMD to cut staff and expenses, but most of those reductions are supposed to come in the form of delayed factory upgrades and consolidated sales offices wherever that makes sense. A confluence of factors drove this change, such as that pesky price war, the newfound complexity of AMD's product portfolio, and the need to stay competitive with cutting-edge manufacturing.

What management does:
These downward numerical trends are hardly ideal, and the combination of shrinking margins and dropping revenue is sending many investors running for the hills in a panic. Not me, though -- and I'll tell you why. Read on, gentle Fool.

Margins

12/05

3/06

7/06

10/06

12/06

3/07

Gross

40.9%

46.3%

50.0%

52.7%

50.1%

43.2%

Operating

2.4%

7.4%

9.4%

10.6%

8.2%

-4.9%

Net

2.8%

6.2%

7.5%

8.8%

-2.9%

-17.3%

Y-O-Y Growth

12/05

3/06

7/06

10/06

12/06

3/07

Revenue

16.9%

19.3%

18.4%

8.4%

-3.4%

-6.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I can see three outcomes of the Intel situation. In one scenario, Intel wins in a tour de force of market power, and AMD goes out of business or fades into the shadows like the Centaur and Cyrix hopefuls before it, not to mention Transmeta (NASDAQ:TMTA). As an AMD shareholder, I obviously think this to be the least likely of the outcomes, and the most uncomfortable.

In another, AMD gets over this uncomfortable road hump with the release of its next-generation quad-core chips at the end of this summer, and then parlays the renewed street cred into newfound profits and market share gains. This would be ideal, and perhaps the most likely outcome. It's still just a short-term victory in that case, and the company will face many more challenges of this sort over the next years and decades.

Then there's the third option -- buyout alert! You heard the rumors earlier this year as AMD was sorting through its financial shortcomings, which were eventually settled through a, um, creative arrangement with Wells Fargo (NYSE:WFC). "Private equity" was the most commonly used catcall back then, but such a deal might make sense for IBM (NYSE:IBM), too. The companies already share process technologies and some hardware facilities, and IBM is cash-rich with a previous history in chip design.

Anything is possible, but I've put my chips on the AMD line, and I think the company has the chutzpah to see this bad hand through. It's a notoriously volatile stock, and we're in one of those deep, deep troughs right now -- perhaps it's time to place your bets or double up, if you can stomach a wild ride for a few more years.

Intel is a Motley Fool Inside Value pick. What is Wall Street overlooking now? A free trial gives you all the picks and how they're doing.

Fool contributor Anders Bylund is an AMD shareholder but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure will help you find the road ahead.