On Oct. 18, microprocessor maker Advanced Micro Devices (NYSE:AMD) released third-quarter earnings for the period ending Sept. 29, 2007.

  • They weren't pretty but could have been much worse. Gross margins were about 8 percentage points worse last quarter, and the net loss was about 33% lower.
  • Operating cash flow is back to the cheery levels of yesteryear already, although hefty capital expenses ensure that the cash balance trickles downward regardless.
  • These financial troubles are AMD's alone and not the industry's; note how AMD's prominent competitors remain profitable and get more CAPS respect.

(Figures in millions, except per-share data.)

Income Statement Highlights

Q3 2007

Q3 2006

Change

Sales

$1,632

$1,328

22.9%

Net Profit

($396)

$136

N/A

EPS

($0.71)

$0.27

N/A

Diluted Shares

554

497

11.5%

Get back to basics with the income statement.

Margin Checkup

Q3 2007

Q3 2006

Change*

Gross Margin

41.0%

51.4%

(10.4)

Operating Margin

(13.9%)

9.0%

(22.8)

Net Margin

(24.3%)

10.1%

(34.4)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q3 2007

Q3 2006

Change

Cash + ST Invest.

$1,528

$2,357

(35.2%)

Accounts Rec.

$682

$688

(0.9%)

Inventory

$839

$466

80.2%

Liabilities

Q3 2007

Q3 2006

Change

Accounts Payable

$1,064

$901

18.0%

Long-Term Debt & Capitalized
Lease Obligations

$5,117

$3,672

39.4%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q3 2007

Q3 2006

Change

Cash From Ops.

$223

$230

(3.0%)

Capital Expenditures

$419

$425

(1.4%)

Free Cash Flow

($196)

($195)

(0.7%)

Owner Earnings

($481)

($91)

(428.5%)

Free cash flow is a Fool's best friend.

Competitive Context

Market Cap

P/E Ratio

CAPS Rating

AMD

$8,040

N/A

**

Intel (NASDAQ:INTC)

$157,500

27.7

***

NVIDIA (NASDAQ:NVDA)

$21,700

41.0

*****

Sun Microsystems (NASDAQ:JAVA)

$21,230

45.8

***

QUALCOMM (NASDAQ:QCOM)

$69,330

25.2

***

The latest reported numbers from Capital IQ. Nobody is anybody without some context.

Related Foolishness:

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.