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Sales down over 10 percent at chip maker AMD

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July 21, 2012

The negative news keep coming in for chip maker Advanced Micro Devices. In its second quarter, server processor sales were down more than the company had expected. But AMD doesn't appear to be losing market share on server chips and has a new engineering team focusing on longer-term plans to try to give its number one rival Intel some cause for concern.

As some in the industry had expected, AMD didn't do so well in its second quarter, with sales down over 10 percent to $1.41 billion and net income down almost 40 percent to $37 million.

The computer solutions group at AMD, which makes processors and chipsets, had $1.05 billion in sales, down 13.4 percent from the year-ago period and also down 13 percent sequentially.

AMD shipped its Bulldozer Opteron 4200 and 6200 processors in November 2011 and clearly got its boost in sales for these chips in the first quarter. It was then adversely affected by the Xeon E5 launches in March and May from Intel. Even with sales down, AMD was able to post an $82 million operating income in the computing colutions group.

AMD's Graphics group had sales of $367 million and posted an operating gain of $31 million compared to an operating loss of $7 million a year ago.

AMD CFO Thomas Seifert said that server processor sales in Q2 were impacted by lower unit shipments compared to Q1 and also lower average selling prices (ASP), which he characterized as "slight." Chipset revenues, which includes both PC and server circuits, declined in the quarter as well, mainly because of lower ASPs.

That could mean OEM customers going for lower-cost SKUs, AMD cutting prices, or both. Rory Read, the CEO at AMD since late last year, said that AMD "experienced a pause" in its server-related business in the second quarter after a good uptake among supercomputing and other high-performance computing customers earlier in the year and that AMD's focus "has to be on building similar acceptance with mainstream IT buyers" and that AMD believed it could drive "modest share growth" in the near term based on its relative positioning in the server racket against Intel and RISC processor suppliers.

AMD's Sea Micro acquisition done last year, which was mostly for AMD to get its hands on the "Freedom" 3D mesh/torus system interconnect at the heart of the SM10000 chassis, is also a key to AMD's future, Read said.

"In the server segment, we also see market expansion opportunities with the growing adoption of dense server technology," Read added. "We have a differentiated leadership position in this market segment as a result of our acquisition of SeaMicro," he said.

"Our IP foundation allows us to deliver disruptive server products and a technology roadmap that strengthens our long-term competitiveness in this emerging market," Read said.

To help AMD do a quantum leap as it did ten years ago with the launch of the first "Sledge Hammer" Opteron processors, Read has hired Lisa Su, formerly CTO at Freescale Semiconductor, to be senior vice president and general manager of AMD's Global Business Units.

On June 27, AMD hired Suresh Gopalakrishnan, who was vice president of engineering at Exteme Networks, to be vice president and general manager of its server business unit, reporting to Su. And on June 15, it had formed an Embedded Systems Group to leverage its chips in the embedded space and put Arun Iyengar, formerly vice president at FPGA maker Altera, in charge.

AMD hasn't said much about its plans for Sea Micro. Su added that the SeaMicro acquisition closed in the first quarter, and that the integration had gone smoothly.

"We have been pleased with the capability and the talents that the team have brought onboard, adding that AMD is still talking to customers about the potential for Sea Micro-based technology and viewed SeaMicro as a long-term growth path," said Su.

In other IT news

There seems to be a bit of a change in thinking here, at least as storage firm provider EMC sees it. Last year, the company said loudly to the whole IT industry that digital tape is passé, obsolete and outdated.

EMC then went on to demonstrate the world's biggest ball of entangled tape you've ever seen at all the marketing events hosted by the company.

Well this year things are different, so what's with that? There is no more aggressive 'anti-tape religion' talk at EMC anymore and it appears that the company's attitude to the storage medium has totally changed, thanks to a growing focus on managing huge data volumes. And that has nothing to do with the Cloud by the way...

EMC's new way of thinking which is as 180 degrees as you can possibly imagine seems to be that for data backups, information should go to disk whether it's in an Avamar or Data Domain backup system. Data to be archived should also go to disk unless it is a super-large data set and then the enterprise customer wants it kept on tape.

"We would still like all protected data to be on disk," said William Jenkins, EMC disk backup division vice president. His business strives every day to make disk economics better, but he admitted himself that super-large datasets could be best stored on tape drives, not disk. Are you a bit confused? Yes, but let's move on.

To be sure, a large amount of tape backup gear is still being acquired by large companies every year and you can bet a fair amount that EMC still wants a good chunk of that multi-billion dollar market.

We then asked Jenkins if Linear Tape File System made any difference to the storage medium's role. Rob Emsley, a senior director for product marketing in Jenkins' division said "We haven't seen a lot of demand for it from the customers we talk to. It may make using archive tape a little easier but it doesn't fundamentally change things."

But make no mistake-- archive tape isn't an unwanted product in EMC's house, but it's not quite as loved as the disk-based solution. But if EMC can still make money off tape, then why not! It's business as usual at EMC it seems.

In other IT news

China is still lagging far behind the rest of the world when it comes to internet technology, even if it does have the full backing of its government, according to the latest numbers from local content delivery agency ChinaCache.

The report reveals that the average connection speeds for each of the country’s provinces, including Shanghai and Beijing, are too slow when compared to most other Asian countries and Europe. As many businesses and home workers in the region will already attest to, despite China’s very ambitious plans to build rapid fibre optic networks, internet connection speeds are still frustratingly low.

Unsurprisingly, Shanghai and Beijing come top with average connection speeds of around 4.0 MBPS and 3.6 MBPS respectively. After this, average speeds drop-off a cliff. The Anhui province comes next with an average speed of less than 3 MBPS.

The bottom three regions, Shanxi, Guangxi and Xinjiang, which between them have a population of over 100 million people, all fail to top 1.5 MBPS, displaying the immense digital divide which still exists in China between the major cities and far-flung provinces.

Source: AMD Corp.

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