Dark times in Sunnyvale
AMD on Monday announced that revenue for the second quarter ended June 27, 2015, is expected to drop 8 percent sequentially, compared to the company's previous guidance of a 3 percent decline, plus or minus 3 percent. The Sunnyvale chip designer blamed its financial struggles on weaker than expected PC demand in the consumer sector, which is negatively affecting its APU sales.
Adding to its financial woes is a one-time charge of $33 million associated with moving several of its existing 20 nanometer designs to a "leading-edge FinFET node." The company didn't state whether TSMC, Globalfoundries, or both will be aiding the transition.
Either way, this is an important time for AMD. Historically speaking, AMD has always been able to bounce back from financial situations that seem dire. And perhaps that will be the case going forward, as the move to FinFET nodes should result in products that are more competitive with rival Intel's offerings, though it won't happen overnight.
To state the obvious, more competitive products are exactly what AMD needs right now. An article in USA Today underscores this notion by pointing out the growing gap between AMD and Intel. While AMD's revenue continues to decline, Intel is seeing revenue growth, albeit at a slow rate these days.
Going back in time, AMD's revenue was more than a quarter of Intel's in 1990. The ratio held steady for a few years before dropping below 10 percent in the late 1990s. Then in the 2000s, AMD brought it back up to around 15 percent, which is where it stayed at for several years. At the time, Intel was infatuated with its Netburst architecture, while AMD was kicking out slower clocked but more efficient processors.
Fast forward to today and AMD's revenue is again less than 10 percent of Intel's. AMD isn't incorrect in pointing the finger at weaker than expected PC sales, but that alone doesn't account for the company's financial situation. Simply put, Intel has the better processor options, and with Skylake-S right around the corner, that's probably not going to change this year.
The good news for AMD is that Windows 10 is also right around the corner, which could lead to a spike in PC sales.
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