AMD: Is the Worst Over ?

"AMD quad-core Opteron is now available"
AMD's processor business has been in the dumps for well over a year. But a resumption of quad-core shipments and a reduction in its workforce, though painful, may signal a turnaround.

(Credit: AMD)Before we get to the good news, let's first consider a draconian scenario for Advanced Micro Devices. As the chipmaker was announcing Monday that it would lay off 1,650 employees later this year, the stock was hovering just above $6, down from the mid-$20s a year ago and about $40 two years ago. If things do not improve, the company may split in two, according to Ashok Kumar, an analyst at CRT Capital Group.

Kumar sees one scenario in which AMD bifurcates into a manufacturing concern and a design company. If earnings don't trend up by the second half, this is a real possibility according to Kumar. "They don't have too many options with the debt overhang (from the ATI acquisition)," he said. The soft economy may not help matters either.

Kumar listed the well-known reasons for AMD's profit shortfalls: Lack of competitive offerings, blended ASPs (average selling prices) well below Intel's, and the delayed ramp of the high-end quad-core Opteron.

Resource:Cnet