AMD back in black

Chip maker posts its first profit in two years

The coming year is looking positive for chipmaker AMD, after the firm posted its first profit for two years.

According to analyst Context, AMD's penetration of the European PC channel is increasing, accounting for 17 per cent of reseller sales of desktops and notebooks in the third quarter of 2003.

AMD's market share was helped by a boost in its portable business where its share was 16 per cent of revenues and 22 per cent of units. This compares with 10 per cent of revenues and 12 per cent in unit terms in Q3 2002.

"Over the past six quarters AMD has managed to increase its share of business across all sectors," said Jeremy Davies, senior partner at Context.

"When you consider that 55 to 60 per cent of all its business is done via the channel in Europe, this is good news. AMD has been very good at working with local system builders and getting new business by wearing out the shoe leather."

AMD's Q4 2003 results back up Context's claims, which saw the vendor report a profit of $43m (£24m) on the back of a $1.2bn turnover. Although small, the quarterly profit is the first in nine consecutive quarters and a big turnaround from the same period in 2002, when AMD posted a massive loss of $855m on $686m turnover.

For the year, AMD's turnover was up 30 per cent on 2002 at $3.5bn, with a loss of $274m - a vast improvement on the $1.3bn net loss recorded for year-end 2002.

"Q4 profitability was driven by solid sales growth across all business lines," said Robert Rivet, AMD's chief financial officer.

"Sales increased in all regions, and we saw continued penetration in emerging markets, highlighted by record sales in China and Latin America. We also saw growth across all microprocessor brands, including strong AMD Athlon XP processor sales."

AMD is also reaping the rewards from its Spansion Flash business, which reported sales up by 161 per cent on a year ago, with a $1.2bn turnover.

Flash sales of $566 in Q4 were very strong, up by 34 per cent on Q3, and it reduced its operating loss to $3m, down from $59m. Despite the overall success of Q4, AMD is cautious about Q1 2004, saying it expects chip sales to be down slightly and Flash sales to be flat.