AMD is not Going to Cut Its Way to Profitability
Breaking Even
AMD lost money again in the recent period. However, the company should break even soon if everything keeps going as it has been. Their profit margins on their processors are such that if they keep increasing sales they should break even soon.
But what does break even mean? AMD has lost about $1.6 billion over the past four periods. Breaking even does not mean that they make up that $1.6 billion. It means that they stop losing money for a quarter.
AMD could achieve profitability by other means, such as selling company fabs, slashing R&D, or spinning off its graphics business. However, the company is “not going to cut our way to prosperity”.
Less Pricing Pressure at the Low End
There have been reports of Intel taking its foot off the gas in the price war with AMD. Intel recently confirmed these rumors and said that Intel was being more selective in its business and walking away from business if it did not make sense. Possibly as a result, AMD has been able to sell processors for more. In notebook and desktop, AMD saw “improvement in ASP [Average Selling Price] in both categories”.
That being said, AMD denies that Intel had anything to do with AMD’s results in laptops and desktops. Both companies report that the environment remains competitive. AMD commanded higher prices, AMD says, not because of “less pricing pressure at that low end”.