AMD: Six-core Istanbul server CPUs moved up to May

During the early part of this afternoon's conference call with analysts this afternoon, AMD CEO Dirk Meyer told analysts -- one day ahead of a momentous product call scheduled for tomorrow afternoon -- that strong reception and testing for its Istanbul-architecture server CPUs will enable the company to start orders for its first six-core products next month. This will enable shipments of six-core systems from suppliers as soon as June, said Meyer.

This despite a continuing, if somewhat diminished, loss for the first quarter of the year of $416 million, on revenue that was 21% lower annually. The server side of the business, Meyer admitted twice, was something of a downer for the quarter, while sales of CPUs and graphics chips in the desktop and mobile segments rose to compensate. The company continues to be cautious about its outlook, and disputes Intel's claim earlier in the week that the fallout in the technology industry had hit bottom.

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7:00 pm EDT April 21, 2009 - Tomorrow afternoon, AMD will announce significant accelerations in its technology roadmap, one portion of which will be an early introduction of the company's 45 nm six-core server processor, code-named Istanbul. This news came late this afternoon from CEO Dirk Meyer, during his quarterly conference call.

"I am pleased to announce that, because of our strong engineering execution, we are pulling in revenue shipments of Istanbul into May, for system availability in June," Meyer told analysts. When Istanbul was originally announced in March 2008, it had been scheduled for sometime within the second half of this year.
That move comes on the heels of Intel's announcement last week that it was moving up the shipment dates of its 32 nm Westmere processors, but also extending its window of availability out further, changing Intel's notorious "tick-tock" timing. AMD lost some ground in the server CPU department last quarter, though its executives deny it lost market share to Intel -- they contend it's a bad market for enterprises all around.

"Server was definitely a weak spot," noted AMD CFO Bob Rivet this afternoon. "Spending has been clamped down pretty hard, so server was actually a decline quarter-on-quarter. Strongest growth was in notebooks, then desktops were reasonable but still grew positively quarter-on-quarter."

Revenue from CPU sales overall was still down annually by 21%, but up 7% over the disastrous fourth quarter of last year, to $938 million. Graphics processor sales declined 15% annually to $222 million, in the only market segment where average selling prices (ASPs) actually rose a bit. But with costs out of the way, even with lower prices, gross margins bounced back a full twenty points to 43%, besting AMD's target of 40%. That made this last quarter's loss not nearly as dreadful as the holiday economic storm. (AMD's numbers incorporate the initial operating figures for Global Foundries, its spinoff that now produces chips for AMD.)

"A bunch of moving parts," as Meyer characterized it. While server ASPs were up sequentially, he stated, "On the desktop side, ASPs were flat to actually up a little bit; on the notebook side, ASPs were down, mostly driven by a mix shift in the marketplace towards lower-end machines. In addition, we walked into the quarter with a pretty big inventory position, so we clearly found opportunities to move inventory, which was also part of what drove the quarter-to-quarter ASP decrease. Finally, [when we] stand back and look at it, our server business was down a little bit quarter-on-quarter, while both the desktop and the notebook businesses were up quarter-on-quarter, which affects the overall ASP and moves it down."

So is it over, as Intel indicated it was? Meyer wasn't ready to go that far, telling one analyst, "I would say that the inventory correction is largely behind us, and what we're left with is just uncertainty about end user demand, with seasonal patterns and the overarching economic question playing off against each other.

"What I would characterize the rest of the year as, [is] one of a technology leapfrog," Meyer told another analyst. "Intel came off their [analyst call] and announced the availability of Nehalem. Of course, that's going to take quarters to ramp across the marketplace. Meanwhile...Shanghai, the quad-core Opteron part, plays extremely well and offers great value, particularly against highly scalable systems and high-density cloud computing installations."
While Intel's tack last week was to project a fuzzy picture of the future as though it were clearer and upbeat, AMD's strategy today was not to project much of a picture at all, but to stay upbeat nonetheless.

"We are executing well on every major element of our strategy," stated CFO Rivet, "from launching Global Foundries to reducing our cost structure to delivering a growing portfolio of platforms tuned to today's increasingly value-conscious end user mindset...We entered 2009 a very different company than the one you were following as recently as a year ago. AMD, the product company [as opposed to Global Foundries] is a much nimbler operation, right-sized to respond to today's economic uncertainty, as well as the dynamic demands of our world-class global customer base."

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