AMD’s latest quarterly report shows just how bad off the company is. Year-over-year revenue fell 10% to $1.4 billion. Non-GAAP net income fell from $70 million to $46 million. AMD was Intel Corp.’s (NASDAQ: INTC) most direct competitor five years ago, and held about 24% of the server and PC chip market in 2007. Last year, its market share fell to 19%.
But that is not AMD’s single greatest problem. The company bought graphic chip maker ATI in 2006 for $5.4 billion. PC makers had begun to add more of these chips to their machines. AMD needed to keep pace with rival Intel and graphic chip maker Nvidia Corp. (NASDAQ: NVDA) The main result of the ATI transaction was that it saddled AMD with an unsustainable debt and did almost nothing to help AMD’s fortunes. AMD had revenue of $6 billion in 2007, while Intel’s was $38.3 billion. Last year, AMD’s revenue rose to only $6.6 billion, while Intel’s soared to $54 billion during the same period.
AMD has had three CEOs in the last five years, as it struggled to find a strategy for growth. The company’s greatest challenge may lie ahead as much of the personal computing market moves to tablets and smartphones. The chip used in the Apple iPad was designed by Apple, and made by Samsung. The Apple iPhone 5 will probably be powered by a quad core processor made by Samsung, the same chip used in the Samsung Galaxy S III. The other primary designers of the current generation of chips are Qualcomm Inc. (NASDAQ: QCOM) and ARM Holdings PLC (NASDAQ: ARMH). AMD’s products are almost nowhere to be found in this latest generation of portable devices.
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