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AMD misses earnings target

Despite good Opteron sales

Growing demand for its Opteron server chips pushed AMD to greater second-quarter profits, but the company failed to meet financial analyst expectations.

AMD yesterday reported a profit of $89m (about £48m) for the quarter, far above its mark of $11m (£5.9m) last year.

Despite the profit, AMD's earnings of $0.18 per share missed a forecast of $0.22 per share on revenues of $1.25bn (£674m) from analysts surveyed by Thomson Financial.

AMD posted $1.22bn (£658m) in revenue for the quarter ended 2 July, up from the $797m reported by the company's processor division last year. Including revenue from its Spansion flash memory unit, which was spun off in December 2005, AMD reported $1.26bn (£679m) in the same quarter a year before.

Strong demand for AMD's Opteron server chip accounted for the 53 percent jump in revenue, AMD said.

Opteron chip sales alone rose 141 percent year on year, chief financial officer Robert Rivet said in a conference call with investors.

"We are well on our way to meeting our goal of 30 percent year-end server market share," he said.

He doesn't have far to go. As of Q1 2006, AMD had 22.9 percent share compared with Intel's 76.8 percent, comparing units sold of Opteron versus Xeon, said Shane Rau, an analyst at IDC. The remaining 0.3 percent belongs to IBM's G5 processor.

"The market had been hungry for a second source for a long time. That alone gives you 10 percent, just for providing a product that competes on price. If you add strong performance and rich feature sets, then you can gain additional share, and I think that's what we're seeing with AMD," he said.


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