Tuesday, October 23, 2007

AMD Projects Positive Adoption of New ATI Radeon Graphics Chip

Advanced Micro Devices hopes to reverse negative trend for its graphics division with a new graphics processor code-named RV670. At least, the company says it is on-track to release the novelty in November. Unfortunately, the company still says that it does not expect the new ATI RV670 to impact the company’s financial results significantly.

After finding itself half a year late with the introduction of its latest flagship ATI Radeon HD 2900 XT graphics card, losing 40% of former ATI graphics revenues and failure to introduce the highest-performing graphics solution ATI, graphics product group of Advanced Micro Devices, says it is back on track with the launch of its performance-mainstream code-named RV670 graphics processing unit (GPU). At least, the company managed to increase graphics revenues by almost one third, which is still well-below results of “old” ATI, but is a record for “new” AMD.

“We will launch the RV670, the world’s first 55nm GPU in the fourth quarter. […] Based on the upcoming release of the RV670, we’re pretty bullish about being able to participate in a bigger and more profitable piece of the business. […] Customers are going to love it,” said Dirk Meyer, chief operating officer and president of AMD, during the conference call with financial analysts.
Based on what is known about the code-named ATI RV670 product, the new GPU features DirectX 10.1, PCI Express 2.0, DisplayPort and double-precision floating point calculations.

While the list of improvements compared to the code-named R600 seems significant on paper, end-users getting the new graphics cards will hardly the aforementioned capabilities really useful right now. ATI RV670 is projected to deliver “R600 performance, better thermal & power”.

AMD said that the success of the new ATI Radeon HD 2000 series of graphics processors led to increased unit shipments and revenue, which drove graphics segment revenue to $252 million, meaning that it grew 29% from the second quarter of 2007. Still, $252 million is considerably less than $325 million recorded by ATI in one of its last quarters. Moreover, already now AMD expects its graphics revenues to remains on the same level compared to the third quarter.

“Seasonally, the fourth quarter is not strong in the GPU marketplace. It is actually typically flat to slightly down. We’ll have to work real hard to grow sales quarter on quarter, which we’ll do, but it is hard to make a lot of progress if you don’t have it from the top line,” said Bob Rivet, chief financial officer at AMD.

“When we launch the [RV670] product, we anticipate doing so with cards available in channels and therefore, we will drive revenue in the quarter. Obviously, with a mid-quarter launch and on a quarter-billion revenue basis, that’s not going to contribute materially to the quarter, but it will provide some upside,” Mr. Meyer clarified.

AMD last week reported third quarter 2007 revenue of $1.632 billion, an 18% increase compared to the second quarter of 2007 and a 23% improvement compared to the third quarter of 2006. In the third quarter, AMD reported an operating loss of $226 million, and a net loss of $396 million, or $0.71 per share. Third quarter 2007 gross margin was 41%, compared to 33% in the second quarter of 2007 and 51% in the third quarter of 2006.

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