Chip maker Advanced Micro Devices suffers staggering $400 million Q3 loss

Chip maker Advanced Micro Devices (AMD) actually did more business - posting $1.6 billion in revenue for the third quarter compared with $1.33 billion last year - but suffered a loss of $396 million compared to a $121 million profit a year-ago. The company''s $5.4 billion purchase of graphics board maker ATI was responsible, the company said.

AMD was in the spotlight this quarter, having fired its top sales executive earlier this summer after slumping results. The company strongly took on larger competitor Intel last year, but this year its deep-pocketed rival has been pushing back.

Chief financial officer (CFO) Robert J Rivet pointed out the brighter side of the picture, saying the company had sold a record number of microprocessors and begun shipping its new quad-core Opteron server processors during the quarter. But investors didn''t share his optimism, with AMD shares down more than 5 per cent to $13.81 on Friday 19 October.

AMD executives say they have won back some market share from Intel during the quarter. "For the second quarter in a row, we gained CPU (central processing unit) market share," said president and COO Dirk Meyer.

Mobile processors sales were strong, hitting an all-time high for the company, Meyer said. Graphics revenue rose 29 per cent, from the first wave of AMD-ATI products. AMD needs to get back to profitability quickly. The company has to develop financial flexibility in order to be able to compete with Intel over long haul.

The history has so far been that AMD makes a technological surge with a better product before Intel responds and takes back market share. Now, AMD has built momentum around the Opteron server processor and its mobile chips are gaining market share. But it has to be wary of a long-range pricing war with Intel.

AMD executives say the transition to a 45-nanometer fabrication process is on track. This could help drive down production costs, to keep pace with Intel''s development. The company says it sold "tens of thousands" of its new Opteron quad-core chips in the third quarter, and expects to ship "hundreds of thousands" in the fourth.

The Opteron is a key product. It builds on the success of the early Opteron chip family, which convinced most technology vendors to build AMD chips (as opposed to Intel chips) into their servers.