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AMD's Terrible, Horrible, No Good, Very Bad Week

Advanced Micro Devices has had the sort of week that might make a computer chip company wonder if Murphy's Law was running the show instead of Moore's Law.

AMD CEO Lisa Su's spilling the beans about the month Microsoft plans to release Windows 10 was the most glaring misstep by the company. It was also by far the least worrisome, though we'd hate to have been the recipient of whatever choice words Redmond sent AMD's way over that goof.

AMD reported its first-quarter earnings last Thursday. Given Intel's own news earlier in the week that PC revenue was down considerably in the quarter, it was expected that the smaller chip firm would have struggled as well. But whereas Intel managed to boost its net income 3 percent from the year before on the strength of booming server chip sales, AMD stumbled to a $137 million loss, a major disappointment after the company managed a profit in the first quarter of 2014.

What's more, Su had some rather stunning news for investors who've perhaps become accustomed to the company's financial ups and downs, but expect AMD at least maintain a puncher's chance against rivals like Intel and Nvidia.

But AMD's client processor sales have been slipping and it's not clear whether the company's next-generation "Carrizo" chips will do much to turn things around any time soon. Su told investors she expected the PC market to "remain a challenge as our OEM customers and channel partners focus on carrying lean inventories based on the uncertain market conditions."

To be fair, Su also said some new AMD products the company is timing around the release of Windows 10 should produce a "better second half of the year."

Patrick Moorhead, principal analyst for Moor Insights & Strategies, was wary about AMD's short-term prospects but willing to give the company a chance to hit the second-half targets it has identified to turn things around.

"AMD will have a challenging 2015, as they have communicated. The uncertainty in the PC market is troubling as that's a big area of their short term opportunity," Moorhead said. "But I do expect some good processors and GPUs from AMD this year which could help them in the second half of 2015.

"Overall, AMD needs to focus on fewer things in areas where they bring unique value and where competition is desired by customers. PC and datacenter OEMs would be foolish to let AMD fall into an abyss, but it's equally important for AMD to give them strong reasons to embrace them. This is where a focused AMD comes into play."

If there's a second-half light at the end of the tunnel for AMD, getting there might require the AMD engine to push through to it while running on fumes.

To wit, Su said last week that AMD won't be releasing any new graphics processors until the second half of 2015. The company has been struggling for a couple quarters now to move mainstream GPUs and the feeling is that Nvidia has AMD beat across a number of price points in the discrete graphics market. If AMD doesn't even plan to have new GPUs for several more months, expect that swing towards Nvidia to continue.

Meanwhile, AMD has all but raised the white flag on its SeaMicro acquisition of several years ago. AMD completed its $334 million deal for the microserver and data center fabric innovator in March 2012, but never really managed to carve out a foothold for an ultra-dense server framework in the ensuing years, noted FierceCIO.

Su said last week that AMD was essentially ditching the SeaMicro venture but would retain SeaMicro's Freedom Fabric technology to see where that might lead.

"As we prioritize our R&D investments and simplify our business, we made the decision in the first quarter to exit the dense server systems business as we increase investments in our server processor development. We retained the fabric technology as a part of our overall IP portfolio," Su said.

SeaMicro's website now has the following message:

"On April 16, 2015, AMD announced plans to exit the SeaMicro dense server systems business, effective immediately."

Ouch. A $334 million acquisition may seem like small potatoes in a world where Facebook buys WhatsApp for $16 billion, but SeaMicro was supposed to be a major part of AMD's future vision of the data center, along with the chip maker's development of 64-bit ARM server chips.

AMD does still have its custom and semi-custom chip business—most importantly, its design wins in Microsoft's Xbox One and Sony's PlayStation 4. But Su said she didn't expect AMD's semi-custom revenue to really pick up until the second half of 2016, while the console business is particularly seasonal, only pulling in the really big bucks during the holidays.

It all adds up to an AMD that still appears extremely vulnerable, even after all the management shakeups, layoffs, belt-tightening, and spin-offs of the past several years.

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