Chipmaking rivals Advanced Micro Devices (NYSE:AMD) and Intel Corp. (NYSE:AMD) have been fighting headstrong for so long that it's hard to remember when the war began. The war -- that is, in the microprocessor biz -- has not only kept scrappy AMD in league with the world's largest chipmaker, but has kept Intel on its toes in terms of technology output, IP discoveries, pricing and more.But, in recent year, both Intel and AMD have had disappointing quarters and lackluster sales as forecasts missed the boat and extreme pricing wars drove down margins in a large way. Wanting to ensure it has the right headcount for the job and demand at hand, Intel has even recently announced the layoff of 10,000 employees as it gets its house back in order and restructures. AMD spent over $5 billion to buy graphics chipmaker ATI from Canada -- just to give Intel another headache.
But AMD has stumbled in its latest quarter, as lower unit prices signaled market watchers in Wall Street that the ongoing price war between Intel and AMD continues to beat up on the smaller, scrappier rival. Although AMD said that it expected a "seasonally strong" fourth quarter, which included the holiday shopping season for PCs, it had anything but that in the midst of the ATI purchase and fierce pricing pressure fro Intel.
AMD said that its fourth quarter gross margin and operating income were hurt by lower average selling prices, though unit sales rose over all. Hmm -- more volume but lower selling prices? Just tell-tale signs that market share (possibly) and overall sales don't hold a candle to making actual profit, yes? I don't know of a business that has succeeded well over the long term when the only focus was selling -- and not making actual profit.
Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.
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