SAN FRANCISCO - Considering the devastating two years Advanced Micro Devices Inc. has endured, investors braced themselves for more bad news in the fourth quarter after rival Intel Corp. disappointed Wall Street with lackluster results.
The slowdown they feared didn't materialize.
Instead, Sunnyvale-based AMD managed to post a narrower loss than analysts expected on signs that AMD is driving down costs and protecting its share of the microprocessor market from an Intel onslaught.
AMD shares rose 71 cents, or 11.2 percent, to $7.05 in morning trading Friday.
"Obviously, they turned in a truly excellent quarter," said JoAnne Feeney, senior research analyst with FTN Midwest Securities Corp. "They've continued the progress they began making a couple of quarters ago. It should assuage the fears of a lot of investors about the company's ability to execute."
Still bleeding from the costly acquisition of a graphics chip company, AMD absorbed heavy charges connected to the deal in the fourth quarter that dragged down its results.
However, AMD executives stoked shareholder optimism by reiterating their pledge to return the company to profitability by the second half of this year. In addition, they said the flaws plaguing AMD's new line of server chips have been fixed and samples will ship to customers in two to three weeks.
AMD's new Opteron server chip, critical to its financial recovery, launched in September. But technical glitches delayed a full release.
AMD's losses in 2007 were staggering, capping a brutal two-year stretch in which the company's market value has plunged from more than $20 billion to $3.5 billion today. The stock has fallen from over $40 a share in early 2006 to nearly $5 in recent weeks.
For the full year, AMD lost $3.38 billion, $2 billion of which were non-cash charges. Revenues were $6 billion.
The fourth quarter was one of AMD's toughest.
For the three months ended Dec. 29, AMD lost $1.77 billion, or $3.06 per share. That compares with a loss of $576 million, or $1.08 per share, in the same period a year ago.
AMD is the world's No. 2 maker of microprocessors, the brains of personal computers. The company has faltered under intense pressure from Intel and the acquisition of graphics chip maker ATI Technologies Inc., which AMD bought for $5.6 billion but recently said is now worth far less than that.
AMD for the first time put a price tag on how far ATI's value has declined — effectively saying it's now worth about 30 percent less. Heavy charges for that decline dragged down results in the latest quarter.
AMD incurred charges in the fourth quarter of $1.67 billion, or $2.89 per share, mostly related to writing down the value of ATI.
Those charges were not included in analysts' expectations, AMD said. Stripping out those charges, AMD lost 17 cents per share. Analysts surveyed by Thomson Financial were expecting a loss of 36 cents per share.
Sales for the period were $1.77 billion, in line with Wall Street's estimates. Higher average selling prices and double-digit percentage increases in the number of chips sold, compared with the third quarter, helped shore up the company's bottom line.
Analysts had long questioned the wisdom of the ATI acquisition, which bolstered AMD's graphics capabilities and added valuable "chipset" technologies to its product lineup. Chipsets are responsible for sending data from the microprocessor to the rest of the computer.
AMD reduced the value of ATI's goodwill — its intangible assets such as reputation — by $1.6 billion.
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