Is AMD Prepared For More Suffering?

By Douglas A. McIntyre Published Jan 24, 5:00AM EST

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AMD (AMD) is now in a cycle that is likely to continue its lower margins, perhaps for some time. At $1.77 billion, its revenue came in ahead of Wall St. forecasts. But, margins dropped to 40% compared to 57% in the same quarter a year ago. AMD said revenue in the next quarter may actually be down from the quarter just reported.

AMD also indicated that most of its financial shortfalls where in its server chip business, the area where its has taken the most share from rival Intel (INTC).

AMD has a critical decision to make now. After getting almost 25% of the server chip market and at one point boasting that the market share number could hit 40%, the company can either retreat from its quest for share gain and try to rebuild net income or push through the poor margins in the hopes that it can take business from Intel and raise prices later.

AMD may go for market share in which case Wall St. may be in for improvements in the top line over the next year or two but an impoverishment of net income.

It depends on whether AMD has the guts to stick to its guns.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.