Tech Industry

AMD quitting handheld, TV chips amid more losses

The company will take a $876 million charge to get out of its handheld graphics and TV processor business, as it keeps looking for a way to return to profitability.

AMD continues to stumble through another down year.

The company announced along with the release of its second-quarter earnings results Thursday that it is getting out of the handheld and digital television businesses. As has been the case for the last several quarters, AMD is continuing to lose bucketloads of money: $1.2 billion this time around.

The $1.2 billion isn't as bad as it looks at first glance, but it's still pretty bad. In order to get out of the business of making graphics chips for handhelds and digital TV processors, AMD has to take a one-time charge of $876 million, which accounts for the majority of the loss.

The charge relates to the amount of goodwill attached to the company's $5.4 billion purchase of ATI Technologies in 2006: goodwill is an accounting term that in this case, stands for "the amount by which we overpaid." AMD attached $3.2 billion in goodwill to the ATI merger, and has now written $2.5 billion of that goodwill off its balance sheet with the divestiture of the former ATI's consumer chip business.

But even with the one-time charges out of the way, AMD lost $269 million on "continuing operations," such as its processor and graphics businesses. That's a little better than last year's loss of $531 million from those businesses, but AMD still has plenty of work turning itself into a profitable company in the second half of the year, its stated goal.

With Intel looking very solid, it's going to be a crucial six months for AMD CEO Hector Ruiz and his executives if they want to remain employed by the company in 2009. Despite getting its much-delayed Barcelona processor shipping in volume to customers and launching a new notebook processor without incident--not to mention a relatively healthy PC market--AMD still managed to lose money.