Tech Industry

My free financial advice for AMD

What should you make of a company that's 37 years old and $200 million in the hole? CNET's Michael Kanellos has a few ideas.

I have piled up greater net earnings over my lifetime than Advanced Micro Devices, and you probably have too.

By reporting a net loss of $611 million for the first quarter, AMD has actually lost more money than it has earned since its 1969 infancy--a figure found by summing up all of the annual net income figures found in the company's annual reports. (The reports made a great tour of groovy 1970s fonts.) In all, AMD has lost $203.2 million.

Granted, the company has a lot to show for its net loss: it spun off Spansion, its memory unit, bought graphics giant ATI Technologies and has billions of dollars in real estate around the world. It has also become a formidable competitor to Intel in microprocessors, particularly in the past three years, winning kudos for its chip designs and manufacturing.

By contrast, I have some couches from Copenhagen Furniture and three pairs of bike pedals. Without my wife's financial acumen and guidance, I would probably be earning money the old-fashioned way: standing on a bucket, pretending to be a statue and begging for change from Cub Scouts.

I'd be standing on a bucket, pretending to be a statue and begging for change from Cub Scouts.

Still, I'm net income-positive. I have tax returns to prove it. My net worth, I'll add, is past the four-figure mark.

It's the kind of success story that I could probably sell to The Learning Annex: "Learn to Beat the Fortune 500 and Bartend in Your Spare Time. Tuesday at 7:30. Airport Hyatt. Sequoia Room II."

What explains AMD's situation? From 1969 to 2003, AMD was largely struggling to keep up with Intel. The company would release products, only to stub its toe in manufacturing or lose in a price war.

By the end of the 2003 second quarter, AMD had a historical, cumulative net income of $186.4 million

Fortune then began to smile on it with the releases of Opteron and Athlon 64 that year. Profits and market share grew. In the second half of 2003, AMD reported net income of $12 million.

In 2004, net income came to $91 million.

However, AMD then had to take charges to spin off Spansion. It also bought ATI for $5.4 billion.

While strategically sound moves, the two decisions did put dents in net income, which came to $165 million in 2005. Then, in 2006, AMD reported a $47 million net loss.

The company was about $407.4 million in the net black until this quarter. AMD's market share gains made Intel angry--Sheriff Buford Pusser in Walking Tall angry--and the smaller chipmaker is now losing market share and being forced to sell its chips at lower prices.

Still, AMD tends to bounce back, and it is set to digest ATI. In addition, financial analysts and others routinely ignore acquisition costs.

If I were to ignore the costs, I'd count AMD as a few billion dollars ahead. But who am I to argue with generally accepted accounting principles, particularly when they make me look good?

So, AMD, don't sweat it too much. If you're feeling down, we can go to the Philosopher's Club and have a few drinks one night.

And if things really get bad, you can stay on the couch.