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Product shortages hit AMD sales

The global chipmaker AMD reported weak earnings, hurt by shipment shortages from Globalfoundries.

The global chip maker Advanced Micro Devices (AMD) suffered sluggish sales during its last quarter, hurt by product shortages from Globalfoundries, a microchip maker owned largely by Abu Dhabi.

AMD reported yesterday it had earned US$1.69 billion (Dh6.2bn) in revenues for its fourth quarter, which was flat from its previous quarter and up just 2.6 per cent from a year earlier.

That amount, however, excludes a $209 million write-down for the value of AMD's stake in Globalfoundries. Once factored in, AMD said it was hit by a $177m loss in the quarter. That compares with a $375m gain during the same period a year earlier.

"We made good progress, but no question, we have more work to do," said Rory Read, the chief executive of AMD.

Globalfoundries is more than 90 per cent owned by the Advanced Technology Investment Company (Atic),which is a wholly owned subsidiary of Mubadala Development, a strategic investment company owned by the Abu Dhabi Government.

AMD, which warned the semiconductor industry was generally volatile, said certain difficulties made it hard to grow business as much as it had hoped last year.

"2011 progress was tempered by execution challenges that impacted our supply," said Mr Read.

"We took several steps during the course of the year to better manage our foundry partnerships."

Over the third and fourth quarter last year, shipments of certain microchips to AMD from Globalfoundries increased significantly - by more than 80 per cent - "as a result of the focus on improved execution," said Mr Read. These chips now represented a third of AMD's overall processor mix.

By the end of the fourth quarter, AMD had decreased its ownership stake in Globalfoundaries to about 8.8 per cent, the company reported yesterday.

This year may prove to be more challenging than last for AMD, as competition in this sector heats up. Intel, a rival chip maker, is planning new product introductions and is increasing its marketing and rebating programmes.

In a cautionary statement yesterday, AMD noted its first-quarter revenues this year might continue to be impacted by production issues at Globalfoundries.

"Globalfoundries will be unable to manufacture the company's products on a timely basis in sufficient quantities and using competitive technologies," AMD said.

nparmar@thenational.ae

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