Tablets will be greatest threat to AMD Ontario

AMD held its quarterly earnings call last night where it presented its Q3 financials and shed some light on upcoming launches in GPU and CPU markets.

Having had a pretty decent desktop CPU and GPU quarter and a rather flat server business, the company sees the notebook market as being its weakest link. Overall revenue was $1.62 billion, a two per cent drop compared to last quarter and with net quarterly income (non-GAAP) of $108 million.

Expenses were lower than AMD had previously suggested, at $595 million, with $359 million of which invested in R&D.

The company focused the presentation on its merits and upcoming launches such as the new 6000-series family of GPUs and Fusion, despite not hiding the rather bleak notebook results. The company was pretty blunt about its notebook business, which performed sub-par. Overall sales performance, says AMD, was solid, despite an expected soft third quarter.

DirectX 11 GPUs also celebrated their first anniversary in late September, and AMD pointed out it has shipped over 25 million of them. Fusion and other launches are on schedule, said the CEO, with Bulldozer (desktop and server) available during 2011 and Llano in the first half.

As for the negative notebook performance, Dirk Meyer did not hesitate to blame OEMs and the ongoing buzz concerning AMD's ability to deliver mobile GPUs, which led vendors to double-order from AMD out of fear of shortages and simultaneously create more Nvidia-based solutions to keep up.

"We saw (at least anecdotal) evidence of OEMs de-featuring the discrete graphics option in response to the dramatic weakening of the Euro that happened 90 days ago" in order to protect their margins, added Meyer.

When questioned about the company's future plans, Meyer confirmed that the entire Northern Islands GPU family will be released in Q4 2010, which we know to be October (Barts) and late November (Cayman and possibly Antilles).

As to AMD's entry into the tablet business, AMD will be focusing on the Ontario design for low-end notebooks/netbooks, and continue assessing the tablet market. "The target power consumption for a tablet device is around 2-3 Watts" said Meyer, and Fusion isn't quite there yet. In AMD's perspective, the CEO did mention the iPad is in fact cannibalising not just netbook, but also low-end notebook sales, which, in our view, presents a clear threat to AMD's Ontario design.

As we see it, if AMD doesn't get a move on with Fusion, the iPad and other tablet PCs will hit Ontario hard, right at launch, as numerous sources have confirmed that tablets are in fact cannibalizing the value segment and netbook sales.